Know your rights
You have the right to cancel or vary a contract in some situations when things go wrong. Your rights depend on what went wrong and how serious it was, including:
- the contract itself and your situation, eg was it for consumer or commercial products?
- specific consumer laws that may apply to your situation, regardless of what the contract says, eg credit contracts and the Credit Contracts and Consumer Finance Act
- general laws dealing with cancellation, such as the Contract and Commerical Law Act when one or both parties have made a mistake
- contract law made by judges (common law rules).
Tip: Even if you’re entitled to cancel a contract, you don’t have to do so.
Also be careful not to unintentionally affirm by your behaviour or agreement. This is where you still continue with the contract even when you know about a breach of contract by the other party. You lose your right to cancel the contract for any previous breach.
Be careful about cancelling a contract without getting good advice first, as you may be in breach of contract.
Specific consumer laws
The Consumer Guarantees Act covers remedies that a business must provide you with, including cancellation and refunds, if there is a problem with its consumer products and services.
Other specific consumer laws that deal with your rights to vary or cancel a contract include:
- the Fair Trading Act – layby sales, door-to-door sales, unfair sales practices, products that you didn’t ask for, unfair and misleading conduct or advertising
- the Credit Contracts and Consumer Finance Act – consumer credit contracts
- the Contract and Commercial Law Act – warranties for commercial products and for private sales, the rules for cancelling a contract for breach or misrepresentation, and other remedies such as compensation, and the rules protecting young people under 18 years of age making contracts, including which contracts are enforceable.
Cancelling because of a mistake
You can apply to court if you or the other party to a contract or both of you made a genuine mistake about an important term under the Contract and Commercial Law Act.
For all contracts for products or services where the Consumer Guarantees Act (CGA) doesn’t apply, you’ll have to rely on the terms of the contract and general contract law if you wish to cancel the contract.
There are two main reasons why a contract may be cancelled under the Contract and Commercial Law Act (CCLA). These are:
- misrepresentation: the trader gave you incorrect information about an essential part of the contract
- breach of contract: an important term or condition of the contract has been broken.
If you decide to cancel a contract for a serious misrepresentation or breach, you must tell the trader why. Then you don’t have to do anything else under the contract.
The CCLA can be used to cancel private sales for products and services or commercial services sold by a business. You can claim compensation based on the difference between what you paid and what the value would be if the statement had been true. A trader can contract out of the CCLA so that it does not apply, but only if it is fair and reasonable to do so.
Cancelling because of natural disasters or other external events
Some agreements may have a force majeure clause in them. This clause excludes or limits a business’s responsibility if a service is or will be affected by some external event. Usually both parties don’t have to do anything further and the contract ends. You’ll also be able to get a refund if you have paid in advance.
Force majeure events beyond human control that prevent service providers from meeting the CGA guarantees of timely performance or fitness for a particular purpose have a similar effect for consumer services contracts.
Lastly, a business may argue that the contract is frustrated, so it doesn’t have to provide the service under the Contract and Commercial Law Act. A contract is frustrated where it is impossible to carry out the contract or it becomes significantly different to what you agreed to. You don’t have to pay anything. If you have paid already, you get a refund.
Read Overcharging or incomplete work to find out more.
Other reasons to cancel or change a contract
Harsh or oppressive contracts: Either a term in the contract or the way another party is carrying out the contract can be harsh or oppressive. That can be grounds to for you to apply for a contract to be varied or cancelled. If your credit contract is oppressive, you may also have rights under the Credit Contracts and Consumer Finance Act 2003.
Read Cancelling your credit contract to find out more.
Unfair contract terms: If a standard form contract entered into after 17 March 2015 has terms in it that are unfair, you can ask the Commerce Commission to apply to court to have them changed or deleted.
Read Standard form contracts.