JUST LIKE THAT? THE VOETSTOOTS CLAUSE - Noluthando Ndala Barnard Inc.

 

What is the voetstoots clause, and what defects can be covered by the legal concept?

In the normal course of operations, it will often be necessary for small businesses to purchase second-hand goods from local suppliers. In most cases, a voetstoots clause will affect the transaction.

 

The voetstoots clause essentially indemnifies the seller from any liability with respect to latent defects in the thing(s) sold. A defect is a flaw that creates an unreasonable risk of harm in the thing’s normal use. A defect is either defined as latent or patent. A latent defect is a material defect, which is not visible after reasonable inspection of the property or goods, whereas a patent defect is one that is easily discovered by any person doing a reasonably thorough inspection. The inclusion of a voetstoots clause in a transaction means that the seller ‘contracts out’ of ensuring there are no latent or patent defects, meaning when a ‘thing’ is sold, it is sold with all its faults or as it stands. This term must expressly form part of the contract and it cannot be implied.

 

Importantly, if a misrepresentation – (which is a false statement of a material fact made by one party which affects the other party’s decision in agreeing to a contract) is made, the seller cannot rely on the voetstoots clause. Thus, an exception to the enforcement of the voetstoots clause is that the seller will not be relieved of responsibility for the selling of a defective thing when the seller has acted fraudulently or with malicious intent. If the purchaser can prove that the seller was aware of the latent defect and failed to disclose this to the purchaser, the seller will be held liable should any defects be discovered at any point in time. This precedent was set in Odendaal v Ferraris (422/2007) [2008] ZASCA 85 where the Court held that it is commonly understood “that if a purchaser hopes to avoid the consequences of a voetstoots sale, he must show not only that the seller knew of the latent defect and did not disclose it, but also that he or she deliberately concealed it with the intention to defraud”.

 

What remedies can be relied upon if you have entered into a prejudicial sales contract containing a voetstoots clause?

Section 55 of the Consumer Protection Act, no 68 of 2008 (‘The Act’) says that a purchaser is entitled to receive property that is reasonably suitable for the purpose which it is intended and is of good quality, in good working condition, and free of defects. It also states that the property or goods must be usable and durable for a reasonable period, failure to which will afford a purchaser certain remedies. These remedies include that of repair, replacement, and a refund. Although each contract has an implied warranty of quality, purchasers need to be aware that not every breach thereof will lead to a reimbursement for full damages. Another important aspect to note is that a voetstoots clause cannot be included in sale agreements where the seller is acting within the course and scope of its ordinary business. What this means practically is that, suppliers, in the normal course of their ordinary business, cannot waive their responsibility towards the service rendered/product sold, unless the agreement is between private persons acting outside of the scope of their ordinary course of business. Juristic persons with an annual turnover of more than R2 000 000.00 are also precluded from benefitting from the provision of the Act.

 

If you are the seller in a transaction where a voetstoots clause may apply, it is recommended that you disclose all defects as an annexure to the agreement of sale. This annexure should be installed by both the seller and the purchaser, as there exists a parallel obligation on the seller to disclose unusual or abnormal qualities. It is crucial that sellers understand when an agreement is subject to provisions of the Consumer Protection Act and whether a voetstoots clause may be incorporated into an agreement of sale. If in doubt, particularly in the case of large transactions, always consult a commercial attorney.

 

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