How to cancel those gym, cell phone, and other fixed term contracts

Cancelling a fixed-term contract is a skill all consumers have to learn with time, usually, once they realise how difficult it is to cancel a cell phone or a gym contract.

Before the advent of the Consumer Protection Act, consumers battled to get out without turning over the last of their savings.

The section in the Consumer Protection Act (CPA) dealing with fixed-term contracts was specifically included because consumers complained so much about this issue.

Fixed term contracts are valid for a certain time and usually apply to cell phones, gyms, satellite surveillance for your car and security services.

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

The duration of fixed-term contracts

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 demonstrate that it will benefit you financially.

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

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Can a fixed-term contract be cancelled?

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

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. 2

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

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.

Cooling-off period

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.

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How much do you pay for cancelling?

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 cell phone
• 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
• 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.

Is the service provider allowed to cancel the contract?

Service providers usually cancel your contract if you do not adhere to your duties 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 or adhere to other terms in the contract.

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The small print

Small print is not allowed in any consumer contract. This includes the terms of cancellation, as well as unfair contract terms, such as giving up your rights in terms of the CPA.

When is section 14 not applicable?

Section 14 is not applicable to agreements between companies or between individuals.

Agreements between you and your bank, franchise agreements and fixed-term investments are also excluded.