Topic 5- The Consumer Flashcards
a contract
a legally valid agreement between 2+ parties where an offer is made and its terms and conditions are accepted
3 ways to reach an agreement
- oral eg. conversation
- silent eg. accept without dispute
- written eg. agreement in writing with signatures
5 requirements for a binding contract
- all parties must consent to the offer and acceptance
- the agreement cannot be illegal
- agreement and consent must be voluntary
- it must be possible to perform the contractual obligations
- all parties must have capacity to contract (eg be 18yrs+)
breach of contract
when one party fails to perform obligations specified in the contract
3 consequences of a breach of contract
- contract can be cancelled
- a fine or jail sentence may imposed by the court
- guilty party can be sued for damages
3 types of contracts
- insurance policies
- leases
- credit agreements
employment contract
- agreement between employer and employee
- terms and conditions are legally binding
- protects both parties in terms of contractual obligations
- contract must be signed by employer, employee and 2 witnesses
an insurance policy
- agreement between a consumer and an insurance company
- insurance company will compensate consumer in case of loss or damage to insured goods
- consumer pays monthly premium to insurer
a credit agreement
- contact between the consumer and credit provider
- consumer is offered a loan to buy goods on credit and pays the full amount plus interest in the form of monthly installments over a fixed period to the credit provider
2 examples of credit agreements
- mortgage (home loan) : money is borrowed from bank to buy a property and paid back over fixed period (20-30 years)
- hire-purchase : consumer pays a deposit and takes goods, then pays monthly installments until goods are fully paid for
a lease
- an agreement between an owner and a tenant
- tenant takes on the lease of the property for period with fixed rent
- lease specifies conditions, rights and obligations of both parties
purchase and sale agreement
- legal contract between seller and buyer of a property
- offer to purchase becomes a legal purchase and sale agreement after the offer is accepted and signed
- buyer and seller must then comply with terms and conditions in contract
business contract
between parties wanting to start a business
cooling off period
- results from direct marketing
- 5 day period after signing a contract within which consumer can change their mind and cancel the contract without penalty
- supplier must return payments to consumer within 15 days of cancellation
- goods must be returned to supplier
exclusion clauses
contract provisions in which a party’s liability is limited if they do not fulfill their contractual obligations
unfair business practices
includes unfair, unreasonable or unjust treatment of the consumer by a supplier
examples:
1. high and unreasonable prices for goods and services
2. false advertising
3. committing fraud
a warranty
seller’s written promise that a product is reliable and free of defects
if a product breaks or becomes faulty it will be repaired or replaced
a guarantee
manufacturer’s written promise that the quality and durability of a product will comply with certain standards for a given length of time
if not, money will be refunded
grey goods
-articles sold without manufacturers’ permission
- not illegal
import duties ARE paid
scams
- false and dishonest business transactions
- often linked to organised crime
- scammers make use of email, telephone, SMS
- anyone is targeted
internet scams
scammers advertise something for sale on internet that may not exist, victim pays
lottery scams
victim believes they won a large sum of money, sends bank details to gain access to it
sometimes a deposit is insisted upon to gain the money
phishing
person receives email supposedly from bank requesting them to log in and verify personal details, information is stolen, can lead to identity theft
credit card cloning
cards are inserted into ATM, magnetic strip is copied
stokvels
- savings club
- members contribute fixed amount of money to a central fund on a regular basis
- all members can withdraw from the fund
- each month/year a different person takes a turn to use the money
pyramid schemes
- unsustainable business model in which members are paid to recruit new members
- get rich quick moneymaking scheme
- promises high return on investments to members
- illegal in SA
multilevel marketing schemes
- similar to pyramid schemes
- companies sell products
- makes use of direct marketing
- sales agents receive part of sales income
- is legal in SA
taxes
- paid to South African Revenue of Service
- source of income for gov
- used to fund social programmes and public services
tax evasion
when tax payers use illegal methods to reduce tax liabilities
tax avoidance
when taxpayers use legal methods and good financial planning to reduce their tax burden
direct taxation
people should contribute to the wealth of the state in the same measure that they contribute to their own wealth
income tax
- levied on all income and profit received by a taxpayer
- main revenue for state
- paid in form of PAYE and provisional tax
pay as you earn
- tax that employer subtracts from employee’s income and pays to SARS
- tax is collected as income is earned
provisional tax
- paid by people with irregular income
- paid in 2 amounts, middle and end of year
- based on estimated income of taxpayer based on income of previous year
capital gains tax
tax pained on profit made when an asset is sold
property tax
- paid by homeowners to the municipality
- amount is calculated according to value and location of property
- money is used by municipality to provide infrastructure for services in communities
transfer duty
- tax levied on all property transactions
- paid when property is registered in buyer’s name
- amount paid is based on purchase price
estate duty
tax payable on a person’s estate after their death
indirect taxation
hidden tax in the price of goods and services, consumer is not always aware of this
value-added tax
- all consumers pay
- levied at 14%
- included in prices of goods and services
- paid to the state
- some gods are exempt
5 food items exempt from VAT
- brown bread
- raw eggs
- fresh fruit and veg
- samp
- lentils
excise duties and levies (sin tax)
-mainly imposed on non-essential articles
5 examples of articles on which sin tax is imposed
- petrol
- tobacco
- alcohol
- electronics
- perfume
customs duties
- levelled on all goods entering the country
- importer pays duties to the state and recovers it afterwards through sales to customers
interest rates
- expressed as a percentage of the full amount owed
- not fixed
repo rate
interest paid to the Reserve Bank
fixed interest rates
applies to a loan when interest remains the same for full period
variable interest rates
applies to a loan where interest rates fluctuate as bank’s interest rates changes
inflation
continuous increase in the prices of goods and services that brings about a decrease in the purchasing power of money
inflation rate
- the percentage at which the prices of goods and services increase in a year
- calculated with the help of the consumer price index
- expressed as an annual rate
- annual percentage change of the CPI
consumer price index (CPI)
- instrument used to calculate price increases and the inflation rate
- show the change in cost of a hypothetical basket of goods and services
3 consequences of inflation
- petrol price increases
- food price increases
- unemployment
