If I had a car worth R140 000 and I wanted to sell it to my son for R70 000, would I be acting in my own self-interest?

The answer to that question is a resounding “No”. Some might even say I need my head read!

You wouldn’t be attempting to get fair market value for the car, and it wouldn’t make any financial sense to take an asset worth R140 000 and flog it for R70 000, would it?

In legal terms, this transaction would not be “At arm’s length”

Now, this isn’t a crash course in legal matters. You are well within your rights to do anything you want with any item you own 🙂

The reason why we have decided to knock out a blog post on this idea is because the National Credit Act only applies to credit transactions deemed to be “At arm’s length”

While the concept “At arm’s length” is not explained in the National Credit Act, it can be defined as a type of transaction where both parties act independently and have no relationship to each other.

When it comes to credit transactions, this is a key idea because any credit agreement agreed to is meant to ensure that both parties in the deal are acting in their own self-interest and are not subject to any pressure or duress from the other party.

The National Credit Act excludes transactions not made “At arm’s length”. These items listed below are also excluded from the scope of the Act and worth noting:

• Where goods are sold or services rendered, and payment is made by a cheque which is subsequently dishonoured.
• A credit agreement between a juristic person (business) and someone who has controlling interest in that juristic person.
• A credit agreement between family members.
• A credit agreement between parties who are dependent on each other.
• Where a 3rd party refuses to pay a charge on behalf of a buyer.
• Where a consumer pays fully or partially for goods and services through a charge against a credit facility.
• Where payment for continuous service or utility is deferred by the supplier in terms of an agreement.
• Any agreement irrespective of its form, if it’s an insurance policy, a lease of immovable property or transaction between a stokvel in terms of its rules.
• Juristic person (business) whose asset value or annual turnover exceeds the threshold which is currently R1 000 000 at the time of the agreement is entered into.
• A large transaction where the consumer is a juristic person, with an asset value below R1 000 000 threshold.

More to follow on some of these terms in future blog posts.

The SA Debt Advisors Team