Plain Language finally makes it to the High Court

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I wrote this blog for Siber Ink who will be publishing my book on Consumer Law early next year.

The Durban High Court recently came to the aid of a consumer who had purchased a defective vehicle financed by Standard Bank. Mr Dlamini returned the vehicle to the dealership where he had bought it, because it malfunctioned within days of purchasing it. He asked the dealer for his refund and cancelled (or so he thought) the finance agreement.

In the meantime the bank demanded payment in terms of the credit agreement and when it did not get it, issued summons for the return of the vehicle, confirming the termination of the credit agreement. It relied on a clause in the agreement which provided that the agreement must be terminated by sending a notice to the bank’s vehicle and asset finance division via fax. Mr Dlamini terminated the agreement with the dealership where he bought the vehicle, but this, according to the bank, was not good enough. The bank alleged that this was a ‘voluntary surrender’ which typically takes place when a consumer cannot afford the repayments. This had significant financial implications for Mr Dlamini and that is why the matter ended up in court.

Mr Dlamini maintained that he did not know that he had to notify the Standard Bank, because he thought that the dealer who sold the vehicle to him also worked for the bank.

Here is what the judgment tells us about Mr Dlamini:

‘Mr Dlamini is functionally illiterate and does not understand English. This is as obvious to me as it was to Mr Mtetwa [the dealer]. Mr Dlamini completed schooling at standard one. At 52 years, he is an unsophisticated African male. He had difficulty in the witness stand engaging with the documents. He had become so excited about the purchase of a vehicle that he paid little attention to the repayment plan. He relied on the Bank to deduct reasonable instalments. He did not expect the Bank to deduct a high amount that left him without the means to support himself, his wife and his two little children. He expected to discover what the amount of those instalments would be when the Bank deducted its first instalment from his account. He trusted his bank. On discovering that he bought a defective vehicle he returned it intuitively to the person who sold it to him.’

The judgment should be of interest to drafters of consumer facing agreements for several reasons. First, the application of this judgment is not limited to credit agreements. The purpose of the National Credit Act and its plain language provisions are virtually identical, which means that the reasoning can be applied to all consumer agreements.

Second, it settles the debate on whether consumer rights must be recorded in the agreement or whether suppliers can just keep quiet and hope for the best. The agreement recorded the consumer’s obligations under the National Credit Act when it came to termination but not the consumer’s rights. This violates the consumer’s right to education and information in terms of section 3 of that Act and was described as ‘deliberate and deceptive’ in that it ‘discourages rescission which is the consumer’s statutory right.’

Third, it places an obligation on a supplier to ensure that an agreement should not be made more onerous through the business practices employed by the supplier. So for instance it would have been relatively easy for the bank to force it agents (the dealership) to report returned vehicles rather than to require the consumer to notify the bank. The court described the latter practice as a ‘veritable trap for poor, illiterate and disadvantaged people who intuitively would return defective goods to a supplier [the dealer] and ask for a refund.’ Even a witness for Standard Bank speculated that this was for the convenience of the bank and not of the consumer. This should ring a bell for plain language practitioners. The first rule of drafting plain language documents (and shaping the underlying business practices) is that a document is drafted with the consumer in mind and not the supplier.

I can hear the (Latin) grumbling of the more conservative members of my profession about the principle of caveat subscriptor. For them, the judgment convincingly (although perhaps not elegantly) argues that the agreement would not have held up under the common law either as Mr Dlamini’s error was iustus. Yes, my use of Latin in this paragraph is meant to be ironic.

For me, the most important part of the judgment was the following:

‘Institutions such as the Bank should welcome the framework proffered by the NCA and the CPA for bridging the socio-economic inequalities substantively and for reforming the credit industry, if for no reason but that sustained inequalities and need lead to unrest and social instability which is not good for business.’

This is not only a good point, but also the method which I use to ‘sell’ plain language contracts. Plain language and generally fair contracts are good for business. If a contract is not aimed at making the transaction understandable to consumers, what are we doing really? More importantly, if the consumer understands the contract, would the dispute have reached the court with the related legal and reputational costs? In short, contracts should be written in consensus building language, which means that it must be understandable.

PS: Judges should really start attaching the contract under discussion in their judgments (or the publishers of law reports should). The value in these precedents lies in the fact that they give guidance to future drafters. This value is greatly diminished if the reader does not have the contract in front of them. Nevertheless, for those wishing to read the judgment as delivered (sans accompanying contract), you can find it by clicking here.

PPS: Elizabeth de Stadler is the author of a forthcoming Siber Ink title, Consumer Law Unlocked. This will be published in early 2013, but copies may be purchased online at a special pre-publication price of only R280 (the published price is expected to be R350). For further details, please click here.

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