Raeesa Ebrahim Atkinson

Category: Contract, Consumer and Credit Law

People enter into credit agreements all the time. Credit agreements have become a part of daily living, whether it be home loans or that cell phone contract you signed on a whim. However, does the R 2000,00 you lent to a friend in need constitute an agreement which falls under the National credit Act 34 of 2005, as amended (hereafter “NCA”)? 

Overview 

Section 4 (1) of the NCA states the following:  

“(a) Subject to sections 5 and 6, this Act applies to every credit agreement between parties dealing at arm’s length and made within, or having an effect within, the Republic, except a credit agreement in terms of which the consumer is- 

(i) a juristic person whose asset value or annual turnover, together with the combined asset value or annual turnover of all related juristic persons, at the time the agreement is made, equals or exceeds the threshold value determined by the Minister in terms of section 7( 1); 

(ii) the state; or 

(iii) an organ of state; 

(b) a large agreement, as described in section 9(4), in terms of which the consumer is a juristic person whose asset value or annual turnover is, at the time the agreement is made, below the threshold value determined by the Minister in terms of section 7(1);” 

Upon consideration of the above, should an agreement not fall under the list of exclusions, fulfil the requirements of a credit agreement and apply to parties dealing with each other at arms length, the NCA. 

Section 8 (3) provides for the requirements of a credit agreement under the NCA and includes an agreement for the repayment of a sum of money. However, one would also need to determine whether the contracting parties are dealing with each other at arms length. 

An arms-length transaction usually refers to a transaction where the parties are acting independently of one another. In other words are parties who are friends and enter into an agreement sufficiently independent for the purposes of the NCA. 

In Fourie v Geyer (MKP27/2018) [2019] ZANWHC 42; 2020 (6) SA 569 (NWM) (22 August 2019)1 the parties had been friends for about 18 years and the Respondent argued, nonetheless, that the agreement entered into was entered into at arms length. The argument was based upon the allegation that the agreement was entered into in the ambit of gaining the utmost advantage for the applicant and upon the consideration that the primary objective of the agreement was contractual gains and to advance the Applicant’s interests.  

The court agreed with the Respondent and found that the NCA was applicable to the agreement. 

Conclusion 

Considering the above, it is clear that where the applicability of the NCA is argued, a determination would have to be made on a case-by-case basis. Parties are therefore warned to properly document and conclude their contractual interests in order to avoid ambiguity. 

Contact an attorney at SchoemanLaw inc for your legal needs by visiting our website at www.schoemanlaw.co.za. 

Raeesa Ebrahim Atkinson | SchoemanLaw Inc
Specialist Attorney Civil Dispute Resolution 
 www.schoemanlaw.co.za