By Daniellé Giannico
The man walking off of the street looking to purchase a new or second motor vehicle can rest assured that his rights are protected from the proverbial dodgy car salesman as a result of the ample protection afforded to him in terms of the Consumer Protection Act.[1] The dealership is not so lucky, and in this article we will be looking at what the position is where a consumer walking into a dealership trades in a vehicle that is not what he makes it out to be.
APPLICATION OF THE CONSUMER PROTECTION ACT 68 OF 2008.
To determine whether the CPA is applicable to a transaction the starting point will be how the act defines a consumer. For purposes of the CPA a consumer is defined as an individual to whom goods and services are marketed in the ordinary course of business of the supplier, as well as an individual who enters into a transaction for the supply of such goods and services in the ordinary course of the supplier’s business.[2]
The Act excludes its application to consumers who are juristic person’s with an annual turnover of more than R2 million;[3] this is referred to as the annual threshold. It could be possible that a dealership does not meet the annual threshold requirement and would on this basis be regarded as a consumer in terms of the CPA.
The next hurdle would then be to look at who the supplier is for purposes of the trade in transaction. The definition of supply, together with the definition of consumer state that the goods and services being supplied to the consumer must be supplied in the ordinary course of the supplier’s business in order for the transaction to fall within the ambit of the CPA.[4] An individual who brings his personal vehicle to a dealership for the purposes of concluding a trade in transaction cannot be said to be a supplier of a vehicle in the ordinary course of his business and as a result the dealership will not be afforded protection under the CPA when concluding a trade in transaction.
DICTA ET PROMISSA – PHAME (PTY) LTD V PAIZES [1973] 3 ALL SA 501 (A)
Dictum et promissum[5]is a concept that comes from the Roman-Dutch common law. This concept has been defined as ‘a material statement made by the seller to the buyer during the negotiations bearing on the quality of the res vendita and going beyond mere praise and commendation’.[6]Very plainly put, it is a warranty made by the seller to the buyer which induces the buyer to conclude the agreement.
The leading case on dicta et promissa is Phame (Pty) Ltd v Paizes. We will briefly look at what was said in this case in so far as the court set out what conduct by the seller would in fact amount to a dictum et promissum, or warranty. Once it has been established that the conduct of the seller did amount to a dictum et promissum, we will turn to what the court said regarding the liability of the seller for the breach of such a statement made.
Firstly we must consider the factors that should be taken into account when determining whether a statement made by a seller goes ‘beyond mere praise or commendation’. These factors were set out by the court as follows-
‘whether the statement was made in answer to a question from the buyer; its materiality to the known purpose for which the buyer was interested in purchasing; whether the statement was one of fact or of personal opinion; and whether it would be obvious even to the gullible that the seller was merely singing the praises of his wares, as sellers have ever been wont to do.’[7]
With regard to the liability for making a dictum et promissum which later turns out to be false the court made reference to the decision in Beukes v Bekker[8] –
‘In my view when a purchaser establishes that he has been induced through a representation made by the
seller to offer a higher price than he would have given but for this representation and he elects to abide
by the purchase, he is entitled to a reduction in price[…]’
The court then goes on to quote from Hall v Milner[9] as follows –
‘But the better interpretation is that there is liability if the seller has either said something contrary to the
truth or has fraudulently puffed-up or commended the goods.’
The seller cannot be held liable for every statement he makes regarding the vehicle, only representations or assertion of a positive and material fact made about the quality of the vehicle will amount to a definite promise or warranty for which he can be held liable. It is inconsequential whether the seller was aware of the fault in the quality of the vehicle nor is it necessary to show that the dealership was misled by such a representation. [10]
What this means for the dealership is that where an individual offers a vehicle for the purpose of trading it in, the dealership is entitled to rely on the warranties made by the individual as to the quality of the vehicle. If these warranties turn out to be false later and the dealership suffers damages as a result, you will be entitled to rely on the common law Aedilitian Remedies to claim either damages or a reduction in the price you paid for the trade in. [11]
Eastern Cape Motors (Pty) Ltd v STU Davidson and Sons (Pty) Ltd (CA98/2015) [2016] ZAECGHC 109 (25 October 2016)
The facts of the case are briefly that Eastern Cape Motors (Pty) Ltd (the Appellant) acquired a Volkswagen Transporter from STU Davidson and Sons (Pty) Ltd (the Respondent) as a trade in vehicle for the amount of R245 000 when the Respondent purchased a Ford Ranger from the Appellant.[12] At the time that the transaction the Respondent completed inter alia, a Trade in declaration which contained the following clause ‘I/We warrant and declare that the vehicle has not been involved in a substantial/major accident (Particularly if it will affect the resale value)’.[13]The Respondent disclosed that the vehicle had been involved in an accident but described it as minor in nature. This was supported by photographs presented as evidence. The Appellant agreed that the damage was minor in nature and unlikely to affect the resale value of the vehicle.[14]
During the process of trying to resell the vehicle the Appellant approached a sales manager in order to sell the vehicle via an online auction.[15] The sales manager required information from the Appellant which he had to obtain directly from the manufacturer. The manufacturer provided the Appellant with the history of the vehicle which stated that in March 2012 the manufacturer’s warranty had been terminated and the vehicle had been declared a write off as a result of being involved in an accident. [16] The vehicle was finally resold during March of 2013 for R150 000.[17]
The question which the court had to decide on appeal was whether there was a breach of warranty for which the Appellant was entitled to claim damages. The Court held that the test for a dictum et promissum was ‘[an] affirmation made at the time of sale is a warranty provided that it appears on the evidence so intended’.[18] The court found that the Appellant had proved that a breach of warranty had occurred.
The Appellant claimed damages for the difference in what he had paid to the Respondent for the vehicle and what the vehicle had eventually sold for as well as the costs involved in transporting the vehicle to potential buyers.[19] The court held that ‘[the] fundamental rule in regard to the award of damages for breach of contract is that the sufferer should be placed in the position he would have occupied had the contract been properly performed without subjecting the defaulting party to undue hardship’.[20] The court awarded damages for the difference in what the vehicle was bought and sold for but not for the transportation costs.
Important to note here is that the warranty regarding whether the vehicle had been involved in a substantial car accident was included in the written agreement concluded between the parties when the vehicle was traded in. As a result of this the dealership was entitled to rely on breach of contract where the warranty was found to be false. It is therefore prudent for dealerships to have consumers, interested in trading in vehicles, complete some form of a written declaration as to the quality of the vehicle at the time of the trade in, however this is not requirement in order to rely on these remedies.
CONCLUSION
In summary, things are not as bleak as they seem at first glance, the law does also offer protection to the dealership and not only the consumer. The dealership is entitled to rely on statements made by the consumer regarding the quality of a trade in vehicle. Where these statements amount to dicta et promissa which induces the dealership to conclude the agreement and these dicta turn out to be false or the vehicle is full of latent defects which only become apparent after the dealership has already purchased the vehicle it will have recourse against the ‘dodgy individual’.
[1] The Consumer Protection Act, 68 of 2008 (the CPA).
[2] S1 Act 68 of 2008.
[3] S5(2)(b) Act 68 of 2008.
[4] S1 Act 68 of 2008.
[5] Plural – dicta et prommisa.
[6] Phame (Pty) Ltd v Paizes [1973]3 ALL SA 501 (a) at p. 513 (Phame v Paizes)
[7] Ibid.
[8] 1924 E.D.L 4 at p. 13.
[9] 1952 (20 S.A 304 (O) at p 314D.
[10] Corbet v Harris 1914 CPD 535 at pp. 543-4
[11] Phame (Pty) Ltd v Paizes [1973]3 ALL SA 501 (a) at pp. 512-513.
[12] Eastern Cape Motors (Pty) Ltd v STU Davidson and Sons (Pty) Ltd (CA98/2015)
[2016] ZAECGHC 109 (25 October 2016) (Eastern Cape Motors) at para 2.
[13] Eastern Cape Motors at para 3.
[14] Eastern Cape Motors at para 7.
[15] Eastern Cape Motors at para 8.
[16] Eastern Cape Motors at para 9.
[17] Ibid.
[18] Helibut, Symons & co v Buckleton [1013] AC 49-51, applied with approval
in Naude v Harrison 1925 CPD 84 at 90-91.
[19] Eastern Cape Motors at para 12.
[20] Eastern Cape Motors (Pty) Ltd v STU Davidson and Sons (Pty) Ltd at para 28.
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