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Consumers > Financial and contractual aspects consumers should take note of > Flashcards

Financial and contractual aspects consumers should take note of Flashcards

1
Q

How should consumers empower themselves?

A

With knowledge of their rights, consumer protection legislation and the many ways in which businesses operate

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2
Q

What is a contract?

A

An agreement between two or more people in which one person offers to do something and another person accepts that offer.
It is intended to create legal rights and duties between its parties.

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3
Q

TRUE or FALSE

All contracts need to be in writing?

A

False. Contracts can be written or spoken.

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4
Q

Give examples of unwritten contracts.

A

Buying food in a shop
Using public transport
Going to the movies

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5
Q

Why is it safer to have a third party present if you are going to be a party to a formal verbal agreement?

A

The third party will be able to support your claim if there is ever a disagreement.

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6
Q

TRUE or FALSE

Written contracts require witnesses?

A

TRUE

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7
Q

What happens once you sign a written contract?

A

It becomes legally binding and enforceable. Meaning that parties agree to the terms and conditions within the contract.

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8
Q

What is breaking a contract called?

A

Breach of contract

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9
Q

Describe what breach of contract means.

A

When one party does not do what they promised to do in the contract.

For example: If a seller agrees to deliver goods on a certain day and fails to do so, this is known as a breach of contract.

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10
Q

What are your legal options when there is a breach of contract?

A
  1. The court can order the guilty party to do what was promised and if they fail to do so, get a fine/prison sentence.
  2. Get an interdict from the court to prevent the guilty person from doing something
  3. You can sue the other party for damages
  4. You can cancel the contract
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11
Q

What is the CPA?

A

The Consumer Protection Act

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12
Q

What provisions does the CPA have which protect the consumer in credit agreements and other contracts?

A
  1. The CPA forbids the automatic renewal of fixed-term agreements. Companies have to give you the option to continue your contract, change it or cancel it.
  2. You have the right to cancel a contract at any time by giving 20 business days notice in writing. You will still need to pay anything you owe the company up until the date of cancellation. You may be charged a cancellation fee up to no more than 10% of the amount outstanding on the contract.
  3. If you have repairs done, companies have to provide you with an estimate for the work, which you must approve. If more work is required above and beyond the estimate, they first have to get your approval.
  4. The CPA identifies your right to good-quality products, in good working condition, free of any substantial defects and fit for its purpose. Suppliers have to let you know of all defects - both obvious and hidden - of your purchase and you have to agree to buy the product in that condition. Voetstoots no longer applies except when a homeowner personally sells his/her home.
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13
Q

TRUE or FALSE

Contract terms and conditions must be explained to you in a language you understand?

A

TRUE

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14
Q

Give THREE guidelines with regards to contracts

A
  1. Contract terms and conditions must be explained to you in a language you understand
  2. Read contracts carefully and ensure that you understand the terms and conditions before signing them. By signing the contract you indicate consent and understanding of Ts and Cs so you become legally bound to fulfil the contract obligations
  3. Ask as many questions as you can and ask for disclosure of the final cost of the item (including all interest and compound interest if applicable)
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15
Q

What are the most important consumer contracts?

A

Contracts for renting, buying and building a house and credit agreement contracts such as instalment sale agreements.

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16
Q

What are exemption clauses?

A

Clauses included in contracts that exonerate (clear) a party from any liability should he/she fail to honour the agreement or when the agreed product does not serve the purpose for which it was acquired.

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17
Q

TRUE or FALSE

Exemption clauses are not illegal; they are part of a legitimate contract.

A

TRUE

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18
Q

According to the CPA, an exemption clause limits the risk or liability of the supplier or requires you to indemnify the supplier for any cause:

A
  1. Your attention must be drawn to this clause and you must agree to it at the time the agreement is reached
  2. Such provisions must be written in plain language and you must be given adequate opportunity to clarify and understand the meaning of the clause.
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19
Q

Exemption clauses:

A
  1. Cant exclude liability for personal injury or death that results from negligence
  2. Have to be reasonable (if the court thinks it unreasonable it will become void)
  3. Cant exclude liability for defective goods supplied to a consumer.
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20
Q

What does indemnify mean?

A

To secure a person against legal responsibility for his/her actions.

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21
Q

Does a minor (under 18) who enters into a contract without the consent of their parents/guardian have to keep to the contract?

A

No, but if the minor claimed to be older than 18 then the person who entered into the contract with the minor can sue for damages.

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22
Q

What is direct marketing?

A

To approach someone, in person or by mail or electronic communication, for the direct/indirect purpose of promoting or supplying goods in the ordinary course of business or requesting a donation.

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23
Q

According to the CPA where does a cooling-off period apply?

A

To all transactions that resulted from direct marketing (transactions consumers didn’t start).

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24
Q

When a sales agent of a cleaning or cosmetics company approaches you directly to promote products or equipment in an attempt to get a sale from you, this is known as?

A

Direct marketing

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25
Q

When you are approached through individual electronic means such as SMS marketing or e-mails, this is known as?

A

Direct marketing

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26
Q

Explain the cooling-off provision.

A
  1. The cooling off provision applies to all goods. it does not apply to services, for example the provision of accommodation, transport, catering and leisure services.
  2. You have a cooling-off period of 5 business days to cancel an advance reservation, booking or order.
  3. You may cancel the agreement without reason and without penalty.
  4. A supplier must refund the purchase price of goods or the solicited donation to you within 15 days of receiving your notification of exercising your cooling-off right.
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27
Q

TRUE or FALSE

A supplier approaching through TV or press will fall within the cooling-off provision?

A

FALSE

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28
Q

What do unfair business practices include?

A

Fraud, misrepresentation and oppressive and unreasonable acts against consumers. The law prohibits them.

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29
Q

Where can unfair business practices arise?

A

Home ownership and rentals, credit agreements, consumers purchasing products and services, insurance claims and debt collection in case of default.

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30
Q

What is default?

A

Failure to pay money that you owe.

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31
Q

What two acts protect consumers against unfair marketing and business practices?

A

The NCA and the CPA. They apply to every consumer transaction occurring in the RSA.

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32
Q

What may happen to businesses which do not adhere to the provisions of the NCA and CPA?

A

Businesses may be deemed unfair.

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33
Q

What does the CPA outline?

A

The CPA outlines key consumer rights that form the basis of evaluating all business practices in SA.

34
Q

TRUE or FALSE

The use of the terms ‘warranty’ and ‘guarantee’ are often not consistent.

A

TRUE

35
Q

What do warranty’s and guarantees have in common?

A

Both are documents to protect consumer rights.

36
Q

What is a warranty?

A

> a written promise to replace or repair an item if it does not satisfy the terms of the warranty
you get a warranty from a company stating that a product is reliable and free from known defects and that the seller will, without charge, repair or replace defective parts within a given time limit and under certain conditions

37
Q

What is a guarantee?

A

> a promise in writing that the quality or durability of a product or service will meet certain standards and that if the product or service does not meet the terms of the agreement, the money you paid for it will be returned
It is a safeguard against loss

38
Q

Under the CPA, you may return failed, unsafe or defective goods to the supplier within how many months?

A

SIX months.

You have the choice of having the goods replaced, repaired or refunded.

39
Q

If the supplier repairs the goods and within three months the failure or defect recurs or another failure or defect occurs, what should happen?

A

The supplier must replace the goods or refund the price to you.

40
Q

What happens to a warranty when you abuse or misuse goods?

A

The warranty becomes void.

The warranty does not extend to ordinary wear and tear.

41
Q

What are grey goods/parallel imports?

A

Goods which have been imported into the country through unofficial or unauthorised distribution channels.

42
Q

Are grey goods legal or not?

A

They are legal. They are imported legally and necessary duties are paid.

43
Q

Why do they fall into the grey goods category?

A

They are sold by individuals or businesses that are not authorised by the manufacturer to do so.

44
Q

Provide an example of a grey goods scenario.

A

A new smartphone is launched and the manufacturer does not allow the product to be sold in SA. Individuals or businesses from SA buy these goods in bulk from another country where they are being sold and import them into SA to be sold as grey goods. The necessary duties are paid when importing them into the country.

45
Q

Grey goods may include which items?

A 
Video games
Wines
Photographic equipment
University textbooks
Pharmaceuticals
Cars
46
Q

Under the CPA, what must a local supplier of grey imports do?

A

Display a conspicuous notice on goods stating that they are grey goods.

47
Q

TRUE or FALSE

Even if the goods are grey, you will have a legal warranty?

A

TRUE
The implied warranty allows you to return faulty goods and get the seller to repair them, replace them or get a full refund.

48
Q

What is a scam?

A

False and fraudulent business ideas that are often linked to organised crime.

49
Q

Give examples of scams.

A 
Online scams
Credit card fraud
Identity theft
Work-from-home scams
419 Scams
50
Q

TRUE or FALSE

The internet is an ideal place for fraudulent operators?

A

TRUE

51
Q

What is phishing?

A

An attempt to get someones secret bank info

52
Q

What are phishing emails?

A

Fake emails usually pretending to be from banks or other financial institutions.

53
Q

Explain how phishing emails get your information?

A

The email asks you to click on a link to change your personal details.
The link takes you to a fake website, which looks real and tricks you into giving your credit card number, account user name and password to phishers.
They then empty your credit card.

54
Q

What are black market goods?

A

Goods which are imported illegally, without payment on any custom duties.
It is illegal to deal in black market goods.
Products are often counterfeits.
Counterfeits include forgeries of currencies and imitations of art, toys, clothing, software, watches, electronic equipment, company logos and brands.
In the case of goods, it results in patent and trademark infringement.

55
Q

How do lottery scams work?

A

You receive an SMS or email stating that you won a lottery jackpot but before claiming your prize you must deposit a sum of money into the lottery’s fictitious bank account.

56
Q

List SIX tips for protecting yourself against online scams.

A

> If you suspect an email is fake or spam, delete it without opening it
Keep anti-spam and anti-virus software up to date
Never give personal details by email
Never open attachments on emails that claim to come from your bank - they could contain spyware that could track your keystrokes and gather your info
Check your bank and credit card account statements regularly
If you think you may have provided financial information such as credit card numbers to a phisher, contact your financial institution or credit card company immediately

57
Q

Why should you be careful of telemarketers?

A

They may tempt you with offers of discounts or free merchandise, or advise you that you have won a prize. They may ask for a credit card number for shipping charges or for some other fake reason.

58
Q

What is the risk of having a credit card?

A

There is a chance you might become a victim of credit card fraud.

59
Q

Explain the different methods which are used to obtain credit cards or credit card info.

A

> card swopping at ATMS
theft or pickpocketing
card skimming, which is the ilegal copying of info from the magnetic strip of a credit or ATM card. This can create a fake or cloned card with your details on it
emails claiming to come from the credit card service provider (phishing)
fake websites

60
Q

Protect yourself by being aware of the risks involved and the different types of credit card fraud by following what guidelines?

A

> never leave your cards unattended. Keep an eye on your card during all transactions
ensure that you get your card back after every transaction
destroy expired cards and sign new cards immediately
report lost or stolen cards immediately
protect your PIN by memorising it
dont keep your PIN and your card in the same place
be careful when giving your personal info and credit card info to unknown people
destroy all financial info before throwing it away
verify transactions on your credit card statement against your receipts

61
Q

What is identity theft?

A

A crime in which a criminal obtains key pieces of personal info such as ID or drivers licence numbers, to pose as someone else.
The info can be used to gain access to your existing accounts, open new accounts in your name and obtain credit, goods and services using your name.
Identity theft can also give thieves false credentials for immigration or other applications.

62
Q

What are work-from-home scams?

A

These scams target people seeking extra income. Instead of helping you make money, the fraudsters use tricks to take your money and leave you with nothing of value.

63
Q

Provide an example of a work-from-home scam.

A

An advertisement requesting you to start a business from home and on responding you are told to deposit a sum of money into the promoters account as registration fee.

64
Q

TRUE or FALSE
According to South African law, work-from-home opportunities promote unfair business practices and are therefore illegal.

A

TRUE

They may not appear in newspapers, magazines, other print and electronic media or through any advertising method.

65
Q

What is a 419 scam?

A

A fraudulent way of obtaining money from unsuspecting consumers.

66
Q

Where does the 419 scam originate and why does it have this name?

A

Nigeria. It is known as a 419 scam because this is the number of the section of the Nigerian penal code that deals with this particular type of fraud.

67
Q

How does the 419 scam work?

A

The scam plays on your emotions, such as sympathy or empathy, or appeals to your moral instincts. You are led to believe that you will make a great deal of money.

68
Q

TRUE or FALSE

419 transactions are legal in SA and don’t usually become money laundering schemes.

A

FALSE.

They are illegal and usually become money laundering schemes.

69
Q

What is money laundering?

A

It is hiding (‘washing’) the true nature or source of illegal money. Money is laundered by passing through legitimate business channels by means of bank deposits, investments or transfers from one place to another

70
Q

What is a stokvel?

A

It is a kind of saving club. It consists of a group of people who have joined together to pledge regular contributions to a common fund from which each member can draw, usually for specific purposes.

71
Q

Provide an example of a stokvel.

A

The pooled money is awarded to each member in turn to enable him/her to make large cash purchases such as putting down a deposit for a home.

72
Q

Provide three guidelines with regards to stokevels.

A

> stokvels re legal institutions. They are a way of forcing yourself to put away a bit of money each month and they also serve as a support network
only get involved in a stokvel with people you know and trust
make sure the stokvel has clear rules about how much money everyone will invest, who will invest the money, how the money will be invested, where and how often meetings will be held, how often payouts will be made and when it will be your turn to benefit from the money

73
Q

What is a pyramid scheme?

A

Get rich quick money making schemes that tak ethe form of a pyramid.

74
Q

What do pyramid schemes promise?

A

Payment just for enrolling other people into the scheme, rather than supplying any real investment or selling products or services to the public.

75
Q

Explain how pyramid schemes work.

A

There is one person at the top of the pyramid( the initiator), who recruits people to invest moeny in the scheme. each of the people he/she recruits then recruits more people so that the number grows from a single person at the top through layers to a large number of people at the base.
This is how people make money especially the initiator, because he/she gets paid fees by every person in the scheme. However, pyramid schemes cant go on forever because of the limited number of people you can recruit. Many people who invest in these schemes lose their money.

76
Q

TRUE or FALSE
Pyramid schemes are unfair trade practices and are illegal in SA. The CPA states that you are not allowed to join a pyramid scheme. If you lose your money in a pyramid scheme, the law will not protect your investment.

A

TRUE

77
Q

What is MLM?

A

Multi-level marketing

78
Q

What does MLM require you to do?

A

You recruit people not only to buy and sell a product but who will also recruit other people for a commission. They operate exactly like pyramid schemes.

79
Q

TRUE or FALSE
MLM schemes are illegal pyramid schemes. They involve fake products and income is derived from sales of those products to outside parties.

A

FALSE
MLM schemes are legal pyramid schemes. They involve real products and income is derived from sales of those products to outside parties.

80
Q

How do you know if a company is operating as a pyramid scheme?

A

The company or scheme will concentrate on the commission that participants earn for recruiting new members, but will ignore the marketing or selling of an actual product. If a pyramid scheme were started by an initiator at the top with just 10 people beneath him/her and 100 beneath the next and so on, the pyramid would involve everyone in the world in just ten layers of people with one person on top.

Consumers (3 decks)

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