Cancellation fee: gym contract (201506-000377) [2016] ZACGSO 1 (25 January 2016)

Cancellation fee: gym contract (201506-000377) [2016] ZACGSO 1 (25 January 2016)

The supplier's method of calculating the cancellation fee by charging 50% of the remaining contract value is unreasonable and contrary to section 14 of the Consumer Protection Act and its regulations. The CPA permits cancellation of fixed-term contracts with 20 business days' notice and allows only a reasonable penalty reflecting actual costs incurred, not future profits or losses. The supplier failed to demonstrate a financial benefit for the extended contract term and did not mitigate its losses. The recommended cancellation fee should include only outstanding arrears, a reasonable annual levy, and a balancing figure for actual administrative costs, totaling R1100. The supplier's...

Citation
[2016] ZACGSO 1
Parties
Applicant: Complainant; Respondent: Supplier
Court
Consumer Goods and Services Ombud
Jurisdiction
South Africa
Judgment Date
25 January 2016
Case Number
201506-000377
Procedural Posture
Consumer Complaint / Recommendation
Outcome
The supplier is recommended to charge the consumer a cancellation fee limited to actual arrears, a reasonable annual levy, and administrative costs, totaling R1100.
Judges
N Melville
Legal Topics
Consumer Protection Act, Fixed Term Contracts, Cancellation Fee, Reasonableness of Penalty
Commercial and Corporate Consumer Protection Act Fixed Term Contracts Cancellation Fee Reasonableness of Penalty

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Downloadable case file Legal principles 5 Authorities cited 10 Party arguments 2 Amounts and remedies 4
Sign in to unlock

Parties

Complainant

Applicant

Supplier

Respondent

Procedural Posture

Consumer Complaint / Recommendation

Legal Issues

  1. 1 Whether the supplier's method of calculating a cancellation fee is reasonable under the Consumer Protection Act.
  2. 2 Whether the supplier may claim future losses as part of the cancellation penalty.
  3. 3 Whether the contract term of 36 months is permissible under the CPA and its regulations.

Ratio Decidendi

The supplier's method of calculating the cancellation fee by charging 50% of the remaining contract value is unreasonable and contrary to section 14 of the Consumer Protection Act and its regulations. The CPA permits cancellation of fixed-term contracts with 20 business days' notice and allows only a reasonable penalty reflecting actual costs incurred, not future profits or losses. The supplier failed to demonstrate a financial benefit for the extended contract term and did not mitigate its losses. The recommended cancellation fee should include only outstanding arrears, a reasonable annual levy, and a balancing figure for actual administrative costs, totaling R1100. The supplier's...

Court Disposition

The supplier is recommended to charge the consumer a cancellation fee limited to actual arrears, a reasonable annual levy, and administrative costs, totaling R1100.

Orders

  • The supplier must charge the complainant a total cancellation fee of R1100, comprising R747 arrear membership fees, R199 annual levy, and R154 for estimated actual costs.
  • The supplier must not impose a penalty based on future profits or the remaining contract value.