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February/March 2011
WASTED COSTS WHEN A BOOKED FUNCTION IS CANCELLED: The New Consumer Act Says …
By Hanlie Kotze, STBB | SMITH TABATA BUCHANAN BOYES
 
Cancellation of a booked event can cost a caterer, hotel or any other venue facility a great deal in the way of wasted time and costs. Against this background, those in the hospitality industry may find it alarming that the Consumer Protection Act, which will become fully operative on 01 April 2011, affords consumers the right to cancel any advance bookings and reservations.

What recourse is there for the service provider who suffers a loss as a result of such a cancellation?
Section 17 of the Act allows a supplier to require payment of a reasonable deposit when a booking is made and to impose a reasonable penalty in respect of the cancellation of the booking.

What is a reasonable deposit and penalty?
The Act gives guidelines on how to determine a reasonable amount for purposes of the deposit and penalty by indicating that a charge will be unreasonable if it exceeds what one would fairly expect to pay, taking into account the following:
the nature of the goods or services booked;
the length of notice of cancellation given by the consumer;
the reasonable potential for the service provider, acting diligently, to find an alternative consumer between the time of receiving the cancellation notice and the time of the cancelled reservation; and
the general practice in the industry.

Important
But note, importantly, that you may not impose any cancellation penalty if the consumer is unable to honour the booking because of the death or hospitalisation of the person for whom, or for whose benefit, the booking was made.

Sourced from STBB
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