Process of making a claim to cancel a contract

Cancellation and Restitution. A non-breaching party may cancel the contract and Cancellation and Restitution. A non-breaching party may cancel the contract and sue for restitution if the non-breaching party has given a benefit to the breaching party. "Restitution" as a contract remedy means that the non-breaching party is put back in the position it was in prior to the breach, while "cancellation" of the contract voids the contract and relieves all parties of any obligation under the agreement.


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7 Cancellation of contract

• (1) Except as otherwise expressly provided in this Act, this section shall have effect in place of the rules of the common law and of equity governing the circumstances in which a party to a contract may rescind it, or treat it as discharged, for misrepresentation or repudiation or breach.
  (2) Subject to this Act, a party to a contract may cancel it if, by words or conduct, another party repudiates the contract by making it clear that he does not intend to perform his obligations under it or, as the case may be, to complete such performance.
  (3) Subject to this Act, but without prejudice to subsection (2) of this section, a party to a contract may cancel it if—

  • (a) he has been induced to enter into it by a misrepresentation, whether innocent or fraudulent, made by or on behalf of another party to that contract; or

  • (b) a term in the contract is broken by another party to that contract; or

  • (c) it is clear that a term in the contract will be broken by another party to that contract.
  (4) Where subsection (3)(a) or subsection (3)(b) or subsection (3)(c) of this section applies, a party may exercise the right to cancel if, and only if,—

  • (a) the parties have expressly or impliedly agreed that the truth of the representation or, as the case may require, the performance of the term is essential to him; or

  • (b) the effect of the misrepresentation or breach is, or, in the case of an anticipated breach, will be,—
    • (i) substantially to reduce the benefit of the contract to the cancelling party; or
    • (ii) substantially to increase the burden of the cancelling party under the contract; or
    • (iii) in relation to the cancelling party, to make the benefit or burden of the contract substantially different from that represented or contracted for.
  (5) A party shall not be entitled to cancel the contract if, with full knowledge of the repudiation or misrepresentation or breach, he has affirmed the contract.
  (6) A party who has substantially the same interest under the contract as the party whose act constitutes the repudiation, misrepresentation, or breach may cancel the contract only with the leave of the Court.
  (7) The Court may, in its discretion, on application made for the purpose, grant leave under subsection (6) of this section, subject to such terms and conditions as the Court thinks fit, if it is satisfied that the granting of such leave is in the interests of justice.
  Section 7(3)(b): amended, on 19 December 2002, by section 4 of the Contractual Remedies Amendment Act 2002 (2002 No 79).
  Section 7(3)(c): amended, on 19 December 2002, by section 4 of the Contractual Remedies Amendment Act 2002 (2002 No 79).
  Section 7(4)(a): amended, on 19 December 2002, by section 4 of the Contractual Remedies Amendment Act 2002 (2002 No 79).
  
  

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  8 Rules applying to cancellation

  • (1) The cancellation of a contract by a party shall not take effect—

    • (a) before the time at which the cancellation is made known to the other party; or

    • (b) before the time at which the party cancelling the contract evinces, by some overt means reasonable in the circumstances, an intention to cancel the contract, if—
      • (i) it is not reasonably practicable for the cancelling party to communicate with the other party; or
      • (ii) the other party cannot reasonably expect to receive notice of the cancellation because of that party's conduct in relation to the contract.
    (2) The cancellation may be made known by words, or by conduct evincing an intention to cancel, or both. It shall not be necessary to use any particular form of words, so long as the intention to cancel is made known.
    (3) Subject to this Act, when a contract is cancelled the following provisions shall apply:

    • (a) so far as the contract remains unperformed at the time of the cancellation, no party shall be obliged or entitled to perform it further:

    • (b) so far as the contract has been performed at the time of the cancellation, no party shall, by reason only of the cancellation, be divested of any property transferred or money paid pursuant to the contract.
    (4) Nothing in subsection (3) of this section shall affect the right of a party to recover damages in respect of a misrepresentation or the repudiation or breach of the contract by another party.
    Section 8(1)(b): substituted, on 19 December 2002, by section 5 of the Contractual Remedies Amendment Act 2002 (2002 No 79).