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Contract and Commercial Law Act 2017

Contracts legislation - Contractual remedies - Cancellation

37: Party may cancel contract if induced to enter into it by misrepresentation or if term is or will be breached

You could also call this:

“You can stop a deal if someone fooled you or breaks the rules”

You can cancel a contract if someone tricked you into agreeing to it, or if the other person breaks or will break a part of the contract. This applies in three situations: if someone lied to you to get you to agree, if they’ve already broken a rule in the contract, or if it’s clear they’re going to break a rule.

However, you can only cancel the contract if you and the other person agreed that the truth of what they said or following the rule was really important. You can also cancel if the lie or broken rule makes the contract much worse for you. This could mean you get a lot less benefit from it, it becomes much harder for you to do your part, or what you’re getting or have to do is very different from what you agreed to at first.

Remember, there are other rules about cancelling contracts that you need to follow too. These rules don’t change your right to cancel a contract for other reasons.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM6844104.

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36: Party may cancel contract if another party repudiates it, or

"You can end a deal if someone else shows they won't do their part"

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38: No cancellation if contract is affirmed, or

"You can't change your mind about a contract once you've said it's okay"

Part 2 Contracts legislation
Contractual remedies: Cancellation

37Party may cancel contract if induced to enter into it by misrepresentation or if term is or will be breached

  1. A party to a contract may cancel it if—

  2. the party has been induced to enter into it by a misrepresentation, whether innocent or fraudulent, made by or on behalf of another party to the contract; or
    1. a term in the contract is breached by another party to the contract; or
      1. it is clear that a term in the contract will be breached by another party to the contract.

        1. If subsection (1)(a), (b), or (c) applies, a party may exercise the right to cancel the contract if, and only if,—

        2. 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 the cancelling party; or
          1. the effect of the misrepresentation or breach of the contract is, or, in the case of an anticipated breach, will be,—
            1. substantially to reduce the benefit of the contract to the cancelling party; or
              1. substantially to increase the burden of the cancelling party under the contract; or
                1. in relation to the cancelling party, to make the benefit or burden of the contract substantially different from that represented or contracted for.

                2. Subsection (1) is subject to the rest of this subpart, but does not limit section 36.

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