Contracts form the backbone of most daily transactions—whether between individuals, businesses, or service providers. While South African law allows many agreements to be concluded verbally (excluding exceptions like the alienation of land or a deed of suretyship), this often leads to disputes where facts are misrepresented or misunderstood. For this reason, it is highly advisable to commit all agreements to writing.

A written contract not only protects all parties involved, but also provides clarity in the event of disagreement. If a dispute arises, having clear terms on paper helps determine whether proper procedures were followed, especially in cases of contract termination or termination by agreement.

To avoid unnecessary legal risk, all parties should ensure that the contract contains express terms on how it can be ended and under what circumstances. Failing to follow those terms can result in an unlawful termination, leaving the defaulting party open to claims for damages.

Fixed-Term Contracts Under the Consumer Protection Act

When it comes to consumer agreements, the Consumer Protection Act South Africa (CPA) places specific limits and obligations on both parties, especially around fixed-term contracts. According to Section 14 of the Act, read with Regulation 5, any fixed-term consumer agreement may not exceed 24 months unless two conditions are met:

• The consumer expressly agrees to a longer term; and
• The supplier can demonstrate that the extended period provides a clear financial benefit to the consumer.

If these requirements are not met, the agreement may be invalid beyond the 24-month limit under the protection of consumers act.

Importantly, the Consumer Protection Act also sets out clear rules for contract termination:

• A consumer may cancel a fixed-term agreement early, provided they give 20 business days’ written notice to the supplier. While early termination may incur a reasonable penalty, this must be fair and aligned with the actual costs incurred by the supplier.
• The supplier, in turn, may cancel the agreement if the consumer commits a material breach and fails to remedy it within 20 business days of written notice.
• If no action is taken when a fixed-term contract expires, and no agreement cancellation letter is submitted, the contract will continue automatically on a month-to-month basis—a detail many consumers overlook.

Crucially, these rights and obligations under the CPA apply only to contracts with individuals, not juristic persons (like companies or trusts), regardless of their size or turnover.

Van Deventer & Van Deventer Inc. – Contract Termination and Consumer Protection Attorneys

Whether you're drafting a new contract or facing a dispute around contract termination, it's essential to understand your rights under the Consumer Protection Act. Fixed-term agreements, in particular, must be handled with care—especially when navigating termination by agreement, issuing an agreement cancellation letter, or avoiding unintended renewal on a month-to-month basis.

Our team assists clients with consumer matters and the enforcement or cancellation of contractual terms in line with the Consumer Protection Act South Africa. We can guide you through the requirements of the protection of consumers act, ensuring any agreement you enter or exit complies with the law and safeguards your interests.

Contact us.