I need some guidance when it comes to the legalities involved with...

I need some guidance when it comes to the legalities involved with my business.

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The Guarantee

What is a Guarantee?

Guarantees offered by manufacturers are free of charge but legally binding. In law, a guarantee is considered “an agreement” to provide some benefit for a set period of time in the event of the goods or services being defective”

Guarantee agreements

Companies usually enter into an agreement with your supplier to repair damaged goods sold through the company. When a product is imported, it’s not practical to return defective goods to the supplier for repair.

However, if you offer a guarantee, you would need to outsource to a reputable repair company that can repair the item so that the guarantee agreement can be met.

You can outsource to a local reliable artisan and negotiate a competitive rate. It’s always advisable to have back up and to approach various repair companies around the country, so you do not depend on single service providers.

When does a guarantee start and end?

A guarantee usually takes effect on the date of purchase and expiries 12 months later or as you see fit. You would also have to draw up terms and conditions that would apply to any guarantee that you offer.

Costing Options

Although many guarantees are included in the price of the goods and sold to the end-user as ‘free’, there are costs associated for the suppler. “In your case you will be facing customers, so your liability is big. It’s very important to ensure that your cover yourself adequately.

You would have to build-in service agreements into your business strategy. “I would recommend that you consider taking liability insurance,” advises Nick Tselentis, Economic, and Legislative Affairs Manager for Consumer Goods Council of South Africa.

Have you considered the updated regulations in the new Consumer Protection Act?

The new Consumer Protection Act will introduce a single, comprehensive legal framework for consumer protection and this will have a huge impact on virtually every business in South Africa.

The Act will have serious consequences as far as product liability goes, especially on the right to fair value, good quality and safety. It imposes strict liability on a producer, distributor, or supplier of goods for any loss or damage that results because of a product defect or inadequate instructions or warnings provided to the consumer.

“Companies that sell DIY kits are going to have to review the instruction kit carefully,” says Tselentis. Everyone in the supply chain will now have to pay closer attention to their procedures and policies regarding product quality, product warnings and product labelling.

The Act will only operate from April 2011, but once it is in operation, South African consumers will be the most protected consumers in the world. The suppliers of goods and services need to understand the Act as soon as they can. As long as you conduct sound business practices, you should not have to worry.

Guarantees on imported goods

“As an importer be very careful how you order stock and make sure that your risk is as limited as possible. What I mean is you must arrange that the goods arrive in South Africa in the best possible condition. Go to the end degree to ensure that goods are packed to prevent any damage. Get up to date with the new Consumer Protection Act, especially Section 20, 21 and 61, recommends,” Tselentis.

Costs

Can you cost the guarantee into the price of the furniture by estimating what you would perceive as reasonable?  Instead of including a guarantee, you can offer a warranty for which you would charge a nominal fee. You could give customers the option of buying the goods with or without a warranty.

Commercial Rights & Legislation

Commercial rights explained

Commercial rights, also known as business or industrial rights, give a person the right to run a business from a certain area.

How to apply for business rights

Business rights must be applied for through the local council (municipality). There are various bylaws that apply to business rights that differ from council to council.

Why is zoning important?

Zoning determines whether a property can be used for business or commercial purposes. These bylaws are set out in the applicable Town Planning Scheme that spells out the rules for possible use. For example, every property in the City of Johannesburg has a set of regulations that are designed to control development. These regulations are determined by the zoning of the property. There are four sub-divisions.

  • Business 1: This is for general business in the form of shopping centres or malls and the developer or owner would be allowed to have almost any type of shop on the premises.
  • Business 2: This is also for a shopping centre, but with certain restricted businesses. For example, a restriction may be placed on opening a bottle store.
  • Business 3: A strict zoning which will not allow a wider variety of businesses to open and operate in a centre.
  • Business 4: This zoning excludes shopping centres or malls. It provides for office use (with or without residential use).

Business rights in residential areas

South Africa’s laws require that businesses wishing to operate in a residential area apply for re-zoning. This does not mean that a one-person business or consultancy requires business zoning, however, if staff is employed, signs put up and customers call on you, business rights must be obtained.

Likewise, if the residential building is going to be used solely for business purposes and no one is actually living there, business rights are required. Each local authority has different parameters for approving residential business rights and each case will be assessed individually. With the exception of professionals, it is unlikely that a business will receive business rights in an established upmarket residential area.

Title

Business rights are also controlled by conditions of title. These conditions are set out in the Title Deeds of each property, and can restrict the way in which a property is developed.

Other regulations

Other legislation that regulates development includes the National Building Regulations, the Building Standards Act (Act 103 of 1977), the Public Health Bylaws and other Municipal Bylaws.

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