On 9 February 2021, FMF made a submission to the Department of Small Business Development on the draft National Small Enterprise Amendment Bill, 2020 which can be read
HERE.
Summary
The National Small Enterprise Act, 1996 mandates the establishing of an Advisory Body to promote the interests of small enterprise, as contemplated in the 1995 Small Business Strategy (which stipulates that there should be a joint vision for big and small business, and the small-business environment should be as market-orientated as possible). The Advisory Body advises the Minister on the impact of legislation on small enterprises.
The draft Amendment Bill would repeal those provisions about the Advisory Body, and insert instead a chapter envisaging the appointing of a Small Enterprise Ombud who would entertain complaints by small enterprises against other enterprises, and investigate alleged unfairness in contracts between small and other enterprises, with power to award the complainants compensation. The Minister may, on the Ombud's recommendation, prohibit certain practices in relation to small enterprises as being unfair, including transfer of commercial risk to the weaker party.
Abstract values such as fairness cannot constitute substantive rules for tribunals to use to intervene in contracts. A notion that contracts need not be enforced if they offend against fairness would give rise to legal and commercial uncertainty and undermine the Rule of Law. It would be better for persons to refuse to sign allegedly unfair contracts in the first place.
Every contract, no matter how carefully negotiated, would be open to subsequent challenge on the ground that some of its terms were unfair, with inestimable damage to the conduct of business, personal trust, and respect for law. Imposing these notions of fairness would have the unintended consequence of deterring bigger enterprises from dealing with small ones.
There are already common-law rules applicable in cases of allegedly unequal bargaining power (including interpreting ambiguous contracts as lightly as possible, and rules about duress, undue influence, and public policy).
A socio-economic impact assessment would identify these shortcomings of the draft Bill. To our knowledge no such assessment was conducted, despite being required in terms of Cabinet policy from 2015.
Consumer statutes recognise that the problem lies with the machinery of the law, rather than the law about unfair contracts. The statutes establish special courts and tribunals, and alternative dispute-resolution agents or ombuds. These statutes' real value lies, not in rules about what is unfair, but rather in the mechanisms which they introduce for more accessible, informal, and inexpensive resolution of disputes.