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