Financial and Contractual aspects

Question 1

Define a contract

Answer 1

Legal agreement between 2 or more people.
Discusses terms and conditions of an offer.
Outlines the rights and responsibilities of all parties.

Question 2

Name and explain the types of agreements

Answer 2

Oral agreements - take place verbally, and creditability is hard to establish
Silent agreements - a transaction takes place without question
Written agreement - legal agreement on paper usually signed in front of witnesses

Question 3

List the types of contracts

Answer 3

Employment contracts
Insurance policies
Credit agreements
Leases
Purchase and sale agreements when buying a home
Contracts for memberships, services and internet subscriptions
Business contracts/partnership agreements

Question 4

Explain what an employment contract is

Answer 4

Agreement between employer and employee
Terms and conditions are binding by law
Protects both parties in terms of their obligations and service conditions
Signed by an employer, employee and witness

Question 5

Explain what an insurance policy is

Answer 5

An agreement between an insurance company and consumer
The insurance company protects the consumer against the loss of insured items
The consumer pays a monthly premium

Question 6

List different types of insurance policies

Answer 6

Household insurance
Life insurance
Motor vehicle insurance
Homeowner’s insurance
Medical aids
Hospital plans
Mortgage protection insurance

Question 7

Explain what credit agreements are

Answer 7

An agreement between a credit provider and a consumer
The credit provider offers a loan to a consumer which enables him to pay for goods at a later date
The consumer repays the full amount plus interest over a set period of time

Question 8

List different types of credit agreements

Answer 8

Bank loan
Lay-by
Credit account at a shop
Hire-purchase/installment sale
Mortgage/home loan

Question 9

Explain what a lay-by is

Answer 9

A buyer pays a deposit and installments without interest until the item is paid off, they will only then receive the item
The original price can not change

Question 10

How does hire-purchase work

Answer 10

Finances more expensive goods
The buyer gets the goods after a deposit is paid and a contract is signed
The store can take back the goods if the consumer does not pay
You pay interest

Question 11

What is a lease

Answer 11

An agreement between a leasor and a leasee
Rental property for a fixed price and minimum period of time

Question 12

What is a purchase and sale agreement

Answer 12

Legal sale agreement between a buyer and seller of a property
Written offer from the buyer that the seller accepts
Both parties must comply with the terms and conditions

Question 13

Explain contracts for memberships, services and internet subscriptions

Answer 13

Agreement between consumer and credit provider
Binding for a fixed number of months

Question 14

Can a membership contract be renewed without permission from the consumer

Answer 14

No, only on a month to month basis

Question 15

Explain what a business contract is

Answer 15

Agreement between two or more people who want to start a business
Protects all parties involved
Provides a full description of contributions, how things are shared, roles and responsibilities and terms and conditions

Question 16

What is a cooling-off period

Answer 16

Period after signing a contract that the consumer can cancel without reason

Question 17

Explain the terms of a cooling-off period

Answer 17

It protects the consumer from impulsive decisions
Suppliers must refund the consumer within 15 days
Goods must be returned to the supplier

Question 18

What are the exceptions to the 15 days rule

Answer 18

A sale agreement can be canceled within 5 days
A credit agreement can be canceled within 5 days
Suppliers must refund the consumer within 7 days

Question 19

What is an exemption/exclusion clause

Answer 19

A contractual provision that will change or limit a party’s liability if they do not fulfill their obligations

Question 20

What defines a legal exemption clause

Answer 20

Clauses that do not apply to anyone can be excluded
All parties must accept the exclusion
It can not harm one of the parties involved

Question 21

What defines an illegal exemption clause

Answer 21

The clause is unfair/unreasonable
It is found unfair by a court
All parties do not accept the changes

Question 22

Name unfair business practices

Answer 22

Discriminatory or unreasonable conduct
Fraud
False or misleading marketing
Unfair terms in a contract
Excessively high prices

Question 23

Define the term warranty

Answer 23

A written promise that a product is reliable and free from defects

Question 24

What is the role of a warranty

Answer 24

Protects the rights of the consumer
Guarantees the product will be repaired/replaced if it breaks within the period covered by the warranty

Question 25

Define the term grey goods/parallel imports

Answer 25

Products that a manufacturer does not want to sell in a specific region which is then imported to the area through unofficial distribution channels

Question 26

Are grey goods legal

Answer 26

They are legal cause import duties are paid
They are just not sold through official distribution channels

Question 27

Explain grey goods

Answer 27

Warranty not filled by official supplier
Some sellers offer repairs, might not be up to standard
Can be frustrating if the goods do not work
Seller can refuse to fill the warranty
The Consumer Protection Act says all grey goods must be labeled as that and that all consumers can return goods to the seller

Question 28

Define the term scam

Answer 28

A false or dishonest business transaction often linked to organised crime

Question 29

Explain scams

Answer 29

Goods/services might not exist at all
Offer is often too good to be true
Online scams are very popular
Anyone can be a victim

Question 30

Name and explain common scams

Answer 30

Internet scams - advertising on the internet, you pay for something that does not exist
Lottery - victim is asked for account details to make the transfer, scammer gets access
- deposit is required in advance and then victim pays the scammer
Phishing - victim logs into their account through a fake email sent from someone who then gets access to their account
Fake proof of payment - a fake proof of payment is sent and the victim then delivers the goods for free

Question 31

Name and explain types of scams (2)

Answer 31

Credit card cloning - a device is installed at a legitimate pay point which gathers card data
False online profiles - deceives people with a fake profile to make money
Job opportunities - fake job opportunities are posted, applicants have to pay a joining fee or buy something before they start
Software scams - scammer pretends to be a software company and asks the victim to make adjustments on their computer to solve a problem, they then give the scammer access to their computer

Question 32

Define the term Stokvel

Answer 32

Savings club where members contribute a certain amount of money to a central fund. Members each receive the full amount of everyone’s contributions once during this period of time

Question 33

Explain a Stokvel

Answer 33

Used to save for a savings account/special occasion/loan
Completely legal
Controlled by the National Credit Act

Question 34

Define the term pyramid scheme

Answer 34

Unsustainable business model where members pay to recruit new members
Promises a high return on investment

Question 35

How do pyramid schemes work

Answer 35

Illegal according to the National Credit Act
One person starts the scheme and gets all the money (they get money from all members)
Members recruit members and receive a portion of the investment money
Recruitment becomes difficult and they eventually collapse

Question 36

What is a MLM

Answer 36

Multi-level marketing scheme is legal and works similarly to a pyramid scheme
Physical products are sold and agents receive a portion of sales from agents working under them