LATENT DEFECTS – BEFORE AND AFTER THE CONSUMER PROTECTION ACT

According to South African common law, a latent defect in any good sold is a defect not visible upon reasonable inspection  by an ordinary buyer.  This defect must also exist at the time of the sale and should be distinguished from a patent defect, which is a defect discoverable by a reasonable inspection by an ordinary buyer.

When a seller delivers goods with latent defects, there are ordinarily two possible remedies available to the buyer :

i) Cancellation of the sale and return of the purchase price or ii) the difference between the price and the actual value of the defective good.

Both these remedies area available to buyer regardless of whether the seller knew of the fault. The remedy of cancellation would only be available if the defect is so serious the buyer would not have purchased the goods had he known of the defect.  There is an exception to these remedies in the circumstance where the seller of the good is also the manufacturer or professes to have expertise in the good sold. In this particular circumstance, the seller is also liable for full consequential damages. These rules however, are very rarely applied. This is because goods are customarily sold subject to voetstoets or “as is” clauses. A voetstoets clause indemnifies a seller for liability for latent defects.

The new Consumer Protection Act (hereinafter referred to as the CPA) significantly increases liability for the sellers of defective goods. The CPA requires delivery of goods free of both patent and latent defects  (unless buyer has been informed prior to sale that goods are defective). Furthermore the CPA inserts an implied warranty of quality  into every contract of sale. In terms of this warranty it is a term of the contract of sale that the goods be delivered free of defects. The dominant opinion is that this warranty is an essential part of any contract of sale and that the warranty would take precedence over any voetstoets clause. Thus, it would be impossible to have a valid voetstoests clause and a valid contract of sale. Section 56 also inserts a cancellation or repair remedy to the consumer, wherein the consumer may elect to either have the goods repaired or have his purchase price refunded.

The damages for any defect will also be significantly higher under the CPA. Firstly, the seller would be liable for consequential damages for breach of the warranty of quality. Section 56 of the CPA goes further in that it also makes the seller for any further harm suffered due to the defect in the goods.