Most Read Contributor in South Africa, September 2016
The confusing definition of "instalment sale
agreements" in the Act
In terms of the National Credit Act ("the Act"), an
instalment agreement is defined as a sale of movable property. From
the definition, it would seem that instalment sale agreements over
immovable property are excluded from the Act; however, this is not
What is a credit agreement?
A credit agreement is defined as an agreement where a credit
provider undertakes to supply goods or services or to pay an amount
and the consumer's obligation to pay is deferred.
Specific agreements excluded from the operation of the Act
Section 8 of the Act excludes certain agreements from the
operation of the Act, namely a lease of immovable property. From
the above, it is clear that a lease of immovable property is
specifically excluded from the operation of the Act, but the Act
does not specifically exclude an instalment sale agreement over
When do I need to register as a credit provider if I conclude
an instalment sale agreement?
In terms of Section 40 of the Act, a seller party to an
instalment sale agreement must apply to register as a credit
provider if the total principal debt owed to that credit provider
under all outstanding credit agreements, other than incidental
credit agreement, exceeds R500 000 (this amount is subject to
change by the Minister of Trade and Industry by notice in the
The effect of the Act on instalment sale agreements over
Although an instalment sale agreement is defined in the Act as
an agreement over movable property, an instalment sale agreement
over immovable property constitutes a credit transaction in terms
of the Act.
If an instalment sale agreement provides for a purchase price of
more than R500 000, then the credit provider (the seller in terms
of an instalment sale agreement) would need to register as a credit
provider in terms of the Act.
When dealing with instalment sale agreements, as well as any
other agreement where payment is deferred, it is important to be
mindful of the implications of the National Credit Act. To avoid
confusion, the National Credit Act should be amended to include
instalment sale agreements over immovable property in the
definition section of the Act.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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