The Consumer Protection Act - Part 2

Read Part 1

Potentially Problematic Clauses - Continued from Part 1

Right to fair, just and reasonable terms and conditions (s48)
Suppliers may not perform work for prices or on terms that are unfair, unreasonable or unjust.  This is a very broad provision and one that could potentially cause problems.  Some of the criteria used to determine whether terms are unfair or unjust is if a transaction or agreement is :

1. Excessively one-sided against the consumer
2. The terms of the transaction agreement are so adverse to the consumer as to be inequitable

Providers in the building industry need to take a good look at various aspects of their conduct including :

1. The amount of deposits taken
2. The amount of progress payments claimed in relation to the work performed
3. Clauses and the conditions relating to variations and extras

If any players in the building industry do attempt to use unfair terms to pad their profit on jobs they now run the risk of committing an offense in terms of the Act.  There is nothing wrong with providing for a healthy profit nor for adequately covering yourself for the risk that you undertake when performing building work.  There is however a limit and you must make sure that the terms and conditions that you agree on can be justified to the consumer and ultimately to your peers or a dispute resolution agent as it will be these people who decide whether you have been fair or not.

Notice for certain terms and conditions (s49)
If you are going to limit your risk or liability or impose an assumption of risk or liability onto the consumer you need to draw this to the attention of the consumer in plain written language and the consumer must have reasonable opportunity to receive and comprehend these provisions.

You are therefore entitled to manage a risk but the consumer needs to be fully aware of what the implications are.

Right to fair value, good quality and safety (Sections 53 to 56)
If the consumer receives defective goods or services he/she may:

1. In the case of services require the supplier to remedy the defect and the quality of the services or refund to the consumer a reasonable portion of the price paid for the services.
2. In the case of goods, if the goods supplied to the consumer are defective the consumer has a right to return the goods and obtain a refund or to have the goods replaced.

This is going to be problematic in the case of buildings that have been built for a consumer. Based on a strict reading of the Act, a consumer may prove that a defect in a building is material and could technically demand that the building is rebuilt.  We are going to probably be angling towards having the construction of buildings, or parts thereof, determined to be a provision of services (as opposed to a supply of goods)  which allows for a more equitable remedy in the cases of defects.

There are a number of issues that need to be looked at carefully with regard this section of the act.

A defect is a material imperfection in the goods or services that render the goods or services less acceptable than a person is reasonably entitled to expect.

The building industry’s standards are varied and the outcome of the product is fairly often related to the price that the consumer is willing to pay.  Consumers are likely to always expect perfect workmanship.  If, by their choices (particularly with regard the price they are willing to pay), they are commissioning work that cannot be expected to be of the utmost high standard, it is well within the providers interest to make this known to the consumer.  Uninitiated consumers are not familiar with the building process and ensuring that they are not met with any unexpected or unpleasant surprises when the job is done, is in the interest and control of the provider. 

This is obviously not intended as an excuse to get away with sub-standard workmanship when taking all factors into account.

Consumers are entitled to timely performance and completion of services and timely notice of delays.

The business of building is, almost inevitably, complicated by the issue of time.  Firstly, building work often meets with unexpected obstacles.  These can be in terms of materials supply, weather conditions, pre- existing conditions on the site, changes on the part of clients and many other reasons.  The provider should allow itself sufficient time to handle these issues as they arise without having to renege on agreements relating to completion.  Where factors cause legitimate grounds for extension, these should be carefully explained to the consumer so that the consumer expectation is suitably adapted.

The Consumer is entitled to have his or her property returned in the condition it was when it was handed over to the supplier.

If the supplier is expecting to cause any degredation to the property in the process of construction it would be well advised to agree with the consumer upfront as to the expected nature of the degradation.  If for example you are doing major building work within a consumers pre-existing ornamental garden, it is quite conceivable that certain of the vegetation may be disturbed etc.  If this is explained to the consumer and both parties agree then the consumer will not have recourse to the service provider for degradation. 

The consumers right to a product that is fit for purpose.
 If the consumer notifies the supplier that the goods are to be used for a specific purpose and supplier ordinarily offers such goods or acts in a manner consistent with being knowledgeable about the use of such goods, then the supplier is obliged to ensure that the goods are reasonably suitable for that purpose. 
The building industry consumer may well procure the construction of a building or structure without giving specific details but informing the supplier as to what the structure is for.  The supplier is advised to make sure the end product can in fact perform as required. 

Goods are expected to be safe and adhere to standards.
 The truth is that the National Building Regulations are disregarded widely.  If anything is built not in accordance with such standards, not only is the provider in contravention of the National Building Regulations themselves but is now in contravention of the Consumer Protection Act too.

Dispute Resolution and Redress For Consumers

In the absence of an industry ombudsman, the building industry will be subject to either:

1. The findings and reasoning of alternative dispute resolution agents, or
2. The consumer court.

In addition the consumer commission may embark on an investigation of any matter complained about by a consumer or on any matter on which it decides to initiate an investigation.

In all the above cases, the fate of the service provider in the building industry may depend on the expertise, knowledge and experience (or lack thereof!) of a practitioner who knows very little about the building industry and its specific characteristics. It will be in our interests to establish an industry code with an ombudsman structure whereby people who have the necessary skills will be able to adjudicate and investigate on complaints relating to building.

Brandon Abdinor | Executive Director