Cancellation

How to cancel: CRA 8 Rules applying to cancellation

(1)(a): Can't cancel before the other party knows of the cancellation (1)(b)

CRA 9: Power of court to grant relief (2)

(2)(b) direct any party to the proceedings to pay to any other such party such sum (2)(c) to do or refrain from doing in relation to any other party any act or thing

Effect of cancellation: CRA Rules applying to cancellation (3)

(3) What happens when you cancel a contract (a) you don't need to perform any further obligations (b) you don't need to divest any property transferred or money paid pursuant to the contract.

Garratt v Ikeda

- Garratt's obligation to pay the deposit had accrued before the cancellation and Ikeda could still recover the deposit. - If accrued unconditionally before cancellation, purchaser has to pay the deposit even after cancellation took effect.

CRA section 7 cancellation of contract: agreed essential (4)(a)

- If (expressed/implied) agreed essential by both parties, a breach of an essential term allows the innocent party to cancel. - Term need only be essential to one party. - The emphasis is on the importance of the term not the consequences of the breach. - If the contractual parties have agreed that something is essential, and if one party either misrepresented the facts of the relevant essential thing or did not preform what was expressed as essential then the other party is entitled to back out of contract. - Essential does not have to be reasonable, it can be subjective

Is this substantial? - A rental property was represented as being able to generate a return of 9%. The return on the property was only 2%.

- If you're relying on rental property, for investment activities. Then it could be substantial. - If the 2% for now may not be serious, if their investment is in long-term.

Intention to repudiate the contract - when other party can cancel.

- clear intention, which can be expressed, implied, by words or conduct - seriousness - whatever the repudiating party is refusing to do, it has to be something serious. E.g. refusing to complete the development of the villas in Fiji.

CRA section 7 cancellation of contract: Consequences substantial (4)(b) - innocent party entitled to cancel.

- if the affect of the breach or misrep... 1. substantially reducing the benefit of the contract from the cancelling party 2. the burden of the cancelling (innocent) party will be substantially increase 3. the benefit of the burden will be very different from what the contract has provided

"substantial..."

- it is up to the courts - How do we manage that uncertainty of what is substantial? Put it into the contract as an essential term. - e.g. "this obligation is essential" so now it is not up to the court. - A breach would entitle innocent party to cancel.

Wrongful Cancellation

If one party propose to cancel the contract in accordance with contractual provisions but this party is wrong then this party has no right to cancel. If they're wrong, this could be a repudiation - this can mean they don't want to perform any contractual obligations anymore - which gives the other other party power to cancel it. - And you can choose to exercise the option to cancel at a time which is beneficial to you.

Effect of cancellation: CRA Rules applying to cancellation (4)

Section 3 doesn't affect the right of a pary to recover damages

Starlight Enterprises v Lapco Enterprises

Starlight had not indicated that it was unwilling to continue performing the contract at the agreed price. If Lapco had been told it was not allowed to increase the price per bag, then Lapco may have carried on at the agreed contract price of $3 per bag. There was no repudiation. - There was no clear intention communicated.

Betham v Margetts

The question is whether in all the circumstances the communication should be regarded as an irrevocable indication that the party concerned would take no further steps to perform his or her obligations under the contract or alternatively that he or she would perform it only in a manner substantially inconsistent with the obligations the contract imposed." - Describes anticipatory repudiation within s 7(2) CRA.

CRA Section 7

To cancel a contract, The party can communicate by words or conduct of not wanting to perform the obligations any further and it must be clear intention .

true or false: once the innocent party has affirmed the contract, both parties must perform their contractual obligations

true

Jolly v Palmer

The defendant had the right to cancel when they found out about the misrepresentation. But they lost that right by affirming the contract. The defendant's later attempt to cancel then amounted to a repudiation of the contract and had to pay damages to the plaintiff (seller).

NZ Tenancy Bonds v Mooney

- Because the time of payment was agreed to be an essential term, the seller was entitled to cancel. - Example of an essential term within the meaning of s 7(4)(a) CRA

Young v Hunt

- Buyer was not entitled to cancel, even though the turnover figure had been misrepresented by the seller - The plaintiff has to prove that "the performance of the term is essential to him", s 7(4)(a) CRA.

Election to affirm or cancel

- To cancel is only an option: the entitled party can complete performance and demand the consideration.

MacIndoe v Mainzeal

- assessing the matter objectively, determine whether the effect of the breach will be, to take the most obvious provisions ... to substantially reduce the benefit of the contract ... or substantially to increase the burden. - Given that paying the instalment on time was an essential part of the contract, Mainzeal were entitle to treat the contract as being repudiated.

What are the ways cancellation is made?

1. Misrepresentation 2. breach of contract 3. duress/undue influence 4. repudiation

What are the 5 ways a contract to end?

1. when obligations are completed. 2.By mutual agreement 3. Frustration - when something happens which makes it obvious the contract can't continue (injury). 4. cancellation

CRA 9: Power of court to grant relief

Application of s 8(3)(b) can be mitigated by the application of s 9 Where the contract is cancelled, the court has the discretion to grant a wide range of relief under s 9. The relief is in addition to cancellation and damages.

Denarau Investments Ltd v Ludlow

Denarau made it clear that it would not proceed at the agreed contract price. They had not properly exercised their contractual right to cancel. This was a repudiation. - There was a clear intention communicated.

can we argue substantiality? - Some land was sold with a representation that an (adjoining) citrus grove was part of the land being sold. It turned out the citrus grove was not part of the land, resulting in a reduction of land area of 25%.

Innocent party has stronger case to argue that result is substantial.

CRA 7: Cancellation of contract (1)

Need to show that the "electing party" (the person who makes the choice on whether to affirm or cancel) has made a firm and settled choice.

Mana Property Trustee v James Developments

Proposing a cancellation of a contract in accordance with a provision of the contract, if wrong - not a breach of an essential term; a wrongful cancellation; grants the other party the option to cancel the contract at any beneficial time.

White and carter v McGregor

White and Carter were not bound to accept the repudiation and could carry on with the contract. White and Carter were entitled to their fees.