Misrepresentation Cancellation Flashcards
Repudiation - (Starlight Enterprises Ltd v Lapco Enterprises Ltd) (travel bag price increase)
- entered into contract for manufacture by Lapco of 4000 travel bags at $3 each
- after 571 bags had been delivered Lapco wrote to starlight saying their prices had increased due to inflation
- Starlight regarded this as repudiation and cancelled the contract
- Lapco brought action against Starlight for breach of contract
- Lapco had not been repudiated, the letter did not manifest the intention not to perform the contract
Repudiation - (Oxborough v North Harbour Builders Ltd) (home built bad quality)
- Oxborough contracted with North Harbour Builders to have a home built
- Near to completion, Oxborough was dissatisfied with the quality of work and commenced proceedings for specific performance of the building contract
- North Harbour builders suggested the proceedings were premature as the work was incomplete and told Oxborough they were willing to go through each of their complaints and address them
- Oxborough cancelled hte contract on the basis NHB had repudiated
- Held: the cancellation on the basis of repudiation was invalid, the evidence did not establish words or conduct that could have led a reasonable person to the conclusion that NHB did not intend to perform its obligations
Repudiation - (Ingram and Knee v Patcroft Properties Limited) (bar and hostel lease)
- Ingram leased a property containing a bar and hostel from Patcroft
- Ingram fell behind in rent payments
- The lease agreement said Patcroft could re-enter the premises and cancel the lease 14 days after the rent had become due and remained unpaid
- Patcroft reentered the property and purpoted to terminate the lease 13 days after rent was due having miscalculated the number of days
- A year passed, Ingram did not cancel the lease and neither paid rent not attempted to regain possession
- Patcroft filled proceedings demanding 1.3 million in unpaid rent
- Held: Patcroft had repudiated the lease by entering the property unlawfully and terminating the lease
- Ingram had no cancelled lease and so agreement continued
- Non payment of rent was justified and Ingram was awarded 200,000 for lost business
Anticipatory Repudiation - (Hochster v De La Tour) (courier)
Anticipatory Repudiation - repudiation that occurs before performance is due
- In April, De la Tour engaged Hochster as a courier with appointment to take effect from June 1
- On 11 May, De La Tour wrote to Hochster advising him that despite their agreement his services would not be required
- Hochster brought action on 22 May for breach of contract
- De La Tour argued no breach as contract was not due to start until 1 June
- Held: De La Tour’s notice was a clear case of anticipatory breach repudiation entitling Hochster to damages
Breach of Contract (2 types)
- if the breach is trivial or minor breach, the innocent party may only sue for damages
- if the breach is a serious breach of an essential term, the innocent party may elect to treat the contract as cancelled (s37) or seek relief under (s43) aswell as recover damages under (s49)
A party may cancel a contract if - (s37(1)
(a) “he/she has been induced to enter it by a misrepresentation” by or on behalf of another party” [Misrepresentation], or
(b) a “term in the contract is broken by another party” [Breach], or
(c) “it is clear that a term in the contract will be broken” [Anticipatory breach].
- and one of the criteria of s 37(2) has been met
Essentiality (s37(2)(a) - Young v Hunt (coffee business turnover)
the truth or performance of the term is “essential” if at the time of the contract both parties agreed that such a representation was essential to the plaintiff party in respect of the contract
- Plaintiff agreed to purchase coffee lounge business from Defendant
- Defendant represented the turnover of the coffee bar to be $600 per week
- Plaintiff after suspecting this to be false, vacated the premises and purpoted to cancel
- Defendant claimed Plaintiff had repudiated and therefore she was entitled to cancel the contract
- Held: Defendant had misrepresented the turnover but Plaintiff could not cancel because there was nothing in the contract to indicate it was essential to Young that the turnover should be $600 per week
- Plaintiff was not entitled to cancel , therefore it was Plaintiff who had repudiated the contract
- Defendant had cancelled the contract validly
Meaning of Essential (s37(2)(a) - (Mana Property Trustee Ltd v James Development) (land sale wrong amount)
- James and MPTL entered into agreement where James would purchase land in Cromwell from MPTL
- James paid a deposit but later refused to settle arguing that MPTL had breached an essential term by delivering less land than agreed
- James was successful at the Court of Appeal and MPTL appealed to the supreme court
- The appeal was allowed
- Held: breaching of an essential term with minor consequences does not necessarily allow for contract cancellation
- James was not entitled to cancel contract as MPTL had not repudiated
Substantiality (s37(2)(b)
“Substantiality” [s 37(2)(b)]:
The consequences of the misrepresentation or breach are “substantial” if the misrepresentation or breach:
(i) substantially reduces the benefit of the contract to the cancelling party [s 37(2)(b)(i)]; or
(ii) substantially increases the burden of the cancelling party under the contract [s 37(2)(b)(ii)]; or
(iii) in relation to the cancelling party, makes the benefit or burden of the contract substantially different from that represented or contracted for [s 37(2)(b)(iii)].
Substantiality (s37(2)(b) - (Pearson v Wynn) (irrigation equipment)
- W bought horticultural land from P including irrigation equipment
- During negotiations prior to sale P presented the property as fully irrigated while it still needed 10,000 spent on it to obtain a water supply
- W cancelled the contract
- The additional cost of getting the work done satisfied substantiality under s 37(2)(b)
Substantiality (s37(2)(b) - (Sharplin v Henderson) (orchard size)
- S entered agreement to purchased orchard from H
- H’s agent negligently misrepresented orchard boundary
- S discovered an area representing 25% of the orchard shown to them was not within the boundary
- S cancelled the contract
- The area was misrepresented and was a significant feature of the property resulting in a benefit that was substantially different
- S was entitled to cancel under s37(2)
Affirmation - Loss of right to cancel (s38) - (Westpac Merchant Finance Ltd v Winstone Industries Ltd) (water in factory)
Affirmation - A party is not entitled to cancel the contract if, with full knowledge of the repudiation, misrepresentation, or breach, the party has affirmed the contract
- In august 1987, Defendant leased premises for manufacturing purposes and required dry conditions
- In November 1987, defendant became concerned about the emergence of water in factory area
- In June 1990, defendant terminated the lease
- Held: Defendant put up with defects for two years, they were held to have affirmed the contract
Notice of Cancellation (s41)
(two exceptions)
s 41 requires that cancellation be made known to the other party before it took effect with two exceptions:
- if it was not reasonably practicable to communicate with the other party
- where the other party cannot reasonably expect to receive notice because of its conduct in relation to the contract
Relief on Cancellation (ss43-48)
*The preconditions for the grant of relief under ss 43 are that the contract must have been validly cancelled in terms of ss 36-42, 43(1) and that it is just and practicable to grant relief (s 43(1)).
*The relief under ss 43 , which is available on cancellation of a contract, is in addition to any damages recoverable. The value of any relief granted under ss 43 shall however be taken into account in assessing any damages: s 49.
Orders of relief under (s 43)
(a) direct a party to pay to any other party the sum that the court thinks just (subject to s 35):
(b) direct a party to do or refrain from doing, in relation to any other party, any act or thing that the court thinks just:
(c) vest the whole or any part of any relevant property in a party:
(d) direct a party to transfer or assign the whole or any part of any relevant property to any other party:
(e) direct a party to deliver the whole or any part of the possession of any relevant property to any other party.
