In most agreements of sale, whether dealing with movable or immovable property, one is likely to find what is known as the Voetstoots clause.
In the case of property sale agreements, it means that the property is sold “as is”, meaning with all patent and latent defects (save for certain exceptions which is a topic for another discussion) and that no warranties exist in respect of the condition of the property.
Latent and patent defects
Standard definitions describe a latent defect as a fault that would not readily be revealed by a reasonable inspection, whereas a patent defect is where a flaw is not hidden and should easily be discovered by a reasonable inspection.
The effect of having a Voetstoots clause in sale of property agreements is that there can be no claims against a seller for defects (whether patent or latent), after the purchaser agrees to buy the property as it appears at the time of the sale.
Not disclosing known hidden property flaws is fraud
However, a seller will not be protected in the event that he/she knew of a latent defect in the property and failed to disclose it to the purchaser or when a seller intentionally conceals the defect from the purchaser.
In the case of Odendaal v Ferraris (422/07)  ZASCA 85;  4 All SA 529 (SCA); 2009 (4) SA 313 (SCA) (4 September 2008), the court held that “a seller who recklessly tells a half truth or knows the facts but does not reveal them because he or she has not bothered to consider their significance, may amount to fraud”.
What does the Consumer Protection Act say?
Even though the Consumer Protection Act 68 of 2008 (CPA) has been in effect since March 2011, there still seems to be a misconception around the Voetstoots clause as many people think that it is no longer applicable due to the protection afforded to consumers in the CPA.
The error lies in interpretation (or rather misinterpretation) of the ambit of the CPA according to which transactions the CPA applies to. The CPA applies to “transactions” in terms of which a supplier in the ordinary cause of business supplies goods to a consumer.
The term “transaction” for purposes of the Act, is a person acting in the ordinary course of business in terms of an agreement between two or more persons for the supply or potential supply of any goods and services. A “supplier” is stipulated as someone who markets or supplies any goods or services. A “consumer” is defined as a person to whom those particular goods and services are marketed/supplied to in the ordinary course of the supplier’s business, or a person who entered in to a transaction with a supplier in the ordinary course of supplier’s business, unless the transaction is exempted from the application of this Act.
“Goods” are defined as anything tangible or intangible as well as a legal interest in land or any other immovable property other than an interest that falls within the definition of ‘service’ in this sector (and consequently immovable property does fall within this definition).
CPA not applicable to private property sale agreements
Considering the above definitions and the ambit of the CPA, it becomes clearer that the Act will not apply to most day to day property sale agreements and as result a Voetstoots clause may validly be contained in such agreements.
The reason for this is that in respect of private sale agreements or transactions, the seller is not selling the property in the course of his normal business. For example, a once-off transaction between two individuals for the sale of a house, would not likely be a supply of goods in the ordinary course of the seller’s (supplier’s) business and could therefore contain a Voetstoots clause as the parties and the agreement does not fall within the ambit of the CPA.
Property developers or investors are subject to the CPA
Where a supplier does however act in the ordinary course of his business during a transaction, supplying goods (property) to a consumer, then the agreement will be subject to the CPA. In this case a supplier, such as a property developer or investor with a property portfolio, is likely to be subject to the Act, given that they acted in the ordinary course of their business. The seller (if selling to a consumer) will in this instance not be afforded protection by the Voetstoots clause.
Section 55 (2) provides that every consumer has a right to receive goods that
(a) are reasonably suitable for the purpose for which they are generally intended;
(b) are of good quality, in good working order and free of any defects; and
(c) will be useable and durable for a reasonable period of time, having regard to the use to which they would normally be put and to all the surrounding circumstances of their supply.
If the CPA applies then Voetstoots clause is invalid
As a result, if the CPA applies to a transaction then a Voetstoots clause cannot be inserted or enforced in an agreement as it would be contrary to the Act. We also know that you cannot contract out of legislation and any attempt to include a Voetstoots clause where the Act does apply would be invalid.
Section 48 (1)(c) (i) and (iii) of the CPA goes on to say that a supplier may not request a consumer to waive any rights or waive liability of a supplier. Any clause that has the effect of limiting a consumer’s rights cannot be unreasonable, unfair or unjust.
In terms of section 55 (6), a supplier will be able to escape liability for defective goods if or when the supplier sold goods to the consumer, the consumer was fully aware of the defects of the goods. The supplier must have informed the consumer verbally, expressly or in writing regarding any defects that may exist.
A consumer cannot hold a supplier liable for any defects that was brought to his/her attention .Thus a supplier will only be able to escape liability if the consumer was expressly informed thereof and not by means of a Voetstoots clause
A building inspector’s report can give property investors peace of mind
Given the above definitions, a property investor that is unable to rely on the Voetstoots clause would therefore be well advised to be as transparent as possible in disclosing the defects in the property. This could be done by way of attaching a building inspector’s report. In this way the consumer cannot say that he/she was not aware or advised of the defects.
Property buyer will always be protected by either CPA or Voetstoots clause, depending on transaction
In conclusion, agreements are only affected by the CPA if the supplier and consumer enter into a transaction for goods or services as set out in the Act. Therefore, it has to be within the ordinary course of the supplier’s business such as, property sale agreement between a developer and consumer. In this case the consumer will be protected by the CPA and the Voetstoots clause will be nullified. A property sale agreement is not subject to the CPA, for example if it is a once-off agreement between individuals as the seller does not operate within the ordinary course of his/her business and therefore the “Voetstoots” will be enforceable.
Those entering into transactions of this nature should distinguish whether their agreement is subject to the CPA or if the Voetstoots clause may be present. For any assistance with Conveyancing or Property Law matters, please contact our attorneys.
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