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LPL4801 ASSIGNMENT 1 SEMESTER 1 OF 2023 [258088]
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QUESTION: (a) Advise Thandi on whether the National Credit Act 34 of 2005 (“the NCA”) is applicable to the agreement.
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LPL4801 ASSIGNMENT 01 OF SEMESTER 012023
UNIQUE CODE: 258088
,QUESTION
Thandi is the sole owner of a catering business “Happy Snacky” which provides food
catering services. Thandi wants to buy a second-hand Volkswagen Caddy to use in her
business and Prestige Bank agrees to sell the vehicle to Thandi on credit. The agreement is
signed at Thandi's home on 2 May and possession and use of the vehicle is given to her
immediately. The agreement makes provision for the sale of the vehicle voetstoots at a
price of R250,000 payable in monthly instalments over three years and provision is made
for the payment of fees and interest. The agreement contains a clause that ownership of
the vehicle will only pass to Thandi once she has satisfied all her financial obligations
under the contract.
(a) Advise Thandi on whether the National Credit Act 34 of 2005 (“the NCA”) is
applicable to the agreement. (6)
(b) Thandi comes to see you on 5 May. She has seen a cheaper Volkswagen Caddy at a
second hand car dealer and wishes to cancel the agreement with Prestige Bank
without incurring any costs. Advise Thandi on her remedies in terms of the NCA. (5)
(c) Thandi comes to see you a year after signing the agreement. She is experiencing
financial difficulties and informs you that she will not be able to cover the full
amount of her next instalment due to Prestige Bank. Prestige Bank did not do a
proper credit assessment prior to the conclusion of the agreement. Advise Thandi
on her options in terms of the NCA. (5)
(d) Soon after Thandi took possession of the vehicle, it starts leaking oil. Thandi
informs Prestige Bank, but is informed that the vehicle has been sold voetstoots.
Advise Thandi on the enforceability of the voetstoots clause in terms of the NCA.
(4)
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, (a) Advise Thandi on whether the National Credit Act 34 of 2005 (“the NCA”) is
applicable to the agreement. (6)
First, it must be determined whether the agreement is a credit agreement which is
governed by the NCA.
The definition for a credit agreement and its subcategories are found in section 8 of the
NCA. In terms of subsection (1), an agreement is a credit agreement if it is a credit facility,
credit guarantee or credit transaction (see Study Guide 3, study unit 4, paragraph 4.2).
From reading the definitions, the agreement in the set of facts is not a credit facility or a
credit guarantee, but rather a credit transaction.
In terms of section 8(4) of the NCA there a number of different types of credit transactions,
but from the facts this probably constitutes "an instalment agreement" (see Study Guide 3,
study unit 4, paragraph 4.2.2). The elements of an instalment agreement are:
Is this a sale of movable property? Yes, a car is a movable thing.
Is all or part of the purchase price is deferred? Yes, the purchase price will not be
paid immediately but in monthly instalments over 3 years.
Is the purchase price paid by periodic payments? Yes, there are 36 monthly
instalments.
Is provision made for interest/fees payable, relating to the amount that has been
deferred? Yes, provision is made for this in the agreement.
Has possession and use of the property been transferred to the consumer? Yes, it is
explicitly stated that the vehicle was handed to Thandi immediately.
Is ownership retained by the seller or may it be reclaimed on default? Yes, there is a
clause which retains ownership by Prestige Bank, until all the financial obligations
of Thandi under the contract have been satisfied.
Accordingly, this agreement is a credit transaction in the form of an instalment agreement,
under section 8(4) (c) of the NCA.
Secondly, it must be determined whether Thandi is a consumer for purposes of the NCA.
The NCA protects a natural person or a small juristic person (see Study Guide 3, study unit 4,
paragraph 4.7).
In this case Thandi is a natural person and would be protected.
Therefore, the NCA does apply to the agreement.
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