This is how to cancel a fixed-term contract

Fixed-term contracts are valid for a certain time and are usually for cellphones, gyms and satellite surveillance for your car.

Companies are not allowed to offer fixed-term contracts for longer than 24 months, unless you agree to it. Image: iStock

You can cancel a fixed-term contract if you follow the right steps as prescribed in the Consumer Protection Act (CPA).

Section 14 and regulation 5 of the CPA determines the maximum duration of these contracts and how you must go about cancelling them.

Fixed-term contracts and the Consumer Protection Act

According to Regulation 5, companies are not allowed to offer fixed-term contracts for longer than 24 months, unless you agree to it and the company can show that it will benefit you financially to agree to a longer duration.

The company must also tell you that you will be charged a cancellation fee if you want to cancel before the contract expires.

Section 14 determines that you can cancel a fixed-term contract when it expires and that the supplier cannot charge you for that, except the last amount you still owe.

Used car dealer instructed to refund consumer, court confirms Tribunal’s finding

The service provider must also notify you in writing 40 to 80 days before the contract expires that it will expire and indicate if the current price will be changed if you renew the contract.

You can also continue with the contract on a month-to-month basis depending on important changes such as price.

You cancel, you pay…

You can cancel a fixed-term contract before it expires, but you will pay for it.

According to Section 14 you can give the service provider 20 days’ notice that you want to cancel. The service provider must then calculate the amount you owe for goods or services provided until the time of cancellation. If you have already paid for the full term, the service provider must refund the portion you will not use.

If you entered into a fixed-term agreement after someone called you as part of direct marketing and you did not call to enquire first, you have five working days to cancel the contract in writing without paying a penalty.

What service providers must consider when calculating cancellation penalty

According to section 14 the service provider must calculate the amount by considering:

• The amount you still owe up to the date of cancellation;
• The value of the transaction up to cancellation;
• The value of the goods which will remain in your possession, such as a cellphone;
• The value of the goods returned to the supplier;
• The duration of the agreement initially agreed on;
• Your losses or benefits as a result of entering into the agreement;
• The nature of the goods or services;
• The length of notice of cancellation you provide
• The reasonable potential for the supplier to find another consumer to enter into an agreement with between the time of receiving the cancellation and the time of the cancellation, while acting diligently; and
• The general practice of the relevant industry.

The service provider is therefore not allowed to force you to pay the full amount for the months that are left and also not to charge a cancellation fee that makes it impossible for you to cancel.

When can service providers cancel your contract?

Service providers can also cancel your contract from their side.

They will usually cancel your contract if you do not adhere to your duties as set out in the contract, such as paying your account on time every month. The service provider must notify you if the contract will be cancelled and can then cancel it within 20 days if you do not pay the arrears amount of adhere to other terms in the contract.

Section 14 is not appliable to agreements between companies or between individuals. Agreements between you and your bank, franchise agreements and fixed-term investments are also excluded.

Read more on these topics

For more news your way

Download our app and read this and other great stories on the move. Available for Android and iOS.