Seeking to rely on a signed exclusion of liability & indemnity clauses? Beware the CPA

A recent High Court decision is a good reminder of the protection provided by the Consumer Protection Act (CPA) to consumers who have entered into agreements which limit and/or exclude the liability of suppliers for damages arising from services rendered.

A key takeaway from the decision is that, any party seeking to rely on a signed exclusion of liability and indemnity clause will have to demonstrate compliance with the provisions of the CPA. Proactive steps must be taken to bring exclusion of liability and indemnity clauses to the attention of consumers and concealing these in small print simply is not going to fly.

In the case of Hendrik Cornelius Van Wyk t/a Skydive Mossel Bay and UPS SCS South Africa (Pty) Ltd, the plaintiff had entered into an agreement for the transportation of an aircraft engine from the USA to South Africa. The engine was damaged during transit, resulting in it being declared a total loss. The plaintiff's attempt to claim damages arising from the loss was met by defences to the effect that the defendant's liability to the plaintiff had been excluded altogether or limited in accordance with the terms of a credit agreement signed by the plaintiff.

Although the plaintiff had signed the credit agreement and had, in the course of his own line of business required that his own customers sign agreements containing indemnity clauses with the result that he would have been aware of the clauses sought to be relied upon by the defendant, he denied that he was bound by the clauses relied upon by the defendant. The plaintiff denied that he was bound by the clauses on the basis that the clauses had not been drawn to his attention in a manner which complied with the requirements of section 49(3) to (5) of the CPA. This section requires a party that seeks reliance on certain contractual clauses to comply with prescribed requirements.

Considering the issues against the backdrop of Constitutional values and the purpose of the CPA, the Court found that the CPA places an obligation on a supplier to explain the existence, content and consequences of indemnity or exclusion of liability clauses. The clauses must be clearly and unambiguously brought to the attention of a consumer. They should not be concealed in an obscure and opaque section of the agreement which the consumer is unaware of.

The Court found that the relevant clauses in this case had been set out in two pages which, although presented to the plaintiff, were not very conspicuous or clearly delineated and no effort was made to draw the attention of the plaintiff to any of the provisions sought to be relied on. The clauses had also been written in an extremely small font. As such, the Court found that the clauses did not comply with the provisions of section 49 of the CPA, did not apply as a result of such noncompliance and that the defendant was not entitled to rely on them. Consequently, the defendant was held liable for the damages sustained by the plaintiff.

Although the Court did not find that the principle of caveat subscriptor (which means let the signor beware as a warning to signatories of agreements that they are liable for the ensuing obligations of agreements they have signed) no longer applies under our law, it found that the CPA seeks to temper the unjust and unfair application of that principle. It also seeks to prevent the formalistic application and harsh consequences of the principle as applied in previous cases.