By now most of us are aware that the Consumer Protection Act (CPA) comes into operation on the 24th October 2010. However there are certain sections of the CPA that apply to so-called ?pre-existing agreements?. This means that agreements that were entered into before 24th October 2010 could still be subject to the CPA even though they were entered into before 24th October 2010.

One of the most significant parts of the CPA that comes into operation early is s61. Section 61 provides that a consumer can sue a supplier of goods or services for product or service liability in terms of s61 of the CPA. As you may be aware the CPA introduces ?strict liability? for producers, importers, distributors and retailers for any unsafe or defective product. This includes any harm due to inadequate instructions or warnings. To make matters worse the ?harm? that is suffered by the consumer includes economic loss (a loss of salary for example) for which the supplier of the goods will be held responsible even if there was no negligence on his part. In addition the producer, the importers, distributors and retailers of the goods will all be held to be jointly and severally liable which in turn means that even though you are a wholesaler not selling to the public, you could still be found liable to pay damages to a consumer you or your staff have never even met!

Now that we know what s61 says, we need to go back to understand precisely when it comes into force. Section 3(4) of Schedule 2 of the CPA indicates that s61 will apply from the ?early effective date? (i.e. 24th April 2010). Thus I would interpret this to mean that a consumer can sue for any damages (including pure economic loss) arising from defective goods where the damage occurred on or after the 24th April 2010. However, in a small technicality, the right to sue for those damages will only arise on the 24th October 2010. To better illustrate this let us consider an example.

Joe Soap goes to a small supermarket and buys some soap for R5.00 on the 25th April 2010. He takes the soap back home and has a shower where he uses the soap. The soap unfortunately contains coco butter to which he is highly allergic and he almost immediately has an adverse allergic reaction to the soap, which in turn results in his hospitalisation for 5 days at the cost of R90 000. As he has his own business he also suffers a loss of business in the amount of R70 000 as he lost a big contract due to his illness.

Joe is most upset that the packaging on the soap did not warn him about the coco butter contained within the soap. He contacts his attorney who then advises him to wait until the 25th October 2010. On the 25th October 2010 the attorney files the complaint with the Consumer Protection Commission and requests that his client, Joe Soap, be paid the sum of R160 000 as damages suffered by Joe Soap. The attorney requests that producer, importer, distributor and retailer be held to be jointly and severally liable for the damage suffered by Joe Soap. The Consumer Protection Commission then refuses the complaint and Joe Soap then approaches the High Court in Cape Town as he believes the Commission was incorrect. He alleges that he has exhausted his remedies in terms of s69 of the CPA and consequently is entitled to judgment in his favour over the producer, importer, distributor and retailer. The High Court duly grants this order.

Joe Soap?s attorney then approaches the supermarket first in order to reclaim his money. Unfortunately in the intervening time the supermarket has been liquidated. However this is no barrier to the attorney as all of the parties were jointly liable. As a result he ignores all the other parties and directs his attention at the producer of the soap that is a large multinational company. He duly obtains his warrant of execution against the large multinational company and he is duly paid R160 000 by the company as they do not have anywhere to hide.

Of course the multinational company is most upset. It seeks to set off the money it had to pay to Joe Soap by looking at its agreements. In its agreement with the importer it specifically says that it will be entitled to claim back any funds which it was required to pay for any product sold by the importer. It duly does so and the importer is forced to pay R160 000 to the producer. Thereafter the importer follows a similar path to claim the money from the distributor. Unfortunately the importer did not think to obtain similar protection in his agreement with the distributor and as a result the importer is ultimately forced to carry the cost of the R160 000 paid to Joe Soap.

What does this example illustrate?

• Businesses need to update their business to business contracts before 24th April 2010!
• Businesses need to enter into insurance to cover this risk before 24th April 2010.

Should you need to take the steps above please feel free to contact us to discuss this further at 021 712 7661 or paul@dingley.co.za.

- Paul Esselaar March 2010)

**Please note that these comments are summarised, may not be applicable to your particular situation and do not constitute legal advice. Please consult your legal professional should you wish to obtain a formal legal opinion.**