Your rights to cancel a contract or seek compensation when buying products or services from a private seller.

Contractual remedies and your rights

The Contract and Commercial Law Act (CCLA) may give you some protection when you’re buying products or services from a private seller or for a business use, ie commercially. This is different to the Fair Trading Act (FTA) and Consumer Guarantees Act (CGA), which both only apply if the seller is in trade.

The CCLA sets out when a contract may be terminated (unless the contract deals with termination differently) because of:

  • breach – not complying with the contract terms   
  • misrepresentation – untrue statements or conduct that persuaded you to enter into the contract
  • repudiation – by one party to the contract making it clear they don’t intend to perform their obligations under the contract.

However, unlike the other two consumer laws, the CCLA can be contracted out of more easily by commercial parties if they choose to do so, simply by including a term in the contract that the CCLA won’t apply.

Also, the CCLA only applies to parties to the sales contract for products or services, whereas you don’t have to be a party to the contract to seek a remedy under the Fair Trading Act.


What you need to know

Under the Contract and Commercial Law Act you may cancel a contract and claim your money back where the other party to the contract:

  • made it clear, by words or conduct, that they will not carry out or complete their part of the contract (repudiation), or
  • made false or misleading statements which persuaded you to enter into the contract and suffer loss (misrepresentation), or
  • has broken or will break an essential term of the contract that is very important to you (breach).

Also the effect of the false or misleading statement, or breach of essential term the breach means:

  • the contract is very different to what was first agreed, or
  • you end up having more responsibilities under the contract, or
  • you end up losing benefits under it.

Whether a term is essential to you will be decided by the Court looking at the contract as a whole. 

For cancellation to be effective you must make it known to the other party before you cancel that you intend to do either by words or by your conduct. Unless it is impracticable to communicate with them or you are unable to do so because of their unreasonable conduct. There is no particular form required otherwise or even that you have to give a reason. 

Once you have cancelled the contract you don’t have to do anything further to complete the contract including payment of money. You are still entitled to recover damages or payment of money to compensate you for your losses.

Note: However if you know of the misrepresentation or breach and then agree to carry on with the contract then you lose the right to cancel the contract later. You have affirmed the contract.

A misrepresentation can be either by words, conduct or silence on the seller’s part if this creates a half truth or false impression or mistaken belief on your part and this is not corrected.

It does not include “puffery” or exaggerated statements.

Opinions and advice or predictions for the future are more difficult and depend on the circumstances at the time and whether there was any reasonable basis for that opinion etc.  

Any misrepresentation made must also:

  • have induced or persuaded you to enter into the contract (but it doesn’t have to be sole reason why you entered into the contract) and
  • it is reasonable for you to have relied on that misrepresentation.

If a term of the contract is breached, or misrepresented you may be able to:

  • claim compensation to put things right, i.e. the cost of having the service completed
  • claim compensation for consequential damages, i.e. other losses that occurred directly as a result of the breach or misrepresentation as well as damages for pain or stress caused
  • cancel the contract and claim your money back
  • ask a Court to vary the contract, or enforce remedies in a contract, as it thinks is appropriate.

The amount of compensation should be sufficient to put you in the position you would have been if the misrepresentation had been true or breach hadn’t occurred. 

Example situations

Misrepresentation

A buyer purchased a car for $4,400 in a private sale. Shortly afterwards the transmission failed and the quote for repairs was between $3,000 and $3,500. The buyer was unable to sort out the cost of repairs by negotiation so he took the seller to the Dispute Tribunal to claim the cost back. The Tribunal held that:

  • a reasonable person reading the advertisement would have considered the car to be in excellent condition, so a misrepresentation existed
  • the buyer had relied on the statement and therefore the misrepresentation induced the purchase
  • the buyer would be unable to receive a refund on the purchase price under the CRA and was limited to damages  of $1,200, as the transmission was 2/3 used.

Essential terms breached

In a Supreme Court case, the Court decided that particular terms in a property development agreement were 'essential' in terms of the Contractual Remedies Act (now replaced by the CCLA). They required the developer to install furniture and obtain a management agreement for the development.

Therefore a breach of these terms by the developer entitled the purchasers to cancel their respective contracts. It followed that being entitled to cancel, these purchasers had not repudiated the contracts and were not liable for the consequences of any such alleged repudiation.


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