Reasonable cancellation charges under CPA section 17
What cancellation charge a South African hotel or guesthouse may keep under section 17 of the Consumer Protection Act, and when it may charge nothing.
By Achekam · · 5 min read · For Hospitality businesses in South Africa
A family books a long weekend with you and pays a deposit. A fortnight before arrival they cancel and ask for the deposit back. Your website says deposits are non-refundable. The guest says the Consumer Protection Act lets them cancel. Both of you are partly right, and the answer turns on one section of the Act and on what is reasonable.
Section 17 of the Consumer Protection Act deals with exactly this situation: a consumer cancelling an advance booking, reservation or order. This piece sets out what it says, as published on Acts Online, how a South African guesthouse, lodge or hotel can apply it to deposits and cancellation charges, and how to record the refund in the books. It is a practical guide, not legal advice; where the amount at stake is large, take advice on your own terms.
The guest's right to cancel an advance booking
Section 17(2) gives a consumer the right to cancel any advance booking, reservation or order for goods or services to be supplied, subject to subsections (3) and (4). A room reservation, a function booking and a table for a large group are all advance bookings of services to be supplied later.
Section 17(1) says the cancellation right does not apply to a franchise agreement or to special-order goods. Accommodation is neither, so for a guesthouse the starting point is that the guest may cancel. The real question is what it costs them.
A reasonable deposit and a reasonable charge
Section 17(3) allows a supplier that accepts a reservation or commits to supply goods or services on a later date to require a reasonable deposit in advance and to impose a reasonable cancellation charge.
So the Act does not forbid deposits or cancellation fees. It requires both to be reasonable. A "non-refundable" label does not settle the matter by itself: what you may keep is whatever a reasonable cancellation charge would be, judged on the tests in section 17(4).
The four tests for reasonableness
Section 17(4) treats a cancellation charge as unreasonable if it exceeds a fair amount having regard to:
- the nature of the goods or services booked, so a single room on an ordinary weekend differs from exclusive use of the venue for a wedding;
- the length of cancellation notice, so a cancellation weeks ahead is not the same as one on the morning of arrival;
- the supplier's reasonable potential to find an alternative consumer, so a room in peak season that will rebook quickly differs from one in a quiet month;
- the general practice of the industry, so what comparable establishments charge in similar circumstances is relevant.
A sliding scale written into your terms follows these tests naturally: the earlier the notice, the smaller the charge. Add a line saying that if the room is re-let for the cancelled nights, the charge will be reviewed, which reflects the third test. Write the scale into the booking confirmation the guest receives, not only on the website.
No charge at all after death or hospitalisation
Section 17(5) prohibits any cancellation fee where the consumer cannot honour the booking, reservation or order because of the death or hospitalisation of the person for whom it was made. In that case nothing may be kept as a cancellation charge, however late the notice.
Handle these cancellations kindly and quickly. Ask for reasonable confirmation, such as a hospital letter or a death notice, keep it with the booking, and refund without argument. It is a rule, not a concession.
A worked example in words
A guest paid a deposit for a weekend stay and cancels with some notice. Your terms set a charge for that notice period, and the room did not re-let. Applying section 17(4), you decide the charge in your terms is fair for the type of booking, the notice given, the low chance of re-letting so close to the date, and what nearby guesthouses charge. You keep that charge and refund the rest of the deposit.
Had the guest cancelled because their mother was admitted to hospital, section 17(5) would apply, and the whole deposit would be refunded.
Recording the refund in Achekam
How the deposit was recorded decides how the refund is recorded.
- If the deposit was invoiced. In Achekam a credit note is issued from the invoice it corrects, in full or for chosen lines, is posted to the ledger, and can be downloaded as a PDF or e-mailed, with leftover credit held for the customer. Credit the part you are refunding, so the part you keep stays as income from the cancellation charge. There is no credit note without an invoice, which is one more reason to invoice deposits rather than just bank them.
- The payment side. A business records customer payments against one invoice or spread across a customer's invoices; a part payment leaves the invoice part-paid, and any extra is held on the customer's account. A receipt can be re-allocated, and administrators can refund or reverse it.
- If the guest paid online. A refund of an online invoice payment is not sent through the gateway by Achekam: it is made in the gateway's own dashboard and recorded by a person. Make the refund there first, then record it, so the two never drift apart.
Send the guest the credit note PDF with a short note explaining the charge kept and why. A clear explanation tied to section 17(4) avoids most second rounds of argument. For deposits on large group bookings, group booking deposits covers how to take and hold them, and travel businesses handling the same question can see refunds when a trip is cancelled.
The text of section 17 of the Consumer Protection Act on Acts Online sets out when a supplier may take a reasonable deposit and what cancellation charge it may keep.
Review your cancellation terms against the four tests this month, rewrite any blanket "non-refundable" wording as a sliding scale, and add the death-and-hospitalisation exception in plain words.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
