Cancellation

Question 1

What are the four ways in which a contract can end?

Answer 1

• performance
• agreement
• cancellation
• frustration

Question 2

When can a party cancel?

Answer 2

• CCLA s 36 repudiation
• CCLA s 37 breach or misrepresentation

Question 3

Actual vs Anticipatory breach

Answer 3

• Actual = Failure to perform without lawful excuse when performance is due
• Anticipatory breach = Unwilling or unable to perform without lawful excuse before performance is due

Question 4

What is repudiation?

Answer 4

An actual or anticipatory breach by one party. An unwillingness or inability to perform + no lawful excuse.

Question 5

For repudiation, why do you not have to wait for actual breach to cancel?

Answer 5

• When it is clear the breaching party intends to breach their obligations, it would be a waste of time and resources to require other party to fulfil their obligations

Question 6

When can somebody be said to have “made it clear” that they will not perform obligations

Answer 6

Kumar
- Fundamental question is reasonable inferrence of intention
- Assessment is fact based against the background of a high threshold
- Must look at circumstances of the case

Question 7

CCLA s 38

Answer 7

No cancellation if contract is affirmed.
A party is not entitles to cancel the contract is, with full knowledge of the repudiation, misrepresentation, or breach, the party has affirmed the contract.

Question 8

Effect of affirmation

Answer 8

Affirming party looses their right to cancel.
It must be shown that the electing party made a firm and settled choice and does not intend to go back on it.

Question 9

What is the procedure for cancellation?

Answer 9

S 41 When cancellation may take effect

Question 10

Why is notice of cancellation important?

Answer 10

Schmidt v Holland [1982] 2 NZLR 406

Question 11

Does a wrongful cancellation amounts to repudiation?

Answer 11

Yes.

Question 12

What is the two step process for breach - s 37?

Answer 12

1. misrepresentation / actual breach / anticipatory breach of contract
   AND
2. Breached term essential or has substantial consequences

Question 13

How to know if something is an essential term?

Answer 13

1. may say expressly
   OR
2. The cancelling party would more probably than not have declined to enter the contract if there had been no agreement that the term in question was essential

Question 14

How to know if something substantially reduces benefit under s 37?

Answer 14

Look at the effect not the breach!

Aerial Advertising Co v Batchelor’s Peas
- No exact test – court has lots of discretion
- Matter of evaluating facts of each case

Question 15

What if a party cancels a contract for insufficient reason when sufficient (unknown) reason also exists?

Answer 15

Kumar
- Cancellation still valid
- Sometimes a party may cancel for a wrong reason
- But if there was a valid reason, the cancellation should be valid

Question 16

Which section provides for affirmation?

Answer 16

S 38 CCLA

Question 17

S 38 CCLA

Answer 17

A party is not entitles to cancel the contract is, with full knowledge of the repudiation, misrepresentation, or breach, the party has affirmed the contract.

Question 18

What is the affect of affirmation?

Answer 18

Affirming party looses their right to cancel

Question 19

What kind of evidence do you need of affirmation?

Answer 19

It must be shown that the electing party made a firm and settled choice and does not intend to go back on it. - Jansen v Whangamata Homes Ltd 2002

An unequivocal choice - BFT

Question 20

What amounts to adequate notice of cancellation?

Answer 20

S 41 (2)
- The cancellation may be made known by words or by conduct showing an intention to cancel, or both. It is not necessary to use any particular form of words, so long as the intention to cancel is made known.

Eg phone call or email will surfice

Question 21

What is the effect of cancellation?

Answer 21

Set out in Worsdale v Polgase
1. Cessation of further future performance (CCLA S 42 (1)(a))
2. Money and property remain where they are
3. Court has discretion to grant relief if 2. makes it unfair

Question 22

When may a court grant relief?

Answer 22

S 43
- if just and practicable

Question 23

If parties don’t get relief what can they do?

Answer 23

They can still sue in other damages - s 42
BUT
If the court has rated relief, the value of such relief should be taken into account when calculating damages.