Financial and Contractual aspects Flashcards
Define a contract
Legal agreement between 2 or more people.
Discusses terms and conditions of an offer.
Outlines the rights and responsibilities of all parties.
Name and explain the types of agreements
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
List the types of contracts
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
Explain what an employment contract is
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
Explain what an insurance policy is
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
List different types of insurance policies
Household insurance
Life insurance
Motor vehicle insurance
Homeowner’s insurance
Medical aids
Hospital plans
Mortgage protection insurance
Explain what credit agreements are
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
List different types of credit agreements
Bank loan
Lay-by
Credit account at a shop
Hire-purchase/installment sale
Mortgage/home loan
Explain what a lay-by is
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
How does hire-purchase work
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
What is a lease
An agreement between a leasor and a leasee
Rental property for a fixed price and minimum period of time
What is a purchase and sale agreement
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
Explain contracts for memberships, services and internet subscriptions
Agreement between consumer and credit provider
Binding for a fixed number of months
Can a membership contract be renewed without permission from the consumer
No, only on a month to month basis
Explain what a business contract is
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
What is a cooling-off period
Period after signing a contract that the consumer can cancel without reason
Explain the terms of a cooling-off period
It protects the consumer from impulsive decisions
Suppliers must refund the consumer within 15 days
Goods must be returned to the supplier
What are the exceptions to the 15 days rule
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
What is an exemption/exclusion clause
A contractual provision that will change or limit a party’s liability if they do not fulfill their obligations
What defines a legal exemption clause
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
What defines an illegal exemption clause
The clause is unfair/unreasonable
It is found unfair by a court
All parties do not accept the changes
Name unfair business practices
Discriminatory or unreasonable conduct
Fraud
False or misleading marketing
Unfair terms in a contract
Excessively high prices
Define the term warranty
A written promise that a product is reliable and free from defects
What is the role of a warranty
Protects the rights of the consumer
Guarantees the product will be repaired/replaced if it breaks within the period covered by the warranty
Define the term grey goods/parallel imports
Products that a manufacturer does not want to sell in a specific region which is then imported to the area through unofficial distribution channels
Are grey goods legal
They are legal cause import duties are paid
They are just not sold through official distribution channels
Explain grey goods
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
Define the term scam
A false or dishonest business transaction often linked to organised crime
Explain scams
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
Name and explain common scams
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
Name and explain types of scams (2)
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
Define the term Stokvel
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
Explain a Stokvel
Used to save for a savings account/special occasion/loan
Completely legal
Controlled by the National Credit Act
Define the term pyramid scheme
Unsustainable business model where members pay to recruit new members
Promises a high return on investment
How do pyramid schemes work
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
What is a MLM
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