Cancellation Flashcards
What are the four ways in which a contract can end?
- performance
- agreement
- cancellation
- frustration
When can a party cancel?
- CCLA s 36 repudiation
- CCLA s 37 breach or misrepresentation
Actual vs Anticipatory breach
- 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
What is repudiation?
An actual or anticipatory breach by one party. An unwillingness or inability to perform + no lawful excuse.
For repudiation, why do you not have to wait for actual breach to cancel?
- 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
When can somebody be said to have “made it clear” that they will not perform obligations
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
CCLA s 38
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.
Effect of affirmation
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.
What is the procedure for cancellation?
S 41 When cancellation may take effect
Why is notice of cancellation important?
Schmidt v Holland [1982] 2 NZLR 406
Does a wrongful cancellation amounts to repudiation?
Yes.
What is the two step process for breach - s 37?
- misrepresentation / actual breach / anticipatory breach of contract
AND - Breached term essential or has substantial consequences
How to know if something is an essential term?
- may say expressly
OR - 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
How to know if something substantially reduces benefit under s 37?
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
What if a party cancels a contract for insufficient reason when sufficient (unknown) reason also exists?
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
Which section provides for affirmation?
S 38 CCLA
S 38 CCLA
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.
What is the affect of affirmation?
Affirming party looses their right to cancel
What kind of evidence do you need of affirmation?
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
What amounts to adequate notice of cancellation?
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
What is the effect of cancellation?
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
When may a court grant relief?
S 43
- if just and practicable
If parties don’t get relief what can they do?
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.
