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2.1.1 Discussion Paper 65 was published during July 1996. Copies of the discussion paper were widely distributed to organisations, institutions, government departments and individuals, such as the Lawyers for Human Rights, the Black Lawyers Association (BLA), the Legal Resources Centres, the Corporate Lawyers Association of South Africa (CLASA), the Council of South African Banks (COSAB), the Consumer Council, the South African National Consumer Union, the National Black Consumer Union, the Black Sash, Business South Africa, the South African Chamber of Business (SACOB), the South African Property Owners Association (SAPOA), the Organisation of Civic Rights, the Housing Consumer Protection Trust, the Association of Arbitrators, the Human Rights Trust, the Human Rights Commission, Law Societies, Bar Councils, Judges President of the High Court, the Chief Justice of the Supreme Court of Appeal, deans of law faculties in South Africa, Chief Magistrates, Senior Magistrates, State Attorneys, attorneys, advocates, Directors-General of Governmental Departments and foreign law reform bodies.
2.1.2 The closing date for comment was initially 30 September 1996, which was finally extended to 15 November 1996. A few respondents, however, favoured the Commission with comment as late as February 1997. A notice was published in the Government Gazette on 8 August 1996 which contained a overview of the discussion paper and its recommendations and a request for comments.[13] The legal periodical De Rebus[14] and the newspaper The Star[15] also informed its readers of the availability of the discussion paper and its recommendations. The Beeld[16] newspaper reported on SACOB's views regarding the proposals and the Financial Mail[17] on SAPOA, Professors Louise Tager and Alfred Cockrel and the Business Day on Mr Peter Leon's [18] comments.
2.1.3 A number of 45 respondents submitted comments to the Commission in respect of discussion paper 65 and the views of persons such as Professors Luise Tager and Alfred Cockrell and Mr Peter Leon were reflected in the media. A number of 18 respondents supported the "no approach" meaning that the existing mechanisms are adequate, that the proposed legislation should not be passed and that consumers should be protected more effectively by extending existing mechanisms and implementing effective preventative administrative mechanisms.[19] Two of the 18 respondents indicated that their comments should be categorised as an "unqualified no" response to the proposed measures. Six respondents supported the "yes approach," meaning that legislation, empowering courts to review contracts, as proposed should be passed.[20] Twenty respondents supported the "qualified yes" approach, meaning that the proposed curial power should be limited.[21] Furthermore, three respondents noted specific problems involved in the law of contract, without addressing the question which one of the three stated specific approaches should be adopted. One of these three respondents drew attention to unfair terms relating to the payment of cellphone accounts even where such accounts are incorrect, another noted unjust and ambiguous terms contained in agreements of sale governing the payment of levies and the creation of a maintenance fund reserve, and the third respondent drew attention to the likely effect of the envisaged legislation on first demand guarantees.
2.2.1.1 As we saw above a substantial number of 18 respondents believe that the proposed general power of review is undesirable since the aim of the Bill can allegedly be achieved either through the existing common law remedies or through preventative administrative action, through the giving of real authority to existing consumer bodies or protection mechanisms which in the end-result would amount to a large degree of self-regulation, consumer awareness and pro-active competitor regulation. The second point of view, albeit of a small group of six respondents, states unreservedly that there is a need for the proposed legislation. The question whether it can be averred that the majority view is that there is indeed a need to introduce the proposed legislation, is determined by the third group of respondents supporting the "qualified yes approach". These respondents believe that there is a definite need for legislation but they suggest that the proposed legislation should be qualified concerning-
2.2.1.2 One respondent, Mr J Hoffman, states that the phenomenon of unconscionability should be a matter for our common law and not Parliament[22] and he considers that McNally JA's view in Transport and Crane Hire (Pvt) Ltd v Hubert Davies & Co (Pty)Ltd 1991 4 SA 150 (ZS)[23] deserves credit. Mr Hoffman remarks that it is evident that our courts have made policy-based interpretations on numerous occasions, this being the result of the inability of the South African common law to adequately address the question of unconscionability in contracts. He believes that it is awkward that the judges are willing to consciously make use of artificial interpretations of unconscionable terms in contracts but when it comes to the adoption, or the opportunity to confirm the existence in our law of common law remedies able to effectively address the question of unconscionability, they refuse to do so. He considers that one of these opportunities presented itself in the form of the exceptio doli generalis; that the general approach by our courts to shy away from an attempt to formulate a general doctrine of contractual morality, can easily be ascertained; the courts have rather had recourse to Parliament to deal with the question of contractual morality; and this ad hoc approach to control often fails in its objectives because of poor draftsmanship of their provisions or because their whole approach to control is fundamentally unsound.
2.2.1.3 Mr Hoffman poses the question whether our common law has the ability, or in the alternative, the adaptability to give rise to the justifiable requirement of judicial control in the sense of the creation of a general and elastic criterion able to account swiftly and with clarity to limit or exclude unconscionable contracts? He considers that it is evident that a great need exists in our law to remedy our current position on the treatment of unconscionable terms in contracts but that it has to be conceded that no case for the common law coming to the rescue has been established on a preponderance of probabilities. He states although many plausible and noble contributions have been made by legal commentators and even judges, the fact of the matter is that the doctrine of fundamental breach will in all likelihood never surface in our courts, given its fate in its country of origin and the rejection thereof in our courts in the past. He considers that it was a noble and brave effort from Lord Denning, but commerce and practice prevailed in the end.
2.2.1.4 Mr Hoffman is of the view that the exceptio doli generalis, if viewed with an energetic imagination, can be regarded as more or less the South African equivalent of the English doctrine of fundamental breach, and just as uncertainty surrounded the doctrine for a number of years until the Suisse Atlantique Societe d' Armament Maritime SA v NV Rotterdamsche Kolen Centrale[24] case, likewise with the exceptio doli generalis until the Bank of Lisbon v De Ornelas[25] case. He notes that in both instances a conglomerate of credible criticism followed the judgments,[26] as happens after every "cast in stone" judgment, but in both cases the judgments persevered. Hence, he considers that the proponents for the resuscitation of the exceptio doli generalis face a mighty battle indeed and it might well have disappeared into the annals of legal history forever, however, if Professor AJ Kerr[27] is correct, the exceptio doli generalis might just answer all the questions.
2.2.1.5 Mr Hoffman believes that it seems inevitable that Parliament will pass legislation based on this investigation in the near future which will remedy the current situation, that it will be a very welcome supplement to our consumer protection legislation, but that it will also be a sad day for our legal system. He considers that it will be an admission of failure of our common law, a system ironically based on equity, to adequately come to the rescue of "victims" of unconscionable terms. He notes that the future resuscitation of possible common law remedies, like the exceptio doli generalis, will also be deprived of opportunities by a statutory replacement and that we are perhaps now back where we started in Roman days, a few months or weeks away from the Praetor issuing legislation to secure simple justice between man and man.[28]
2.2.1.6 Prof RH Christie remarks that the proposed legislation would interfere with the development of the common law by shackling the courts to the wording of the statute. He considers that once the Appellate Division had interpreted the statutory criteria its interpretation would be binding as a matter of law, but that public policy is a matter of fact not law. Prof RH Christie states that looking at the proposed Bill's three criteria of whether a contract is "unreasonable, unconscionable or oppressive,' the common law, using its flexible instrument of public policy, is already prepared to declare unenforceable a contract or term that is "plainly improper and unconscionable" or "unduly harsh or oppressive"[29] but has wisely decided not to interfere with a contract or term that is merely unreasonable unless it is in restraint of trade or is contained in a document that is signed without being read or in an unsigned document such as a ticket. He is therefore of the view that there is no need for legislation.
2.2.1.7 Adam Fletcher however supports the introduction of legislation on the matter.[30] He indicates that he finds the most compelling indication in favour of legislative entrenchment of good faith in contracting to be the stance taken in other jurisdictions. He argues that the time is nigh for good faith to be elevated to a position from where it can operate against substantive, and if necessary, procedural unfairness in contracts. He beliefs the concept is not taken sufficiently seriously in South Africa, and that legislation is the most viable and expedient method of attaining this goal.
2.2.1.8 Prof Reinhard Zimmermann asks whether the formalistic and clinical conclusions of the majority in the Bank of Lisbon v De Ornelas case mean that the Roman-Dutch law should have lost the feature which enabled it to survive in the modern world, its flexibility to react to new challenges and to accommodate new problems, and its openness to considerations of policy.[31] He also asks whether the description of Roman -Dutch law as a strong and vibrant legal system with a powerful inherent capacity for growth have become pure hypocrisy. Prof Zimmermann notes that freedom of contract and pacta sunt servanda have, in the course of this century, increasingly come under assault as a result of, inter alia, rampant inflation, monopolistic practices giving rise to unequal bargaining power, and the large-scale use of standard form contracts. He remarks that extreme individualism was short-lived and that there is today, all over the world, a transition from freedom of contract to social responsibility. He explains that this development can be described as a return to the ethical foundations of the earlier ius commune. Prof Zimmermann notes that many of the doctrines designed to accommodate the concern for substantive justice have been abandoned such as the clausula rebus sic stantibus and laesio enormis and the will theories replacing them have turned out to be in many ways deficient. He considers that the introduction of legislation such as the Credit Agreements Act, the Usury Act, the Conventional Penalties Act and the Alienation of Land Act are examples of the legislature attempting to readjust the balance. In referring to the investigation conducted by Prof CFC van der Walt as part of this investigation, Prof Zimmermann notes that the perception has been gaining ground that the issue of unfair contract terms has to be addressed in a more fundamental, less fragmentary manner.
2.2.1.9 Adam Fletcher notes a number of alternatives to legislative reform:[32] He remarks that Carole Lewis advocates a modification of the literal approach to interpreting contracts in order that the real intention of the parties can be ascertained as opposed to being purported to be ascertained.[33] Prof R Zimmermann also considers[34] her proposal which has been suggested to counter the inequity arisen in cases such as Bank of Lisbon and Rand Bank v Rubenstein[35]. He remarks that it would be naive to assume that this is the only remaining problem area for which another route to contractual equity has to be devised after the demise of the exceptio doli. Adam Fletcher further notes that Proff GF Lubbe, C Murray and A Cockrell speculate that the defences of undue influence and duress could be extended to cover situations of economic duress and undue influence and thereby provide relief from unfair contractual terms. Prof Zimmermann also considers this proposal that the doctrine of undue influence has paved the way for the recognition of abuse of circumstances as a general ground for the rescission of contracts. Prof Zimmermann is of the view that the proposal essentially accepts the parameters set by the will theories: the courts are merely concerned with the fairness of the bargaining process. He points out that the assumption here is if that the result of fair negotiations is likely also to be substantially fair. Prof Zimmermann notes that recognition of this ground would mean an extension of the existing list of defences consisting of fraud, misrepresentation, duress, and undue influence. He further points out that proposals were made By Professors LF van Huyssteen and SF van der Merwe that a change of circumstances may effectively render a contract unenforceable. Prof Zimmermann is however of the view that there is no signs of this kind of renaissance of the clausula rebus sic stantibus in South African case law.
2.2.1.10 Adam Fletcher further states that although these alternative suggestions to legislative reform considered by him are useful and valid, they ignore the fact that leaving the issue in the hands of the judiciary will prolong the process of reform indefinitely. He further considers that the legal record indicates the contrary. Adam Fletcher suggests that legislation is a preferable medium of legal reform in the current situations because of the following reasons which have, inter alia, been pointed out by the Commission,[36] namely that courts are slow, costly, incapable of abstract preventative action, ill-equipped for policy decisions and bound by precedent.
2.2.1.11 A number of respondents vehemently opposed the proposed legislation on the ground of the alleged large scale uncertainty which will result from the Bill: It is alleged that what is in issue is the sanctity of contract,[37] a subsequent challenge to this principle based on the provisions of the interim Constitution has failed,[38] the problems occasioned by continuing to apply the sanctity of contract approach are overstated and sanctity of contract is the cornerstone of the economy. Uncertainty would therefore be introduced by the proposed legislation.[39] A considerable period of uncertainty will be followed by expensive and non productive time consuming litigation. By giving a general review power to the courts the legislature will create uncertainty, swamp the courts with litigation and inhibit trade and commerce.[40] Any party which, as a result of second thoughts or intervening circumstances, is unhappy with the consequences of a contract freely entered into will without doubt attempt to use the provisions of the Bill to its own advantage. The phrase "sanctity of contract" is not an empty one and is recognised in most countries either judicially or by statute. The whole concept of law is to create order and certainty and where such order or certainty is absent, a profound effect on formal, everyday commerce can be expected and will result. Although not detailed in the discussion paper, this aspect has clearly been considered by the Working Committee, but consigned to a less important role for reasons (to the extent given) which are not compelling.[41]
2.2.1.12 Further comments pointing to the effect predicted by the previous respondents are as follows: The proposed legislation will become the first resort of the pleader in contract litigation; whatever criteria are laid down for adjudging the fairness or otherwise of a contract or contractual term, the door must be opened to the adducing of evidence to enable the court to adjudicate the issue; a non-excipiable defence could almost always be advanced, on however tenuous grounds, to delay the early resolution of even the most clear contractual claims; the phrase litigation paradise[42] is appropriate to describe what will follow the enactment of such legislation; the task of the lawyer advising his or her client would be rendered almost impossible; each case would have to be decided on its own merits and reliance on precedent may well prove hazardous, as a particular contractual term could be held to be fair in one case but unfair in another, due to differing circumstances pertaining at the time of the conclusion of the contract; commercial certainty in the drafting of contracts would be difficult, if not impossible, to achieve; and the common law relating to contracts has developed over a long period to strike a balance between contractual certainty and what can be described as equitable considerations.[43]
2.2.1.13 Respondents remark also as follows: The present proposals of the Commission are just as or even more unacceptable than its earlier proposals.[44] Legislation such as proposed was not successful even in a highly developed country such as Germany and a lot of litigation was needed there to regain a measure of legal certainty after the Allgemeine Geschäftsbedingungengesetz commenced in 1977. Even today after two decades the legislation causes enormous uncertainty. Those who have not yet realised that legislation, such as is proposed, will be totally counterproductive, will probably never realise it. It is hoped that this form of "social engineering" will be abandoned. The only results to be attained by the proposed legislation are to further damage economic initiative and development in this country.[45]
2.2.1.14 The following concerns were also raised: The extent to which the common law powers are to be modified or replaced by proposed legislation would be disputed, leading to uncertainty and expensive litigation. This has happened in Israel with the Contracts (General Part) Law 1973, sections 12 and 39 of which impose a criterion of good faith, and there is every reason to expect the same to happen in South Africa with a statute of a similar nature.[46] The common law of contract, based on the principles of freedom of contract and pacta sunt servanda, has been evolved primarily to meet the requirements of the business world, but it is a mistake to think of it as concerned only with the requirement of predictability.[47] It contains many principles and rules designed to produce a just legal outcome when the contract does not conform to the classical pattern of a well-considered bargain between well-informed parties. Misrepresentation, fraud, duress, undue influence, mistake and common law illegality and unenforceability spring to mind. One of the unintended consequences of the proposed Bill would be to create a "demarcation dispute" between the common law principles and rules and the new statutory criteria. This has happened in Israel with the Contracts Law of 1973. In South Africa there would be a similar demarcation dispute because our courts are poised to achieve the desired result by developing the common law without the aid of legislation.[48]
2.2.1.15 The proposed legislation will encourage litigation, litigation lawyers will have a new source of work, it will create a massive risk for the lawyers in the commercial field, and lawyers will have to call for indemnity and extra insurance cost will be incurred.[49] The development of sanctity of contract, although mostly centred around the restraint of trade issue, indicates the need not to meddle therewith. Merely an assumption that there could be uncertainty or unfairness is insufficient grounds for change which would definitely have adverse effects, change common law and throw into disarray the current structure. This is so, even if existing statutes, or the common law, does not initially seem to be ad idem with the Constitution. The courts will loose their character of judicial courts and become equity courts with uncertainty reigning supreme.[50] The Labour Court functions as a court of equity and not a court of law therefore there has hardly been talk of certainty during the years. The legislation would be a waste of costs, interpretation would lack certainty and the Bill would lead to further unwarranted doubt.[51]
2.2.1.16 Respondents argue, furthermore, as follows: The concept of public policy in the common law has a restricted application, and the proposed legislation would presumably be interpreted to grant a greater licence to courts to interfere with contractual relations than is provided by the common law.[52] The effect thereof would be that the validity of many contracts would be in doubt. Even if the proposed legislation is limited to contracts which are considered "unconscionable" the results would be unpredictable.[53] The wide discretion afforded a court will not only undermine legal certainty, but it will also destroy commercial certainty by interfering with the market place and, furthermore, it could inhibit trade and commerce and discourage local and foreign investment.[54] One would not know, when concluding a contract in respect of which South African law is the governing law, whether or not and how that contract might be re-written by a South African court. The fact that the provisions of the Bill may not be waived or limited will interfere with the right to choose the law which will govern contracts and it will, in turn, have a detrimental effect on business in those cases where the parties do not wish South African law to apply. The sanctity of contract is a sound and well-established principle which should prevail and not be tampered with.[55]
2.2.1.17 Respondents also raise the following concerns: Enactment of the proposed legislation would be tantamount to re-introducing elements of the doctrine of laesio enormis, originally limited to land sales but later extended to many contracts, allowing rescission of a transaction where consideration was below half of true value. The "antediluvian fossil" was vilified by the case of Tjollo Ateljees v Small 1949 1 SA 856 (A), urging its repeal by legislation as being out of keeping in the modern world with its highly developed commercial and financial organisation and which was done by the passing of the General Law Amendment Act, 1952. A general law such as is proposed, could undermine legal certainty in the law of contract to the detriment of, and at great expense to, the business community as it would undoubtedly precipitate a deluge of vexatious actions. Legal certainty is an important element in economic decision-making, as a party to a contract must have reasonable assurance of the validity and enforceability of the rights and obligations flowing from the contract. Legislation of the nature envisaged often encourages parties to challenge or cast doubt on the validity of contracts on mainly spurious grounds, simply because they no longer wish to be bound thereby for whatever reason. This would in turn add to already congested court rolls and onerous case loads to be dealt with by a legal system, presently heavily overworked, and understaffed. The provisions of the Bill requiring a court to amend a contract is tantamount to calling upon it to make a new contract for the parties. This is in itself an unfair burden on the judiciary, many of whose members are known to regard the prospect thereof with disfavour. How is a court to arrive at a substitute formula in the case of a long term contract in terms of which the price is to be determined by a formula and the court is asked to conclude that the result of such formula is "unreasonably prejudicial".[56]
2.2.1.18 Finally, respondents argue as follows: The very drive internationally towards electronic contracting and distribution mechanisms is founded upon the fact that the concept of sanctity of contract results in commercial and customer certainty.[57] This is a solid foundation, well established, well protected and well policed. It is upon this foundation that new methodologies of contracting are implemented. Should a court at some point in time be empowered beyond current legislation to rectify, vary or, even worse, try to interpret or establish the intention at the time of contracting, the solid foundation of contracting could be undermined.
2.2.1.19 Adam Fletcher however argues that good faith should be accorded more importance and influence in the South African law of contract in order that it can serve as a much needed tool of equity and fairness in a commercial era where these aims are increasingly prone to neglect and abuse.[58] He addresses the argument that allowing good faith to effect the substantive validity of contracts will detract from legal certainty:[59] He submits that this may be true and that one cannot deny that certainty in law is important. He however states that he feels that the concerns for certainty are somewhat misplaced. He argues that, on a simplistic level, if one considers good faith and public policy in contract law at present, a degree of uncertainty exists already, and in particular with the latter. He believes, furthermore, that carefully drafted legislation can combat uncertainty and may allow a degree of judicial discretion which would be vital given the abstract nature of good faith. He also considers that in the end the general pursuit of justice between contracting parties must prevail over legal certainty. He notes that efforts to maintain certainty will result in a failure to do justice to contracting parties' expectations, which is a worse evil than legal uncertainty. His conclusion on the question of certainty is that while legal certainty is a valid concern, it is not so crucial as to be prohibitive of according good faith a more prominent position in contract law.
2.2.1.20 A recurring comment by respondents is that the existing legislation is sufficient and that if in any particular field greater protection is required, it should be applied ad hoc to the specific evil which is intended to be countered. The respondents who are of this view proffered the following arguments: Some of the malpractices referred to in the discussion paper are already protected by law, others can readily be protected by relatively minor legislation, or there are a number of Acts which are aimed at precisely all or some of the same problems at which the Bill is aimed.[60] The South African common law and statute law, together with the Constitution, provide adequate general protection to, and relief to parties who feel aggrieved by unreasonable, unjust or unfair contract stipulations.[61] Greater consideration could have been given to specific amendments to the plethora of consumer protection laws, too many, on the statute book, aimed at preventing undesirable practices, eg the Credit Agreements Act, Usury Act, Prescription Act, Conventional Penalties Act and Harmful Business Practices Act, and a host of others,[62] to the imposition of a general obligation of good faith such as that imposed in the American Uniform Commercial Code[63] and any further legislative intervention should be directed towards specific areas of abuse without introducing provisions to cover all contracts generally.[64]
2.2.1.21 Furthermore, these respondents argue as follows: Since there are a number of statutes which protect contracting parties against harsh or oppressive terms in specific circumstances, no legislation is necessary at present, save perhaps in specific types of contracts in which experience has shown that contractual freedom is being abused.[65] The Judges argue that in general, these provisions provide with greater or lesser clarity which provisions are regarded as objectionable, and, in addition, the courts have a common law power to set aside contracts on the grounds that they are contrary to public policy. In exercising this power, the court in terms of Sasfin v Beukes 1989 1 SA 1 (A) has regard to features such as that the contract is "unconscionable", "unduly prejudicial" or "grossly exploitive". Hence, these provisions are sufficient.[66]
2.2.1.22 In addition it is argued that sufficient consumer protection mechanisms exist currently, such as the National Business Practices Committee, and the Consumer Affairs (Harmful Business Practices) Act of Gauteng and the bodies potentially protecting the consumer already in place should rather be empowered to take action.[67] The existing consumer protection legislation can be varied, as opposed to being replaced, and the same result or better result achieved.[68] Any limitations on the freedom to contract, intended to address the perceived unconscionable clauses, should be set down in: statute law such as national or provincial consumer protection legislation, the Long-term Insurance Act; self-regulatory codes governing the conduct of certain sectors; and more generalised codes of conduct and effective action by way of orders given substance by the Harmful Business Practices Act. As to the latter two forms, the consumer protection legislation could empower, or at least guide, the courts to strike down or rectify clauses which are found to be in breach of the relevant codes. The only means of public policy control over contract provisions by express prohibition or invalidation should be via some codification mechanism, which may be varied from time to time, without retrospective effect, thus preserving the integrity and certainty of contracts yet eliminating the worst manifestations of unconscionable terms.[69]
2.2.1.23 Further costly structures are being proposed when enabling legislation should rather help existing structures to operate as effectively as possible.[70] Attractive as the proposals may seem, it would almost certainly fall victim to what neo-conservative thinkers call the law of unintended consequences and would do more harm than good.[71] One unintended consequence would be to create a form of demarcation dispute between the courts' new statutory power and their existing common law powers to intervene in cases of misrepresentation, fraud, duress, undue influence, mistake and common law illegality and unenforceability.[72]
2.2.2.1 A number of South American countries have enacted legislation since 1990 providing for consumer protection against unfair contracts similar to the existing legislation in other so called first world countries.[73] Extensive consumer protection statutes were introduced which, among other things, provide a range of administrative and judicial remedies.[74] There were developments in Europe too, where the members of the European Union had to ensure that their national law conform with the principles contained in the European Directive on Unfair Contract Terms, and, furthermore, in Africa, such as the Zimbabwean Consumer Contracts Act 6 of 1994 and the Model Law for Consumers in Africa. We also note in this Chapter that good faith and fairness are part of international law too.
2.2.2.2 The contractual doctrine of good faith inspired a sometimes critical and otherwise supportive reaction to a contractual doctrine of good faith in a number of foreign jurisdictions:[75]
"In 1984, Professor Michael Bridge, then of McGill University, took aim in a major article at the doctrine of good faith performance as it had been developed south of the Canadian border. He speculated that, ?Far from involving the community ethic in the day-to-day task of law-making and decision-making ... good faith is more likely to produce idiosyncratic judgment'. It was Bridge's conclusion that ?Anglo-Canadian law does not need to legislate a standard of good faith because it has evolved sufficiently towards the protection of justified expectations' and that while ?a preoccupation with [good faith] is useful in articulating contract theory and in defining the goals that our contract law is harnessed to serve, good faith could well work practical mischief if ruthlessly implanted into our system of law'. Professor Roy Goode told an Italian audience that ?we in England find it difficult to adopt a general concept of good faith'. He seemed not at all overcome with regret and added that ?we do not know quite what [good faith] means'.
Other English jurists, however, have been more positive about a doctrine of good faith performance. As far back as 1956, Professor Raphael Powell observed that ?there are a number of individual cases in which the [English law of contracts] contains an element of ... good faith' and opined that ?[f]or want of a rule of good faith the courts have upon occasions had to resort to contortions or subterfuges' or ?to fictitious implied promises.' In 1991 Steyn J, in a lecture on good faith at Oxford University, explained that, lacking a doctrine of good faith, ?English law has to resort to the implication of terms'. He urged rather that ?in using the high technique of common law the closest attention is paid to the purpose of the law of contract, ie, to promote good faith and fair dealing'. Even more support for a doctrine of good faith has come in other parts of the common-law world.
Australia is a leading example. In 1987, Professor HK Lücke admitting that ?the United States legal system has some special characteristics which make it necessary for lawyers to embrace broad principles and policies' nonetheless thought it not unreasonable to hope that good faith would ultimately make a significant and beneficial impact upon [Australian] private law'. He was supported by Professor Paul Finn, who noted in the same year that equity ?has no exclusive proprietorship of "good faith"' and, in 1989, that the ?doctrine of "good faith" in contract performance is now squarely upon contract's agenda'. It was also in 1989 that Priestley JA published an article in which he turned his attention to the doctrine of good faith as a ?feature ... of much United States contract law' and wondered whether "Australian law has reached the point where terms may readily be implied into contracts, having substantially the same effect as the good faith formulation in the United States.' In 1992 he elaborated this view in a case involving the power of a government agency to terminate a construction contract on default by the contractor if the contractor did not ?show cause to the satisfaction' of the agency why the contract should not be terminated. After reviewing US and other common law authorities on good faith, Priestley JA concluded ?that people generally, including judges and other lawyers, from all strands of the community, have grown used to the courts applying standards of fairness to contract which are wholly consistent with the existence in all contracts of a duty upon the parties of good faith and fair dealing in its performance.
The doctrine of good faith has also stirred interest in Canada." ... "In 1987, in its report on Amendment of the Law of Contract, the [Ontario Law] Commission recommended that legislation recognize the doctrine of good faith in the performance of contracts generally, that this statutory obligation not be disclaimable, and that the provision should take the form of Restatement (2d) § 205."
2.2.2.3 In 1994 Mr Peter Quinton, the Director of the Law Reform Unit of the Australian Capital Territory Community Law Reform Committee, commented as follows on the question of legal uncertainty in reaction to the Commission's Working Paper 54:
"The issue under consideration in your paper has recently been the subject of specific consideration in the ACT. As a result, the ACT Legislative Assembly has recently enacted a coherent body of law regulating competition within the ACT. The Fair Trading Act 1992, came into effect on 1 January 1993. The law applies to the supply of goods and services.
These provisions complement Commonwealth anti-trust provisions in the Trade Practices Act, which itself has recently been the subject of review by the ALRC in compliance with the Trade Practices Act 1974, Report No 68, Australian Law Reform Commission, June 1994. While noting the desirability of a national scheme of consumer protection, in this report the ALRC has gone on to suggest a series of changes to the Trade Practices Act 1974 to promote the objectives of the Act. The report proposes a new right to replacement. It also considers measures to minimise the effect of and preventing further contraventions.
The passage of the Fair Trading Act 1992 did not bring about the end of civilisation as we knew it. Indeed, as far as I can ascertain, people have not been crowding the courts seeking remedies under the Act. While, no doubt, there will remain contractual provisions which are unfair, the mere passage of legislation has not precipitated change in the marketplace. On the basis of this experience, I believe that change in the commercial practice will occur slowly in this area."
2.2.2.4 Brenda Marshall remarks that in recent times, concerns have been raised that the provisions of the Australian Trade Practices Act of 1974 are causing widespread uncertainty among business persons, resulting in much complex and costly litigation.[76] She states that commentators are presumably basing their concerns on section 52 of the Act's notoriety as the most litigated provision in the Trade Practices Act. Ms Marshall comments that in Australia, the courts and the legislature have declined to place paramount importance on the absolute certainty of contract, accepting that there are notions of justice and fairness of equal or higher value.[77] She remarks that while certainty and predictability are valuable attributes of a legal system, Australian law takes the view that they should not be used as an excuse for unscrupulous behaviour. She indicates that the case law reflects a growing concern by judges with moral issues in evaluating the behaviour of parties, whether they be involved in consumer or commercial transactions. She notes that, from a legislative perspective, it can be argued that provisions such as section 52 of the Trade Practices Act establish minimum absolute standards of commercial probity. Ms Marshall is of the view that while commercial morality is a desirable judicial and legislative goal, it inevitably conflicts with certainty of contract. She indicates that insofar enactment and interpretation of the provisions of the Trade Practices Act reflect notions of commercial morality, they may well create a degree of uncertainty in the business community, but that this is simply part and parcel of the principle that unconscionable and misleading conduct is to be condemned. Ms Marshall notes that one commentator explained this matter as follows:[78]
"It is little wonder that the growing importance of the [Trade Practices] Act, as a whole, is creating commercial uncertainty along with a commensurate level of judicial activity, when the entire focus of the law is directed more towards enforcing different set of norms of conduct or moral constraints vis-a-vis the consumer and parties in an inferior bargaining position, as opposed to the familiar 'hands-off' approach of the general law to notions of justice and fairness in arm's length commercial relationships."
2.2.2.5 Dr Malcolm Clarke notes a number of objections raised against a general doctrine of good faith, some of which were also raised by the respondents to the Commission's discussion paper, namely -[79]
2.2.2.6 Dr Clarke gives, inter alia, the following answers to the concerns raised above:[80] He believes that the fear of uncertainty is not justified by the track record of the doctrine of good faith in Germany. He considers that the fear is based on a misunderstanding of good faith and that it is not a rule but a standard, which is not applied without more but which requires concretisation through the judicial creation of certain rules.
2.2.2.7 It is believed that in answering the question whether there is a case for adopting reform in South Africa, valuable insights can be gained by noting the arguments adopted by the Ontario Law Reform Commission and the Law Reform Commission of Hong Kong when they considered that the case is made out for reform there. The Ontario Law Commission argues as follows:
"In our view, statutory affirmation of the doctrine [of unconscionability] would stress its pervasive importance and encourage the courts to evaluate realistically the significance of standard form terms and manifestly unfair bargains. It ought also to encourage the courts to abandon such anachronistic tools as the doctrine of fundamental breach and adverse construction. Fictitious techniques of this kind do harm to the law, because they conceal the reasons for judicial decisions and prevent the development of clear principles. Statutory recognition of a generalized doctrine of unconscionability would fill the gaps in legislative intervention, and enable judges to direct their minds to the truly relevant criteria for decisions.
Accordingly, we recommend that legislation should be enacted expressly conferring on the courts power to grant relief from unconscionable contracts and unconscionable terms in a contract and spelling out the remedies available where unconscionability is found. However, as we emphasized in our Report on Sale of Goods, legislative recognition of the doctrine of unconscionability should not be construed as a life jacket for persons who have entered into a bad bargain; nor should it interfere with the right for parties to bargain freely with respect to the terms of their contract. The thrust of the legislative doctrine that we support is to redress the imbalance where parties are not bargaining from equal positions and where the stronger party has taken advantage of its superior power to impose harsh and oppressive conditions on the weaker party.
We recognize the concerns of some critics of the doctrine of unconscionability that its statutory adoption may lead to uncertainty and that it will enable judges to impose their view of public policy on the market place. In our view, both these concerns can be satisfactorily answered. The numerous jurisdictions that have now adopted some form of statutory unconscionability doctrine have not found it giving rise to a flood of uncertainty. In fact, the volume of litigation has been extremely modest. So far as the exercise of the judicial power is concerned, this would be subject to the usual rights of appeal that are open to an aggrieved litigant."[81]
2.2.2.8 The Hong Kong Law Commission states its point of view as follows:
"The main argument in favour of an unconscionability provision appears to be that judges need to be given a clear power to strike down unfair terms or contracts so that they would not have to resort to artificial interpretation or distinction in order to avoid injustice.[82]
A major argument against such legislation is that legislation of this kind may create uncertainty as to whether an apparently binding contract may be enforceable. ...
We however do not feel that the objection that an unconscionability provision introduces uncertainty into the law carries weight. If certainty were the sole aim of law, it would justify passing a statute, or adopting a principle of interpretation, that the consumer or weaker party was alway wrong (or, indeed, right). There is another aim of law which is fairness. As Lord Atkin put it 'finality is a good thing but justice is a better'. Certainty is a pragmatic rather than a principled consideration craved by lawyers so that they can advise their clients upon their rights. We do not belittle certainty, but we do not feel it is paramount. Certainty in this context is sometimes sought to be justified by the principle of sanctity of contract, that a party must abide by his agreement. This assumes of course that a piece of paper signed by that party is truly his agreement. But in reality that party has not genuinely consented to the terms on that paper, which are in standard form and have not been read (or been expected to be read) by him, let alone been the subject of negotiation. The principle of sanctity of contract carries conviction only if there is a contract in the sense of a full-hearted agreement which is the result of free and equal bargaining. Unfortunately, in modern life, there is rarely the time or the opportunity for such bargaining; it has been replaced by the convenient form and the standard clause.
Professor Cranston points out in 'Consumers and the law' (2nd ed, 1988) that the objection that an unconscionability provision could introduce uncertainty ignores the ways courts have historically narrowed discretion. Although the counter-argument is that it is questionable whether the judiciary possess the necessary breadth of vision for such a discretion to be entrusted to them, in his view it is possible to meet some of these criticisms by fleshing out an unconscionability provision on the basis of legislative and judicial experience in the area of unjust contracts.
The Alberta Institute of Law Research and Reform also felt that the development of a doctrine of unconscionability would not result in uncertainty if the doctrine is laid down within clear statutory guidelines.[83]
...
Our initial reaction was that if the court should be given powers to review harsh or unconscionable provisions in sale of goods and supply of services contracts, that would lead to uncertainty in the law and would amount to interference with freedom of contract. We had thought that the introduction of legislation on the control of exemption clauses would be sufficient.
On consultation, there was much support for introducing legislation in Hong Kong to control harsh or unconscionable terms. It was suggested to us, we think with justification that, in focussing on the contents of the clause itself, we were taking too narrow a view and that unconscionability also depended on the circumstances of how the contract was entered into. We are now of the view that this is an important area and that it could help to protect the consumer."[84]
2.2.2.9 The Japanese Consumer Policy Committee which is a subcommittee of the Social Policy Council noted in December 1996 that the Council has considered the rectification of consumer transactions several times in the past.[85] The Committee remarks that transactions between consumers and businesses are becoming more diverse and complex because of changes in the socioeconomic structure (the move towards service industries, globalisation, the ageing of the population, and the move towards information/technology) and also because of the growing diversity and complexity of products and services themselves. The Committee considers in addition, that as deregulation progresses a wider range of goods and services are being provided to consumers more cheaply, and while this is widening the range of consumer choice, it also requires that consumers act according to choices that they themselves have made in an independent, pro-active manner. The Committee notes that there are, however, differences between consumers and businesses in terms of access to information and negotiating power, and it is often the case that contracts are entered into for transactions that are neither efficient nor rational, consumers having been unable to make appropriate choices. The Committee considers that it is difficult to conclude that businesses always, in the process of negotiating contracts, provide consumers with the information they require to make appropriate choices in a speedy and accurate manner, and often there is a strong drive from the business to induce the consumer to enter into a contract. The Committee notes that consumers quite often are insufficiently informed of the content of contracts because of the enormous number and complexity of contractual clauses and terms. The Committee remarks that in cases in which businesses have unilaterally created standard contracts in advance, contracts are often signed with, for all intents and purposes, no room for the consumer to fully understand and negotiate the content.
2.2.2.10 The Japanese Consumer Policy Committee remarks that these trends have led to a sharp rise in the number of contractual disputes between consumers and businesses in recent years. In 1995, more than half-54.7%-of the consultations given by such organisations as the Japan Consumer Information Centre and the Local Information Centre concerned contracts and contract cancellation. The Committee considers that this has therefore created the need to create a framework that will assure the free choice of consumers and enable them to select appropriately from among a wide variety of goods and services. The Committee states that it has noted the need for specific and comprehensive civil law rules to be made for both the procedural (contracting process) and content (contract terms) aspects of consumer transactions. They suggest that these rules must be suitable, without exception, to all industries and transactional forms in consumer transactions, and must improve predictability for both consumers and businesses. They suggest that it is necessary to eliminate improper contract terms in a direct manner.
2.2.2.11 The Consumer Policy Committee suggests that as a policy for the rectification of the contracting process, they must consider the formation of civil rules that, focussing on consumer transactions, specifically and comprehensively impose a requirement on businesses to in good faith provide consumers with information and explanations of important matters, with the stipulation that a contract can be cancelled if this obligation is not discharged. They consider in doing this and in drafting specific rules, they should consult Germany's laws on negligence in the contracting process, France's obligations to provide information, and the United States' laws on unconscionability and misrepresentation. The Committee notes that as a policy for the rectification of contract terms, they must consider specific and comprehensive civil rules that concretise and provide standards of interpretation for the content of the general "good-faith" civil rules. They note in doing this and in drafting specific rules, they should consult the European Union's Directive on Unfair Terms in Consumer Contracts.
2.2.2.12 The Consumer Policy Committee suggests that the proposed measures will provide behavioural guidelines for both consumers and businesses that will restrain improper actions and prevent disputes from occurring, should there be disputes, they will also provide concrete guidelines for their resolution and therefore facilitate retroactive relief. The Committee considers that for businesses in particular, the existence of rules can be expected to lead to reductions in the cost of dispute settlement, and in relation to deregulation, the formation of these rules will provide a clear articulation of rules for areas on which the current legal system is not clear, thereby improving the stability of transactions. They predict that the rules will not represent the imposition of new regulations on transactions; if anything, they will make it easier for consumers to make appropriate choices while at the same time making it easier for businesses to be innovative in their activities. The Committee further states that in addition to drafting the specific and comprehensive civil rules they must also take measures to supplement these rules and improve their effectiveness such as the enhancement of individual forums and methods for settling disputes and the promotion of information supply and consumer education regarding contracts.
2.2.3.1 The Commission notes the concerns raised by a substantial number of respondents, particularly in respect of the possibility that foreign investors and contracting parties might be discouraged from concluding contracts in South Africa should the law enable courts to review contracts in order to determine whether they comply with principles of contractual fairness. The Commission however duly noted local and foreign developments concerning the law of contract. Apart from there being local calls for the recognition of fairness in contracts,[86] measures have lately been adopted and existing ones extended in foreign jurisdictions clearly recognising the need to regulate unfair contracts. One respondent suggested that since South Africa's competition is not first world countries, but countries such as China, India, Malaysia and the South American countries, research on these countries would be more appropriate.[87] The Commission appreciates these constructive comments. We noted in this paper that there are South American countries which have adopted legislation providing for consumer protection against unfair contracts similar to the existing legislation in Europe, North America and Australia and that there are calls in India presently for legislation which would make it compulsory for traders to obtain approval to include specified exclusionary clauses in standard form of contracts. The Commission furthermore noted developments in Europe regarding the European Directive on Unfair Contract Terms, and, furthermore, in Japan and also in Africa, such as the Zimbabwean Consumer Contracts Act 6 of 1994 and the Model Law for Consumers in Africa. The Commission further noted the reaction the doctrine of good faith inspired in a number of countries.
2.2.3.2 We noted above that some respondents argue that the introduction of measures against unfair or unconscionable terms would isolate South African contracting parties and inhibit foreign investment and trade. The Commission is of the view that the developments noted above require that this argument should be critically considered. It seems to the Commission that South Africa would rather become the exception and its law of contract would be deficient in comparison with those countries recognising and requiring contractual fairness. Furthermore, the Commission regards the views of Adam Fletcher and Professors Hutchison and Van Heerden as persuasive on the question whether the proposed legislation will create unwarranted legal uncertainty. The Commission accepts, as they suggest, that any change effected by the proposed legislation, will produce a measure of legal uncertainty and consequent litigation, at least in the short term when many contracts are challenged, that this is, however, a price that must be paid if greater contractual justice is to be achieved, that certainty is not the only goal of contract law, or of any other law, and lastly in any event, that the fears provoked by the proposed Bill are exaggerated, in the light of the experience of countries that have already introduced such legislation. The Commission further agrees with them that the developments taking place in other jurisdictions, and particularly on the African continent, indicates that this matter cannot be ignored. The Commission furthermore concurs with Prof Zimmermann's observation that the issue of unfair contracts has to be addressed in a more fundamental and less fragmentary way. The Commission is finally of the view that reform is called for and that Adam Fletcher's suggestion that legislation is the most viable and expedient method to effect legal reform, is persuasive.
2.2.3.4 The Commission further shares Mr Justice Olivier's view that the principles of good faith, based on public policy still plays and should play an important part in the South African law of contract as in any legal system which is sensitive to the views of the community who is ultimately the creators and users of the law in regard to the moral and ethical values of justice, fairness and decency.[88] The Commission also shares his view that the judgment in the case of Sasfin v Beukes[89] should or may not be regarded "as a free pardon for recalcitrant and otherwise defenceless debtors".[90] The Commission also notes Mr Justice Olivier's argument that the reticence of the Local and Provincial Divisions of the former Supreme Court to give full effect to bona fides is contrasted by the more accommodating view of the Supreme Court of Appeal as is clear, inter alia, in Ex Parte Minister of Justice: In re Nedbank v Abstein Distributors (Pty) Ltd and Others and Donnelly v Barclays National Bank Ltd.[91]
2.2.4.1 The Commission is of the view that there is a need to legislate against contractual unfairness, unreasonableness, unconscionability or oppressiveness in all contractual phases, namely at the stages when a contract comes into being, when it is executed or when its terms are enforced.[92] The Commission consequently recommends the enactment of legislation addressing this issue.
2.3.1.1 The Working Committee's provisional recommendation excluded provision for the introduction of preventative administrative mechanisms. One respondent suggests that the High Court already has an inherent jurisdiction to effectively deal with any situation the proposed Bill seeks to address.[93] Another suggests that the powers of the courts will become more consumer orientated through a process of evolution and stare decisis rather than by imposed legislation which upsets too many aspects of current understanding and legal certainty for it to really balance itself.[94] Three respondents who support the "no approach" state that they are of the view that the proposed legislation will not improve or ameliorate the lot of ordinary consumers nor assist or protect them, since they have neither the means nor the knowledge to access the court system,[95] and furthermore, that it would be inadvisable for parties to bring an action where there is no clear right but a judge's discretion.[96] The point was, however, also made that it is not realistic to believe that consumers are more effective watchdogs and will complain about very transgression, as in many instances they would not be informed enough to know whether or not a transgression has taken place, and that in the insurance industry it has been found that contracts or agreements are effectively watch-dogged by competitors.[97] The argument was further raised on the heavy case load of the courts and the expected increase in cases, should the provisional recommendation empowering courts to review contracts, be implemented.
2.3.1.2 It is also argued that the setting of industry norms, the drawing up of codes of conduct and the appointment of an Ombudsman to control marketing practices has appeal and would serve the man in the street far better than the passing of the proposed legislation.[98] It is further said that if the true victims are the poor and uninformed, then they will not seek recourse to the courts and hence the proposed legislation will not help them. The view is also held that more appropriate would be the adjudication of disputes by an existing body such as the Business Practices Committee, which would have the authority to declare contracts void if they are found to contravene any of this consumer legislation.[99] It is also argued that the vulnerable consumer looks to the law for protection, but since litigation is generally too cumbersome and expensive to provide that protection,[100] it is the machinery rather than the law that needs attention.[101] A substantial number of respondents supporting the "no" approach are of the view that the existing bodies are either sufficient or should be empowered to take direct action.[102]
2.3.1.3 It is proposed that legislation should be adopted which creates a mechanism of the nature of an administrative tribunal which would then consider particular standard wording or clauses and after evidence and due consideration determine whether such wording or clauses would in future be unacceptable and therefore illegal.[103] Murray and Roberts suggests that such an approach has the advantage of fostering legal certainty and also limiting the potential, and therefore the cost, of litigation. Murray and Roberts further notes that such legislation and any code or guidelines promulgated thereunder could be amended from time to time in the light of experience. Murray and Roberts remark it supports the German, Swedish or Israeli mechanisms described in par 1.18 and 1.19 above, stating that such mechanisms provide for reasonable legal certainty. Mr Sibusiso Nkabinde suggests that in addition to the passing of the proposed Bill, preventative measures such as proposed or equivalent steps be implemented, such as -
2.3.1.4 An insightful remark by the Joint Legal and Technical Committee of the Institute of Retirement Funds who falls into the "no" approach category and who supports preventative mechanisms is that the preliminary proposals focus on a remedy and not on prevention which would be far more effective for the group that needs protection. Cliffe Dekker and Todd Incorporated suggests that our courts are already hopelessly overburdened with an excessive caseload, that our courts are inaccessible to the ordinary citizen, and if the courts were, in addition to their current functions, also to be required to adjudicate on whether contracts contain any unreasonable, unconscionable or oppressive terms, the court system will break down completely. This firm of attorneys is of the view that the efforts currently being made to make the courts more accessible have not been effective, even for the current work load of the courts. Cliffe Dekker and Todd Inc believes that any assumption that a vast number of contracts will not be referred to the courts, would be naive, and that it is impossible to foresee what will happen if the work-load is doubled, trebled or quadrupled but considers that it will undoubtedly result in chaos. Murray and Roberts suggests that the real issue is that of appropriate consumer protection rather than one of empowering courts to rescind or amend contracts.
2.3.1.5 One respondent supporting the "unqualified yes" approach believes that the existing Business Practices Committee does not represent consumers and should not be used for preventative purposes.[104] Six respondents falling in the "qualified yes" category support preventative mechanisms,[105] two of which support the English preventative system existing under the Office of the Director-General of Fair Trading[106] whereas one respondent in this category is totally opposed to preventative control. It is suggested that the financial implications and constraints on an ordinary consumer may necessitate the appointment of an Ombudsman charged with the task of regulating marketing practices including unconscionable contracts along the lines of the Scandinavian consumer protection system.[107] Mr Justice B Wunsch and Mr PA Bracher suggest that the preventative approach adopted in the United Kingdom through the powers and duties of the Director-General of Fair Trading is a more practical one than the envisaged legislation.[108] Professor Alfred Cockrell is sympathetic to the argument for certainty but sees the protection of consumers against unfair clauses in sale and lease documents as timely and necessary. He argues as follows:[109]
"It is not enough to have legislation and leave it to the courts. The process will be cumbersome, and as experienced in England, with lots of little cases, it will take a long time to get any rigorous principles established. We need to establish guidelines for the courts. The proposed Bill is too short and cryptic."
2.3.1.6 Professor Cockrell's views corresponds with those of Professor Hein Kötz of the Max Planck Institute in Hamburg who says that the experience of Europe is that those who need the protection of the courts cannot afford the costs or are not sophisticated enough to know that the clauses would be considered unfair.[110] This is why most European systems have not confined themselves to the enactment of substantive provisions on unfair contract terms and why they have developed new control systems in which public officials or consumer organisations have been given standing to act in ordinary courts or special tribunals. SAPOA opts for self-regulation and after vigorous lobbying to Prof Tager's committee from "an unrepresentative group acting for small traders", SAPOA is bringing its guideline lease document up to date "to keep pace with current thinking". Furthermore, a property Ombudsman is also being introduced.[111] The GCB is also of the opinion that there should, in addition to power of review as contemplated in the draft Bill, be an effective system of preventative administrative control on the lines pointed out by the research team.
2.3.1.7 COSAB believes that the judicial system is the best way of ensuring that our law develops in an open and accessible manner and that all parties are given an opportunity to be heard. COSAB is opposed to an administrative body being given any power to decide on the permissibility of contract terms, and believes that the courts are generally in a better position to develop legal principles of this nature.
2.3.2.1 The question arises whether provision should be made for the existence of a preventative body acting against unfair or unconscionable contracts. An administrative body, namely the Unfair Contracts Term Committee was established as a subcommittee of the Business Practices Committee during 1995. Another noteworthy development was the introduction of the Province of Gauteng's Consumer Affairs (Unfair Business Practices) Act of 1996 which came into operation on 27 September 1996. This legislation creates a tribunal which is, amongst other things, empowered to consider the fairness of contracts. (It should be noted that in terms of Schedule 4 of the Constitution of 1996 consumer protection falls within the functional area of concurrent National and Provincial legislative competence.)
2.3.2.2 The definition of "unfair business practice" contained in the Act states that it means any business practice which, directly or indirectly, has or is likely to have the effect of unfairly affecting any consumer. Business practice includes, inter alia, any agreement, accord or undertaking in connection with business, whether legally enforceable or not, between two or more persons. The Act establishes the Office for the Investigation of Unfair Business Practices and provides for the appointment of a Consumer Protector. One of the powers of the Consumer Affairs Court is that it may, pursuant to proceedings instituted, if it is satisfied that any particular business practice which was the subject of proceedings in question should be declared to be unlawful, declare any agreement, accord or undertaking, or terms thereof to be void. The media notes the establishment and role of the Consumer Courts as follows:
This is not a law court, but a tribunal structure, similar to the Industrial Court, which can handle consumer complaints quickly, efficiently and affordably, instead of resorting to the small claims or magistrate's courts, which can be an expensive process.'
Examples of cases to be heard include those involving companies which take deposits without supplying goods or insurance companies which sell policies with unfair contracts.
The idea for the court was conceived by the Consumer Affairs Interprovincial Working Group of the nine provinces and the Trade and Industry Department. It was welcomed by the umbrella body of all consumer organisations, the National Consumer Forum (NCF), which feels its expectations are being met.
NCF chief Diane Terblanche says: ?The creation of this kind of structure is long overdue. Consumers are finally getting protection and the Government is playing its role, therefore we are very positive about the move.'"[112]
The court ... will be the first of several that will open countrywide and is a huge step forward for the consumer who cannot afford to make a civil action in the civil courts.
A panel of three members well versed in consumer affairs, including attorneys, will sit in court to hear complaints. Legal representation is allowed and consumers will be called as witnesses. All services and costs are free of charge.
'When a complaint is received, we try to sort the matter out amicably between the parties. If this does not work, we take the matter to the Consumer Protector who will decide whether the case should be heard in court. If the protector deems it should go further, a court date is set.
Sometimes, when there are several complaints about one company, we can save time by bringing a class action against the business,' said Collette Caine, the Director of Consumer Affairs and Business Regulation in Gauteng.
...
Courts will be opened in all nine provinces within the next six months and offices where complaints can be made are open countrywide and not just at the main centres. Among the 20 offices already set up are those in Soshanguve, Soweto and even Springbok."[113]
2.3.2.3 Regulations governing, inter alia, the practice and procedure of the Consumer Affairs Court, are presently being drafted. It remains to be seen whether and to what extent the Consumer Affairs Court will be able to provide redress in respect of unfair contracts or terms. It seems, however, that the Court will, in principle and by definition, be able to provide curative - ie after an dispute arose - and not preventative relief over contracts.
2.3.2.4 Another matter to be considered in this regard is the proposed amendments to the Harmful Business Practices Act[114] to be effected by the Consumer Affairs (Unfair Business Practices) Bill.[115] The memorandum on the objects of this Bill indicates that the purpose thereof is, inter alia, to harmonise the national and provincial legislation; to replace the Business Practices Committee with a Consumer Affairs Committee; and to reconstitute the Special Court to which appeals in terms of the Harmful Business Practices Act lie, as a permanent court. The Bill further provides that the decision of the Special Court shall be one of equity and fact on the basis of fairness. Finally, if any person seeks to enforce or rely on an alleged unfair business practise in any proceedings before any civil court, the Bill provides that that court may, on application of any party to those proceedings, stay those proceedings in the interests of justice until such time as the Minister of Trade and Industry or the Special Court has come to a decision in terms of the Bill. The proposed definition of "business practice" includes, among other things, any agreement, accord, arrangement, understanding or undertaking, whether legally enforceable or not, between two or more persons.
2.3.3.1 The Unfair Contract Terms Committee notes that the research team's endeavour in making their proposals for the establishment of a subcommittee of the Businesses Practices Committee was to follow a minimalist line, in that no unnecessary new structures or bureaucracies would be proposed. They consider that whereas there already was in place the Harmful Business Practices Act and its Business Practices Committee, with powers that could, with some amendments, be used also to effect preventive control over unfair contract terms to some extent, it seemed logical to the research team to go along that route. They consider that it was incidentally at all times the second best option and that the risk it carried - and still carries - with it was that, because of the very specialised expertise needed in order to perform preventative control over unfair contract terms, this might not be a priority in a more generally constituted Business Practices Committee, operating under a rather restrictive definition of a business practice, nor would they be able to gain the necessary expertise and experience to do the task as well as it should be done. They are of the view that some of the problems encountered by the Business Practices Committee since its establishment, leading to the need for that act to be currently under review, support this argument. The UCTC note that this leads back to the original idea of the research team, namely that preventative control can, also judging from experience elsewhere, best be undertaken by an independent Ombudsman-like office. The UCTC says it remains of the opinion that a dual system of control is needed for contracts, namely judicial and preventative control.
2.3.3.2 Mr Sibusiso Nkabinde states that the current Business Practices Committee's investigations and recommendations are not sufficiently publicised - even lawyers are not familiar with its works - and the Harmful Business Practices Act does not provide for the petitioning of the Committee or the filing of complaints by members of the public with the Committee to carry out investigations into such complaints or petitions. He considers that as a result of the lack of the Business Practices Committee's stature - as a result of inadequate publicity of its work - and lack of sufficient interaction with members of the public - through the lack of a mechanism to allow public petitions or complaints - it would be insufficient to merely appoint a sub-committee or liaison committee to investigate the use of unconscionable terms in standard form contracts without addressing the Business Practices Committee's lack of public stature, accessibility and transparency. He suggests that the Harmful Business Practices Act should be amended so as to allow the public to petition or file complaints with the Committee on grounds set out clearly in the Act, and, in addition, people with stature as a result of their expertise and preferably a demonstrable history of attempting to improve consumer protection, should be appointed to such committee. Mr Nkabinde proposes that consumer courts should be established nationally to resolve disputes arising from consumer contracts and means should be devised to make such courts easily accessible by consumers, from a cost point of view, and to make such courts less procedurally formal than ordinary courts. He considers that the biggest barrier to effective consumer protection is the cost of litigation which the ordinary consumer cannot afford, especially against companies who have the resources to delay or prolong proceedings so as to discourage consumers from litigating. Mr Nkabinde therefore suggests that such courts should have powers to review unconscionable contracts.
2.3.3.3 It is clear that considered from the perspective of creating an institution to effect pre-emptive contractual fairness, the concerns raised above are not sufficiently addressed by either conferring the powers to the newly established Consumer Affairs Court, or by amending the Harmful Businesses Practices Act as proposed. It is also clear that the Consumer Affairs Court lacks the powers of a body such as the English Director-General of Fair Trading has (see below).
2.3.4.1 A number of respondents state that the position of consumers are hardly improved by provisions which only entitle aggrieved parties to contracts to seek redress in court. (See paragraphs 2.3.1.1 to 2.3.1.7 above.) This issue raises the question of access to justice.
2.3.4.2 The Australian view on access to justice in contractual disputes is put as follows:[116]
"Provisions of the substantive law ... are obviously very important in providing a means of achieving justice for individuals, particularly consumers, trying to enforce their contractual rights. This, however, may have limited effect in providing control in the interests of consumers generally. This is partly because of cost and other factors, increasingly discussed recently in public debate in Australia on 'access to justice' problems, making resort to the courts to resolve their disputes quite beyond the reach of most individuals. Moreover, even in those relatively rare cases which are brought to court, the decision in any individual case directly binds only the parties to the contract being sued on. The mere fact that a provision is likely to be held to be ineffective if litigation does arise does not necessarily deter enterprises from continuing to use such provisions in their contracts. Accordingly, many jurisdictions have experimented with a variety of techniques designed to provide a more generalised or 'abstract' control of unfair contracts. This can take various forms, but typically a public authority or an organisation of consumers or traders will be empowered to seek an injunction or similar order prohibiting the continued use by a trader of a contract term that is unfair to consumers.
Abstract control of unfair contracts almost of necessity concentrates on the substantive terms of contracts against which complaint is made. Many reform statutes in Europe follow a pattern of combining a general prohibition on unfair contracts with the setting out of certain types of clauses which are to be regarded as unfair. For example, ... in contracts with consumers, certain specified types of clause are presumed to be invalid unless the business party can show they are reasonably justified in the circumstances (the 'grey' list) and others are always invalid (the 'black' list). ...
Certainly a case can be made that somewhat greater certainty would be created if, following the European example, the existing 'shopping lists' of relevant factors appearing in State and federal legislation were to be supplemented by lists of types of clauses which are to be (absolutely or presumptively) ineffective, at least in consumer transactions."
2.3.4.3 The following arguments are raised in the United Kingdom in support of public control over contracts:[117]
Legislative adjustment of what might be termed the common law of consumer protection improves the position of the consumer and, in perhaps a rather imprecise way, helps to make more effective the market mechanism based on consumer/supplier dialogue. ...
The case for public controls becomes all the stronger when account is taken of practical difficulties which confront consumers seeking to enforce legal rights, however generous those rights may seem on paper. ... an effective consumer protection programme cannot be constructed from the operation of the private law alone.
Most fundamental of all is consumer ignorance of the law. Attractive though rights may look on paper, they will play a major role in the consumer/supplier relationship only where a sufficient number of consumers are aware of them. ... In fact, paradoxically, the more sophisticated and nuanced consumer protection law is on paper, the greater the risk that consumers will be confused by it and alienated from it in practice. Legal rights should be easy to grasp and to use. Lack of understanding of the law among consumers plainly defeats much of the purpose of the law. It should not be left out of account that ignorance of and/or disinterest in the nuances of consumer law among practising lawyers, perhaps even combined with antipathy to consumer disputes as trivial complaints, are yet a further impediment to its practical impact.
In part this leads to the charge that consumer protection law is, or has become, law for the middle class, at least (or especially) in its private law manifestations. The middle class complains about purchases, whereas poorer sections of society worry about being able to make purchases in the first place. It hardly matters whether a product is of satisfactory quality if you cannot afford it. The middle class understands the law and can either use it or threaten to use it; poorer sections of society are doubtful about its relevance to their needs. The allegation that consumer law is middle class law is not without foundation. If it is true that adjustment of the private law is of disproportionate assistance to already affluent members of society, then a stronger commitment to public law regulation may be appropriate.
Even where the consumer is aware, however dimly, that a legal point has arisen, it is a practical truth that literally the last thing that the typical disgruntled consumer will do is to initiate litigation against a trader. Court proceedings take time and cost money, even if they are ultimately successful. Naturally, if they are lost the consumer may be greatly out of pocket and obliged to pay his or her own costs and those of the other (winning) side. In practice, the cost of formal resort to law typically excludes the middle class as much as poorer members of society. Moreover, courts are intimidating to the average citizen. Consequently there will be a strong consumer preference to avoid legal proceedings. Frequently consumers write off loss to experience, occasionally perhaps after attempting to complain. The majority of consumers do nothing which will immediately affect the supplier's pocket. This is particularly likely to be he case in the event of small scale loss incurred as a result of a disappointing purchase. The rational consumer will not invoke the law. ...
Where action is actively pursued by the consumer, informal settlement will be preferred, where feasible. This preference will to some extent be shared by the trader. The small trader, especially, will be almost as reluctant as the consumer to embark on the perilous seas of litigation from which it is notorious that lawyers normally emerge the real and (sometimes) only winners. Nonetheless the risk remains that traders, typically with more resources at their disposal than consumers, will be able to use consumer reluctance to litigate as a method for fobbing off the vindication of consumer rights. ...
It is not difficult to construct a powerful argument that a legal system based on individual action by 'consumer' against 'trader' bears no useful relation to an economy of mass production and extended distribution and marketing chains. The pursuit of such distinct goals as the correction of market failure and fairness within a market order cannot be fully achieved under a system based purely o private law.
...
Contract and tort are also limited in their capacity to deliver fair outcomes. Contract, classically is in any event concerned with no such thing. It has latterly moved more in the direction of controls reflecting notions of fairness, but this aspect remains relatively unsophisticated and is in any event not undisputed. Tort law is more allied with ideas of social fairness. However, as judge-made law, it remains erratic and unpredictable in its scope.
Such qualifications to the role of tort and contract in securing an efficient and fair market are greatly deepened by the practical problems of securing access to justice. The reluctance of consumers to go to court and the absence of effective recourse to representative actions together shelter producers from the consequences of their failure to fulfil consumer demand and expectation, while also denying consumers the practical enjoyment of legal rights.
The perception that private law rights are often hazily understood by consumers and that their pursuit is frequently neglected sharpens the policy perception that an effective programme of consumer protection in the modern market must embrace public law too. For the benefit of consumers, for the benefit of fair and honest traders who find themselves exposed to dishonest competition, and in the public interest generally in an efficient market system, action to improve the operation of the market can be justified."
2.3.4.4 The same authors suggest that the traditional methods of dispute resolution in the UK should be re-examined:[118]
"However, the most damning criticisms of private law as a method of consumer protection relate to the inability of legal institutions to deal with consumer complaints. Critics claim that, even if the substantive law were framed in the most pro-consumer terms, the rights granted to consumers would not be effective because the amounts of money involved are generally too small to be worth litigating; because the legal system and lawyers appear alien to the average consumer and only the more educated consumers are aware of and can articulate their complaints in terms which allow them to take advantage of the law. These criticisms have been well made and have encouraged responses seeking to question the way legal services are delivered to consumers and to re-examine dispute resolution procedures. ...
Many reforms have still been based on a paradigm which involves an individual consumer in dispute with an individual business. Attempts have been made to even up this relationship by providing or subsidising the advice costs of the consumer or making legal action less expensive, less intimidating, less risky and more convenient. However, legal reforms which continue to view consumer problems as individual problems are going to lead to a continuation of many of the present difficulties. Consumer law will continue to be viewed as 'middle class' law, for it will only be worth litigating disputes involving high-cost goods and services (although many middle-class consumers will themselves be excluded by the high cost of lawyers). Equally consumers will not be allowed to claim the organisational advantages which are automatically available to all but the smallest businesses. One response is to recognise the collective dimension by increasing the public law protection of consumers. Alternatively, consumers can be permitted to aggregate individual claims in group or class actions, or consumer organisations can be allowed to invoke private law rights on behalf of consumers generally."
2.3.4.5 Whilst it is acknowledged that civil and criminal sanctions do a great deal to protect the consumer, it is argued that they are not sufficient for the following reasons and that a third measure of consumer protection, namely administrative control by a public body is needed:[119]
2.3.4.6 The following views support the argument that curial invalidation of unfair terms will hardly ameliorate the position of consumers:
"We should not expect the invalidation of unfair terms in consumer contracts to provide more than a marginal improvement in the standard of living for consumers. The prospects of expensive litigation are likely to deter all but the most determined consumers from seeking a judicial declaration on the invalidity of an unfair contract term. The best protection for consumers is always likely to come from public administrative measures, which can tackle abuses in a whole sector of trade and can insist upon preventative measures which remove the offending terms from standard contracts." [120]
"It is unrealistic to expect individual consumers to challenge the alleged use of unfair terms by sellers and suppliers in all but the most exceptional circumstances. It has long been established that well founded fears of expensive litigation and ignorance in relation to rules of law, legal procedures and so forth will deter consumers from enforcing their rights in court. It has equally been recognised that a more effective system for protecting consumers' right is to provide some type of administrative agency charged with the task of safeguarding and promoting rights on behalf of consumers."[121]
2.3.4.7 The New Zealand Law Commission also considers that, far from the problem being limited to unfair contracts, an underlying problem exists of practical access to justice.[122] They are of the view that it may not be enough that the courts can do justice in cases that come before them since many who are vulnerable cannot or do not pursue their rights in the courts for various reasons, and that the availability of legal aid is only one reason. They remark that empirical evidence suggests that members of groups most likely to be the victims of exploitation or unconscionable conduct are least likely to take the matter to court.
2.3.4.8 The Hong Kong Commission also remarks that litigation is unpopular with consumers.[123] They note that the rights given to a buyer under their Sale of Goods Ordinance are enforced by taking proceedings in the court and if the goods supplied are unmerchantable or unfit for the buyer's purpose, the buyer can take the seller to court and sue him for breach of his obligations under the Ordinance. They indicate that the question whether the matter will be dealt with in the District Court or the Small Claims Tribunal depends on the amount of money involved. (The jurisdiction of the District Court was shortly before increased to $ 120 000 and that of the Small Claims Tribunal to $ 15 000.) They remark that the result thereof will be that more consumer cases will go to the Small Claims Tribunal. The Hong Kong Commission considers that rules introduced to protect consumers would only be effective if they could be readily and easily enforced, and that legislation giving a right to sue in court may not be adequate as a consumer protection measure. They are of the opinion that even if their recommendations proposing the amendment of the Sale of Goods Ordinance, this would only go a short way towards what other jurisdictions have done. They note the following reasons why litigation is unpopular with consumers:
2.3.4.9 It is noted that in India the legislature has not given any attention to problems of consumers arising out of exemption clauses.[124] Attention is drawn to the fact that it is not unusual for a trader to display a notice at a prominent place in his establishment stating that goods sold will not be accepted back even though these are defective, and that these directions are accepted by most consumers without a murmur. It is said that consumers in India are so exposed to exclusion clauses that hardly any of them find them burdensome in comparison with the amount of harassment to be faced if such cases are taken to court. It is noted that in so far as consumers are concerned exclusion clauses continue to be enforced by private traders and the state owned public utility services. It is stated that in view of poverty, ignorance and lack of powerful consumer organisations, it would be futile to expect that consumers will resort to court action to vindicate their rights, and that most consumers depend exclusively on state monopolistic services or undertakings for their basic needs. It is suggested that in the Indian conditions the best way to deal with the menace of such contracts or terms of contract would be to have all standardised contracts containing exclusion clauses approved by a designated authority.
2.3.4.10 We noted above that the Japanese Consumer Policy Committee suggests that specific and comprehensive provisions should be adopted and that measures be taken to enhance the settlement of disputes.[125] The Committee states that individual forums and methods for settling disputes include mutual negotiation, mediation and intervention, and arbitration, and partly because these forums and methods are not sufficiently well-known, consumers do not necessarily resort to these means for settling disputes. They consider that should consumers be unable to reach an agreement in these forums and disputes, the next step is to seek resolution in a lawsuit, but they note that this involves large expenses and a considerable amount of time before final resolution. The Committee notes that additionally, consumers tend to bring dissatisfaction and complaints to Local Information Centre consultations, with the result that other dispute settlement institutions are not fully utilized. The Committee therefore states that this makes it necessary to enhance dispute settlement procedures, and specifically, this will involve on the one hand enhancements in arbitration institutions, and on the other, active efforts to explain dispute settlement systems to consumers and the referral of consumers by the Local Information Centres to appropriate forums and methods. The Committee considers that doing this will enable the disputes settlement process to rectify transactions that are disadvantageous to consumers, and by having consumers themselves involved in the settlement of disputes will improve the awareness of consumer issues among all parties involved while at the same time contributing to greater independence by establishing the practice of individuals making their case and taking responsibility for the case they make.
2.3.5.1 The New Zealand Commission argues that some machinery for public action may be unavoidable if there is to be a truly effective remedy for unfair contractual practices. They believe that one possibility is to introduce a consumer ombudsman who might have powers not merely to investigate unfair contractual practices (on complaint, and perhaps on his or her own initiative) but also to hear parties and to make recommendations. The New Zealand Commission is of the opinion that, probably by analogy with the Ombudsmen under the Ombudsmen Act 1977, a consumer Ombudsman should not be able to make binding orders.[126] They remark that in Sweden, quite apart from the consumer ombudsman, an independent agency, namely the Board for Consumer Policies, has jurisdiction to settle consumer disputes, including allegations of unfair contractual terms.[127] They note, however, that the decisions of this Board, although usually accepted, are not legally binding. They consider that it may well be that a similar institution should be set up in New Zealand. They further propose that the ordinary courts should have sole jurisdiction to decide claims and grant relief, but that the Commerce Commission, which seemed the only suitable existing agency, should be given express standing to bring proceedings either on an individual contract or a class of contracts. They further propose that such contracts need not be proffered in business by one person, but, for instance, they might be contracts drawn up by a trade association and proffered by its members. They explain that the Commerce Commission would not simply be acting as a complainant's representative but in the public interest and when the Commerce Commission were to bring proceedings, the court may enjoin an unfair contract term generally. Hein Kötz remarks that the effectiveness of consumer bodies are substantially limited by the fact that they have limited financial resources.[128] He notes that this is the reason why it has been proposed often that governmental administrative bodies with comprehensive powers to examine market relations of businesses be established. He points out that such a measure was implemented in Sweden first.
2.3.5.2 The following provisions of the Danish Marketing Practices Act governs the appointment and some of the powers of the Danish Consumer Ombudsman:[129]
15.-(1) It shall be the duty of the Consumer Ombudsman to see that the provisions of this Act are not contravened, especially considering the interests of the consumers.
(2) The Consumer Ombudsman may require all such information as he considers necessary for the performance of his functions including information considered necessary to decide whether a matter falls within the scope of this Act.
(3) The Consumer Ombudsman shall possess the qualifications and fulfil the general conditions necessary for appointment as a judge.
(4) Decisions made by the Consumer Ombudsman under this Act cannot be made the subject of an appeal to any other administrative authority.
(5) The Minister of Industry and Coordination shall be empowered to make regulations specifying the functions of the Consumer Ombudsman.
16.-(1) The Consumer Ombudsman shall by negotiation endeavour to induce persons carrying on a trade or business to act in accordance with the principles of good marketing practices and with the provisions of this Act in general.
(2) If a person carrying on a trade or business fails to fulfil a commitment given to the Consumer Ombudsman after negotiations conducted pursuant to subsection (1) hereof, the Consumer Ombudsman may issue such orders to the person concerned as may be deemed necessary for ensuring the fulfilment of such commitment.
17. After conducting negotiations with the relevant trade and consumer organizations, the Consumer Ombudsman shall endeavor to influence the conduct of the persons carrying on a trade and business by drawing up and publishing marketing guidelines within specified areas considered important, especially to the interests of the consumers.
18.-(1) The Consumer Ombudsman shall, upon request, give his opinion on the legality of contemplated marketing initiatives unless such opinion gives rise to any particular doubt or special circumstances exist. An advance statement shall not imply that an actual decision has been taken with respect to the legality of the initiative concerned.
(2) Where the Consumer Ombudsman has given an advance statement to a person carrying on a trade or business to the effect that a contemplated initiative will be legal in the opinion of the Consumer Ombudsman, the Consumer Ombudsman may not on his own initiative intervene with respect to an initiative covered by the advance statement and implemented within a reasonable time after the issue of such advance statement.
(3) The Minister of Industry and Coordination may lay down specified rules governing fees for the issue of advance statements.
19.-(1) Any person with a legal interest herein may institute legal proceedings with respect to injunctions, orders or liability for damages pursuant to section 13 of this Act. The Consumer Ombudsman may institute legal proceedings with respect to injunctions and orders pursuant to section 13 (1) of this Act.
(2) If a charge is brought against a person for contravention of this Act, the execution of such charge shall be left to the Consumer Ombudsman if he so requests.
20. If, in connection with a contravention of the provisions of this Act, a plurality of consumers has uniform claims for damages, the Consumer Ombudsman may, upon request, recover the claims collectively.
21.-(1) The Consumer Ombudsman may issue an interlocutory injunction where there is a reasonable possibility that the object of an injunction referred to in section 13 (1) of this Act may not be achieved if the decision of the court has to be awaited. An action to confirm the injunction shall be brought not later than the next following weekday. The provisions of paragraph (1) of section 648 (1), sections 648 (2), 649, 650 and 651 of the Danish Administration of Justice Act shall apply correspondingly and the provisions of sections 628 (1), 629, 633, 634 (2) and (5), 636 (1), 639 and 640 (1) shall apply with the necessary modifications.
(2) Where judgment in a case to confirm an injunction under the provisions of subsection (1) hereof cannot be given before the expiration of five weekdays after the institution of proceedings, the court may, in the course of the preparatory stages of the case before the expiry of the said period, order that the injunction shall continue. Before such a decision is made, the court shall, as far as possible, give the parties an opportunity to make representations. If the injunction is not confirmed before the expiry of the said period, it shall lapse.
22.-(1) Any person guilty of breach of an injunction or non-compliance with an order issued by the court or by the Consumer Ombudsman pursuant to section 16 (2) hereof shall be liable to a fine or to mitigated imprisonment. However, non-compliance with an order to repay money received shall not be subject to penalty.
(2) Any person who fails to give such information as is required of him under section 15 (2) of this Act or, in matters falling within the scope of this Act, gives false or misleading information to the Consumer Ombudsman shall be liable to a fine, unless the offence carries a more severe penalty under any other enactment.
(3) Any person who is guilty of an offence under sections 2 (1)-(3) or 6-9 of this Act or who wilfully contravenes the provisions of section 5 of this Act shall be liable to a fine, unless the offence carries a more severe penalty under any other enactment. Offences under subsections (2) and (3) of section 2 of this Act consisting in injurious statements made in respect of a person carrying on a trade or business or in respect of any other matters particularly relating to such person shall be a cause for private prosecution.
2.3.5.3 The Danish Consumer Ombudsman Mr Hagen Jrrgensen states that the Consumer Ombudsman - who is appointed by the Government - has the task to make sure that private and public business activities are conducted in accordance with good marketing practices.[130] He notes that the Parliamentary Ombudsman and the Consumer Ombudsman are independent but they lack the powers to make decisions with binding effect. He says in their jobs they must try to convince, to persuade or to put pressure on the subject of their investigations. Mr Jrrgensen notes that if a company does not comply with the statements of the Consumer Ombudsman the Ombudsman can ask the courts to issue injunction on acts that infringe the law and if a specific prohibition in the law is violated - for instance the prohibition of misleading advertising - the Consumer Ombudsman can act as public prosecutor at the courts. He states that proper marketing practices are a basic normative standard and it is the Ombudsman's duty to supplement and further develop the content of the term "good marketing practice" also in relation to unfair contract terms. He notes that the Consumer Ombudsman gives special attention to consumer interests on basis of an average norm and attempts to balance those interests with business and society interests. He remarks that the Ombudsman informs the public of cases of common interest, whether they are handled by him or by the courts. He notes that the Consumer Ombudsman may intervene in civil law suits in order to support the individual consumer - for instance if the case is of fundamental character and he can claim restitution for the individual consumer by means of a trial on an illegal marketing practice. Further, if a number of consumers have equal claims of compensation, connected to an infringement of the law,