Cancellation:

• Remedies for the CGA

For consumers only.

o The seller of goods in a consumer contract

Rely on SGA.

a. Repudiation s 7(2) CRA

• (No) repudiation => (No) right to cancel under s 7(2) CRA, Starlight Enterprises v Lapco Enterprises Does not intend to perform/complete such performance" assessed from the point of view of a reasonable person, Starlight Enterprises v Lapco Enterprises, Oxborough v North Harbour Builders, Denarau Investments v Ludlow OBJECTIVE TEST.

2 Contracted out of the CRA?

• If a contracting-out clause within the meaning of s 5 CRA does not cover a particular breach, the CRA will apply, Sharplin v Henderson

• Cancellation of a private sale:

pursuant to ss 7 f CRA

2 Newmans Tours v Ranier Investments: s 9 jurisdiction extends to:

o Restitution interest = in case of unjust enrichment, the right to restoration of a valuable benefit conferred on the other party o Reliance interest = the right to compensation for loss due to steps taken by the innocent party in reliance on the existence of the contract, the object being to restore the innocent party to the position which he would have occupied had the contract not been made o Expectation interest = the right to compensation for loss of the bargain, the object being to financially restore the innocent party to the position which he would have occupied had the contract been performed • The cancelling party can choose any one of these three losses as the basis for a claim • If there is a conflict between the expectation and the reliance interest, the expectation interest will usually prevail

-Consumer of goods:

o The consumer of goods can rely on either the CGA or the SGA except in so far as the former exclude the latter, cf s 56A SGA o The consumer of services can rely on either the CGA or the CRA except in so far as there is inconsistency

Relationship between CRA and CGA

s 15(g) Nothing in CRA shall effect 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"

o The consumer of services

can rely on either the CGA or the CRA except in so far as there is inconsistency

- Cancellation of a commercial contract for services

governed by the CRA (commercial contract for services)

(iv) Implicit anticipatory repudiation ("by conduct")

• One party acts in a way calculated to or having the effect of precluding the possibility of the contract being performed • Example: the sale to a third person, Lovelock v Franklyn

(iii) Explicit anticipatory repudiation ("by words")

• One party informs the other that the contract will not be performed, Hochster v De la Tour

2. Cancellation under the SGC • S 60(2) SGA:

• S 60(2) SGA: "The rules of the common law ... shall continue to apply to contracts for the sale of goods" • The CRA does not apply to contracts for the sale of goods, s 15(d) CRA, except for ss 4(3), 6(2) CRA, Finch Motors v Quin • That is, ss 7-9 CRA do not apply to the sale of goods, Moodie v Agriultural Ventures => Instead of cancellation under the CRA, the right to reject goods according to ss 32, 36 f Sale of Goods Act, Broadlands Finance v Inwood

4 No affirmation, s 7(5) CRA

• To cancel is only one option: the entitled party can complete performance (and thus affirm the contract) and then demand the consideration, White and Carter v McGregor • Affirmation precludes subsequent cancellation in respect of the same breach => Cancellation after having affirmed the contract (e.g. by resale) amounts to a repudiation of the contract, Jolly v Palmer • Affirmation does not remove the right to damages for misrepresentation under s 6 CRA, Hughes v Huppert • The continuation of the repudiation gives the innocent party a continuing right to cancel, Oxborough v North Harbour Builders • A further breach after affirmation revives the right to cancel, Oxborough v North Harbour Builders With full knowledge of the repudiation or misrepresentation or breach" => Must the affirming party have full knowledge of his/her legal rights (apart from full knowledge of the factual circumstances)? o The rights arise from the terms of the contract => Parties are presumed to know the terms of their own contract, Nectar v SPHC Operations o Nectar v SPHC Operations does not distinguish between cases where the contract expressly confers a right to cancel for a particular breach and where that right arises from the application of the CRA

Cancellation under s 7 contractual remedies act (CRA) A Scope 1.

1 Relationship to the common law: "in place of the rules of the common law and of equity", s 7(1) CRA

(ii) Anticipatory Repudiation

Although s 7(4) CRA does not apply to s 7(2) CRA, anticipatory repudiation normally has to relate to: o Non-compliance with a term that is essential to the cancelling party • Example of an essential term: the obligation to obtain a resource consent, Jack v Guy o Non-compliance which will have serious consequences for the cancelling party, Betham v Margetts

i. A contractual term is only broken if:

At completion: The work does not conform with the contract Before completion: The work is such that it 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 WHAT MATTERS: • It matters whether the contract stipulates a time by which the obligation must be performed, Mana Property Trustee v James Developments Read terms in contract.

o The provider of services in a consumer contract

CRA

- Commercial contract for the sale of goods

Governed by the SGA (sale of goods act), right to reject goods pursuant to s 32, 36 f SGA.

1 Deposit

Is there an obligation to pay the deposit after cancellation? • Yes, if the deposit has been accrued unconditionally before cancellation, Brown v Langwoods Photo Stores, Garratt v Ikeda Problem: amount of the deposit • Parties can expressly provide their own remedies (and respective periods of notice, Soccer Nelson v Soccer NZ) instead of those regulated in the CRA => S 5 CRA prevents the court from exercising any discretion under s 9 CRA • If the deposit is the normal 10% of the purchase price, relief under s 9 CRA will be precluded by s 5 CRA • If the amount exceeds 10%, s 5 CRA will not prevent the application of s 9 CRA to provide a remedy for the purchaser

(b) Effect of misrepresentation/ breach substantial: s 7(4)(b) CRA

More than trivial, Jolly v Palmer • Depends on the individual case; the courts take subjective and objective factors (money) into account, Cullinane v McGuigan, Pearson v Wynn • Examples: o Incurrence of additional costs, Hansen v Boocock, Gallagher v Young o Breach of a dispute resolution clause in a building contract, Tinnock v Birkenhead Heights

3. Willingness to Perform:

One party breaches, the other party cancels; the cancelling party is unwilling or unable to perform the contract o A party could be seen as benefiting from its own wrong where it is unable or unwilling to perform the contract and seeks to avoid liability for its own breach by cancelling the contract on the basis of the other party's breach, Noble Investments v Keenan, Ingram v Patcroft Properties o A party who accepts that the contract is at an end, and who only seeks damages, does not need to show that it was willing and able to perform the contract in order to be able to validly cancel a contract, Nicholls v Tamariki

B: Requirements 1. Grounds

One party cancels on unjustifiable grounds => Effective provided proper grounds existed, Donnelly v Westpac Banking - Cancelling party unaware of justifiable grounds => Effective o Arg.: 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, Thompson v Vincent

5. Notice of cancellation:

Problem: notification 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, Car & Universal Finance v Caldwell

What is deemed "essential?"

within the meaning of s 7(4)(a) CRA. 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, Progeni Systems v Hampton Studies. S 7(4)(a) CRA covers essentiality to the plaintiff; however, both parties must have agreed on the essentiality => Parties make a term essential by agreeing on it o Burden of proof: on the plaintiff, Young v Hunt o If a contract incorporating the term is signed, it will be easier to establish its essentiality than if statements are made during negotiations, Hansen v Boocock • Example: a contract for the sale and purchase of property provides that the time for payment of the deposit is "strictly of the essence of the contract", NZ Tenancy Bonds v Mooney

C Legal consequence: terminates the contract in the future, s 8(3) CRA

• According to s 8(3)(a) CRA, "no party shall be obliged ... to perform [the cancelled contract] further" • S 8(3)(a) is concerned with "further" performance and does not take away accrued rights, see subs (b) => S 8(3)(a) does not have the effect of divesting unconditionally accrued rights => An obligation unconditionally accrued before cancellation can still be enforced after cancellation • Unconditionally means: o No impediment (e.g. by unfulfilled condition) to the enforcement of the right at the point of cancellation and o Enforcement must not have been subject to any reciprocal obligation on the part of the enforcing party

V Ss 9 ff, 43 Fair Trading Act (FTA)

• Misrepresentation under the CRA = misleading within the meaning of s 9 FTA, Taco Co of Australia v Taco Bell, Unilever v Cerebos Gregg's Contractual Remedies Act: -Cancellation at the discretion of a party to a contract, s 7(2), (3) CRA -Cancellation only effective in the future, s 8(3)(a) CRA Affirmation bars cancellation, s 7(5) CRA -Only a serious misrepresentation within the meaning of s 7 CRA qualifies for cancellation -No equivalent limitation -A third person may make an application under s 9(7) CRA if it is material for him to know whether relief will be granted -The order is made against the other party to the contract, s 9(2) CRA -No explicit remedy of variation of contract -The Sale of Goods Act overrides the CRA as far as cancellation for breach is concerned, ss 60(2) SGA, 15(d) CRA, Finch Motors v Quin, Moodie v Agriultural Ventures, Broadlands Finance v Inwood Fair Trading Act: -Cancellation at the discretion of the court, s 43(2) FTA ("The court ... may make 1 or more of the orders described") -The court may declare a contract void ab initio, s 43(3)(a)(ii) FTA -No corresponding provision in the FTA -It would be theoretically possible for the court to make an order declaring a contract to be void in respect of a minor misrepresentation -Remedies only available where the misrepresentation was made "in trade" -The person who suffers the loss need not be a party to the proceedings, s 43(2)(b) FTA -The order is made against the person who engaged in the misleading conduct, s 43(1), (3) FTA; as it is about the cancellation of a contract, it will be a contracting party, though -The court may vary a contract, s 43(3)(c) FTA S 50(1), (3) FTA

D Relief, s 9 CRA

• Not required that the relief be pleaded, s 9(1) CRA ("the court ... may ... if it is just and practicable to do so, make an order"), Forde v Electrodry • Wide discretion to grant relief, Brown v Langwoods Photo Stores o Subject to only one prerequisite: it must be "just and practicable to do so", s 9(1) CRA, Newmans Tours v Ranier Investments • S 9 CRA empowers a court to grant relief to both parties (not only to the cancelling party), Thompson v Vincent • Under s 9(2) CRA, the court may (a) direct the transfer of specific property; (b) order the payment of a sum of money; (c) "direct any party ... to do or refrain from doing in relation to any other party any act or thing" o Example for s 9(2)(b) CRA: damages for loss of income, mental suffering and distress, Burch v Willoughby Consultants • "Any such order ... may be made upon and subject to such terms and conditions as the court thinks fit", s 9(3) CRA • S 9(4) CRA list the factors to which "the court shall have regard" ("such other matters as it thinks proper", s 9(4)(f) CRA

2 S 7(4) CRA

• S 7(3)(a) OR 3(b) OR 3(c) CRA (+) => In addition, s 7(4) CRA must be satisfied, ie either the term is essential OR the effect of the misrepresentation/breach is substantial IMPORTANT. Essential term broken to satisfy cancellation under s7. • A breach of an essential term with only a minor effect entitles to cancel under s 7(4)(a) CRA and so, under s 7(4)(b), does a breach of any term, even a minor term, if it has a serious effect, Mana Property Trustee v James Developments

1 Statutory limitations

• S 9(5) CRA 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" • S 9(6) CRA prohibits any order "in respect of any property, if any party to the contract has so altered his position in relation to the property ... it would ... be inequitable ... to make such an order"

3. Cancellation under the Consumer Guarantees Act (CGA)

• The CGA applies only to consumer contracts = the supply of goods and services to consumers • S 2(1) CGA contains a definition of "consumer" • Services, s 2(1) CGA = contract to perform work (including of a professional nature

Rules of cancellation under CGA and CRA

• The rules about cancellation are the same in the CRA and the CGA, ss 8 CRA, 37 f CGA, except that under the CGA a cancelling consumer of services is entitled to a refund of money paid, s 38(1)(a) CGA, whereas under the CRA that is not so => That inconsistency means that s 38(1)(a) CGA will prevail in that instance

(c) Breach, s 7(3)(c) CRA

• 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, Brooklands Motor v Bridge Wholesale Acceptance • The cancelling party bears the risk of unexpected performance

2 Secondary obligations (e.g. arbitration clauses, restraints of trade) after cancellation?

• These clauses survive by virtue of s 5 CRA, Broadcasting Corp of NZ v Nielsen

(b) Misrepresentation, s 7(3)(a) CRA

• To be able to cancel for misrepresentation, a party must satisfy the four essentials for an actionable misrepresentation