cancellation

Question 1

what are the cancellation provisions in CCLA and what does each cover

Answer 1

s36 - grounds of repudiation

s37 - grounds of misrepresentation or grounds of breach of contract

• NOT for sale of goods - look to part 3

Question 2

what does part 3 of the CCLA cover

Answer 2

sales of goods

Question 3

what does s4 Consumer Guarantees Act say

Answer 3

• remedies in this Act in addition to rights or remedies under other acts (meaning they apply in parallel to CCLA remedies)

Question 4

what does s40 CCLA say

Answer 4

statute takes precedence over common law - only use case law to determine legal concepts found in s36

Question 5

what do you first need to cancel a contract

Answer 5

• stipulation to that effect in the contract itself

- ground that gives you a right to do so under the Act

Question 6

what does the language of the cancellation provisions say about whether the remedies are entitlements or discretionary

Answer 6

party to a contract ‘may cancel’ - the plaintiff has a right/entitlement to cancel the contract, it doesn’t say the court may make an order so it is not discretionary

Question 7

cancellations of other contracts - not sale of goods, is governed by what part of the CCLA

Answer 7

part 2

Question 8

what rules apply to the cancellation of contracts for the sales of goods

Answer 8

s 201(2) CCLA: “the rules of the common law … continue to apply to contracts for the sale of goods’

subpart 3 of part 2 CCLA does not apply to contracts for the sale of goods

that is: s36-42 CCLA do not apply to the sale of goods - instead of cancellation under the CCLA, the right to reject goods according to ss 164-169

Question 9

how does cancellation under the Consumer Guarantees Act (CGA) work

Answer 9

the CGA applies only to consumer contracts = the supply of goods and services to consumers. s 2(1) CGA - consumer = when whatever was purchased was purchased for personal, domestic or household use. it can apply to services in a contract to perform work (including of a professional nature)

Question 10

what is the relationship between the CCLA and Consumer Guarantees Act

Answer 10

s 59(1)(g) CCLA - nothing affects the CGA.

s 4(1) CGA - ‘the rights and remedies provided in this Act are in addition to any other right or remedy under any other Act’

Question 11

what is the scope of cancellation under ss 36 CCLA

Answer 11

1. relationship to the common law: ‘in place of the rules of the common law and of equity’ - s40(1) CCLA statute takes precedent over the common law
2. if a contracting-out clause within the meaning of s 34 CCLA does not cover a particular breach, the CCLA will apply. Should there be a cancellation clause in the contract, the contract takes precedence over s36/37 - this provision must be express

Question 12

what is repudiation, s 36(1) CCLA

Answer 12

‘does not intend to perform/complete the performance’ assessed from the point of view of a reasonable person. Every repudiation amounts to a breach of contract, and repudiation is where it was an essential term of the contract. it can be anticipatory, by words explicit or by conduct implicit

Question 13

what are the grounds requirements for cancellation

Answer 13

• one party cancelling on unjustifiable grounds = effective provided proper grounds existed
• cancelling party unaware of justifiable grounds = effective - why should a party which, by the time of trial, can demonstrate it was entitled to cancel, nevertheless be held to have acted wrongfully in doing so because it was unaware of that position at the earlier time? there is no requirement to specify, at the time of cancellation, the reasons for doing so

Question 14

a contractual term is broken only if (Oxborough v North Harbour Builders, Yu v T & P Developments)

Answer 14

at completion - the work does not conform with the contract

before completion - the work is such that is cannot be made to conform with the contract

before completion + any defects can be remedied - the builder has made clear that he does not intend to rectify

Question 15

what is anticipatory repudiation (‘does not intend to perform’)

Answer 15

• although s 37(2) CCLA does not apply to s 36(1)(a) CCLA, anticipatory repudiation normally has to relate to:
  a. non-compliance with a term that is essential to the cancelling party e.g. the obligation to obtain a resource consent
• non-compliance which will have serious consequences for the cancelling party

Question 16

what is explicit anticipatory repudiation (‘by words’)

Answer 16

where one party informs the other that the contract will not be performance

Question 17

what is implicit anticipatory repudiation (‘by conduct’)

Answer 17

• one party acts in a way calculated to or having the effect of precluding the possibility of the contract being performed

Question 18

what is rejecting goods, for example when the wrong quantity is delivered, like

Answer 18

has a similar effect as cancellation but only applies when the type of contract concerns the sale of a good (part 3)

Question 19

what is the definition of repudiation in s36

Answer 19

“a party to a contract may cancel the contract if, by words or conduct, another party (B) repudiates the contract by making it clear that B does not intend to:

a. perform B’s obligations under the contract; or
b. complete the performance of B’s obligations under the contract

Question 20

what are the requirements for cancellation due to misrepresentation in s37(1)(a) CCLA

Answer 20

to be able to cancel for misrepresentation, a party must satisfy the four essentials for an actionable misrepresentation (same requirements as under s 35)

Question 21

what are the requirements for cancellation due to breach in s37(1)(b) CCLA

Answer 21

the test is whether a reasonable bystander, aware of all relevant existing and future facts, would have believed that by the time of the purported cancellation it was clear that there would be a breach of requisite essentiality or seriousness. the cancelling party bears the risk of unexpected performance (in cases of anticipatory breaches) and could be done for repudiation if they unexpectedly performed having cancelled

Question 22

what is a further requirement for cancellation for breach or misrepresentation under s 37(2) CCLA

Answer 22

either the term is essential or the effect of the misrepresentation/breach is substantial.

a breach of an essential term with only a minor effect entitles to cancel under s 37(2)(a). so does a breach of any term, even a minor term, if it has a serious effect

Question 23

what does essential mean within s 37(2)(a) CCLA

Answer 23

= when the representation is of such importance to the representee that without it he would not have contracted with the representor or not on those particular terms

both parties must have agreed on the essentiality - they make a term essential by agreeing on it. the burden of proof is on the plaintiff. if a contract incorporating the term is signed, it will be easier to establish its essentiality than if statements are made during negotiations

Question 24

what is the effect of a misrepresentation or breach being substantial s 37(2)(b) CCLA

Answer 24

= more than trivial. it depends on the individual case and the courts take subjective and objective factors into account. a substantial effect could mean higher costs for the plaintiff or the breach of a dispute resolution clause in a building contract.

Question 25

what effect does affirmation have on cancelling in a contract under s 38

Answer 25

affirmation precludes subsequent cancellation in respect of the same breach - cancellation after having affirmed the contract amounts to a repudiation of the contract. affirmation does not remove right to damages for misrepresentation under s 35 CCLA. the continuation of the repudiation gives the innocent party a continuing right to cancel. a further breach after the affirmation revives the right to cancel.

Question 26

what is the problems/effects of notice of cancellation under s 41 CCLA

Answer 26

problem: notification is not always possible. where one party prevents the other from communicating cancellation by wrongfully absconding, neither he nor those who acquire a title through him can insist on actual notification

Question 27

what is the legal consequence of cancellation under s 42 CCLA

Answer 27

s 42(1)(a) CCLA - “no party is obliged or entitled to perform it further”

this is concerned with further performance and does not take away accrued rights - an obligation unconditionally accrued before cancellation can still be enforced after cancellation.

secondary obligations like arbitration clauses or restraints of trade survive by virtue of s 34 CCLA - “if a contract expressly provides for a remedy for misrepresentation, repudiation, or breach of contract, or makes express provision for any of the other matters to which sections 35 to 49 relate, those sections have effect subject to that provision”

Question 28

what relief can be given under s 43 CCLA

Answer 28

it is not required that the relief be pleaded, ‘the court may, if it is just and practicable to do so, make an order.’ they have a wide discretion to grant relief - it must be just and practicable to do so (only one prerequisite). ‘an order under section 43 may be made on the terms and conditions that the court thinks fit.’ they may grant such relief to both parties and may order the payment of a sum of money, direct a party to do or refrain from doing, in relation to any other party, any act or thing or direct the transfer of specific property (s43(3)).

Question 29

what are the statutory limitations for cancellation

Answer 29

s46 prohibits any order ‘that would have the effect of depriving a person, not being a party to the contract, of … any property acquired … in good faith and for valuable consideration.

s47(1) prohibits any order ‘in respect of any property if any party to the contract has so altered the party’s position in relation to the property that … it would … be inequitable … to make the order’

Question 30

what are some key differences between the CCLA and the FTA as regards cancellation

Answer 30

CCLA:

• cancellation at discretion of the party
• only effective in the future
• affirmation bars cancellation
• only a serious misrepresentation within the meaning of s 37(2) qualifies
• no limitation of ‘in trade’
• a third person may make an application under s 48(c) CCLA if it is material for him to know whether relief will be granted
• order made against the other party to the contract
• no explicit remedy of variation of contract
• part 3 CCLA overrides Part 2 as far as cancellation for breach is concerned

FTA:

• cancellation at discretion of the court
• court may void a contract ab initio (from the start)
• no provision regarding affirmation
• theoretically possible for the court to make an order declaring a contract to be void in respect of only a minor misrepresentation
• remedies only available when the misrepresentation was made ‘in trade’
• person who suffers the loss need not be a party to the proceedings
• order is made against the person who engaged in the misleading conduct
• court may vary a contract