Contract and Commercial Law Bill

Government Bill

Explanatory note

General policy statement

This is a Bill to re-enact, in an up-to-date and accessible form, the following Acts:

  • the Carriage of Goods Act 1979:

  • the Contracts (Privity) Act 1982:

  • the Contractual Mistakes Act 1977:

  • the Contractual Remedies Act 1979:

  • the Electronic Transactions Act 2002:

  • the Frustrated Contracts Act 1944:

  • the Illegal Contracts Act 1970:

  • the Mercantile Law Act 1908:

  • the Minors’ Contracts Act 1969:

  • the Sale of Goods Act 1908:

  • the Sale of Goods (United Nations Convention) Act 1994.

The Bill is a revision Bill prepared under subpart 3 of Part 2 of the Legislation Act 2012.

The revision powers are set out in section 31 of the Legislation Act 2012. In summary, a revision Bill may—

  • revise the whole or part of 1 or more Acts, and for that purpose may combine or divide Acts or parts of Acts:

  • omit redundant and spent provisions:

  • renumber and rearrange provisions from the Acts revised:

  • make changes in language, format, and punctuation to achieve a clear, consistent, gender-neutral, and modern style of expression, to achieve consistency with current drafting style and format, and generally to better express the spirit and meaning of the law:

  • include new or additional purpose provisions, outline or overview provisions, examples, diagrams, graphics, flowcharts, readers’ notes, lists of defined terms, and other similar devices to aid accessibility and readability:

  • correct typographical, punctuation, and grammatical errors, and other similar errors:

  • make minor amendments to clarify Parliament’s intent, or reconcile inconsistencies between provisions:

  • make consequential amendments to other enactments:

  • include any necessary repeals, savings, and transitional provisions.

However, a revision Bill must not change the effect of the law, except as authorised by section 31(2)(i) or (j) (minor amendments to clarify Parliament’s intent or reconcile inconsistencies or to update monetary amounts).

Accordingly, this Bill does not make any substantive policy changes.

A number of relatively minor inconsistencies, anomalies, discrepancies, and omissions were identified in the course of the preparation of this revision Bill. The following sets out, in general terms, the kinds of matters that were identified and how they have been remedied:

  • a number of minor changes have been made to achieve consistency with current drafting style and format (for example, a missing “; and” from the end of section 17(2)(a) of the Sale of Goods Act 1908 has been corrected in clause 141):

  • a number of the revised Acts contain words denoting the masculine gender (for example, “his” or “he”). Under section 31 of the Interpretation Act 1999, words denoting the masculine gender include females. In many of the situations where these words have been used, the person involved could be a natural person or a body corporate or an unincorporated body (for example, the Sale of Goods Act 1908 uses “his” or “he” in the context of a buyer or seller who could be a natural person, a body corporate, or an unincorporated body). Various amendments have been made to ensure that the language used is gender-neutral and, where appropriate, is consistent with the application of the provisions to a body corporate or an unincorporated body (as well as a natural person):

  • section 7(1)(b) of the Contracts (Privity) Act 1982 (which relates to uncertainty about whether a variation or discharge is precluded by section 5(1)(a)) only refers to a promise. This is inconsistent with section 7(1)(a), which refers to a promise or an obligation. Clause 16(1)(b) has been extended to cover an obligation (as well as a promise):

  • section 6(2) of the Contractual Mistakes Act 1977 (which provides that a mistake, in relation to a contract, does not include a mistake in its interpretation) is expressed as applying only “For the purposes of an application for relief”. This is inconsistent with section 6(1), which refers to relief being granted in the course of any proceedings or on application made for the purpose. Clauses 25 and 26 are clarified as applying for the purposes of relief (regardless of whether the relief is granted in the course of any proceeding or on an application made for the purpose):

  • some provisions expressly provide that the court has a discretion when making orders while other provisions simply provide that the court “may” make an order. Under current drafting style, provisions of this sort would normally be expressed as “the court may”. For consistency, the reference to a “discretion” has been omitted in favour of a more modern approach:

  • a number of the contract statutes have a similar provision about orders relating to property that was the subject of the contract or was the whole or part of the consideration for the contract. Section 9(2)(a) of the Contractual Remedies Act 1979 has a number of differences as compared with the other examples (for example, it refers to “real or personal property” rather than just “property”, it refers to orders in respect of “the whole or any part of” that property, and it includes a direction “to deliver to him the possession of” the property). The various provisions in the Bill have been aligned for consistency:

  • the various contract statutes refer to orders being made on terms and conditions. These provisions have been drafted in a variety of ways. Minor drafting changes have been made to remove the inconsistencies:

  • most of the Acts revised in this Bill were enacted before the Interpretation Act 1999. That Act contains various provisions that are intended to shorten legislation. For example, section 16 provides that a power conferred by an Act may be exercised from time to time and section 32 provides that parts of speech and grammatical forms of a word that is defined in an Act have corresponding meanings in the same Act. These provisions have been relied on when preparing this Bill (see, for example, clauses 33, 43, and 70):

  • section 4(2) of the Frustrated Contracts Act 1944 provides that “This Act shall apply to contracts to which the Crown is a party in like manner as to contracts between subjects.” This wording is inconsistent with the “Act binds the Crown” clauses in the other revised statutes. The standard “Act binds the Crown” clause (clause 8) includes the subpart relating to frustrated contracts:

  • references to “an action” in various provisions of the Sale of Goods Act 1908 and the Carriage of Goods Act 1979 and a reference to “rights of suit” in section 13B(1) of the Mercantile Law Act 1908 are inconsistent with more modern references to proceedings in the various contract statutes. These references have been updated:

  • section 5(1) of the Minors’ Contracts Act 1969 refers to “a contract of service”. The equivalent provision (clause 92) refers to “an employment agreement” for consistency with terminology in the Employment Relations Act 2000:

  • section 9(2)(b) of the Minors’ Contracts Act 1969 contains an anomaly in that it refers to a guardian “(if the minor is under 18 years of age)”. On enactment of that Act, a minor could be over 18 years of age. However, under the Minors’ Contracts Amendment Act 2005 a new definition of “minor” was inserted that makes these words redundant. These words have been omitted from clause 99:

  • section 14(2) of the Minors’ Contracts Act 1969 refers to “an action” in relation to section 43 of the District Courts Act 1947. This terminology was previously used in section 43 of the District Courts Act 1947. However, that provision now refers to “a proceeding”. This anomaly has been corrected:

  • the Sale of Goods Act 1908 and the Mercantile Law Act 1908 contain various definitions of goods. The Mercantile Law Act 1908, in particular, contains a number of inconsistent definitions. These definitions have been aligned for consistency:

  • section 5 of the Sale of Goods Act 1908 contains the proviso “provided that nothing in this section shall affect the law relating to corporations”. However, companies now have full contract-making power with no formalities prescribed by the Companies Act 1993. The proviso has been omitted on the basis that it is no longer necessary:

  • section 10(3) of the Sale of Goods Act 1908 provides that the question of what is a reasonable price is a question of fact. Although this provision is located in section 10, various other provisions of the Sale of Goods Act 1908 refer to a reasonable price (for example, section 4(1) (capacity to buy and sell) and section 11(1) (agreement to sell at valuation)). The provision has been moved to clause 198(1) in order to avoid confusion about its application. In addition, section 57 of the Sale of Goods Act 1908 contains a similar provision that provides that the question of what is a reasonable time is a question of fact. However, the wording of sections 10(3) and 57 is inconsistent. The wording has been aligned in clause 198:

  • the Sale of Goods Act 1908 contains various references to a reasonable time. Rule 4 in section 20 of that Act provides that “What is a reasonable time is a question of fact.” For consistency with other references to a reasonable time, these words have been omitted because the concept is adequately covered by clause 198(2):

  • section 19 of the Sale of Goods Act 1908 refers to the property in goods being “transferred”. In contrast, section 20 and other provisions refer to property “passing”. These references have been aligned for consistency:

  • section 26 of the Sale of Goods Act 1908 refers to market overt. This reference has been omitted because the law relating to market overt no longer applies in New Zealand:

  • section 46(1) of the Sale of Goods Act 1908 (which relates to the duration of transit) only refers to carriers by land or water (not carriers by air). This anomaly has been corrected in clause 178:

  • section 60(4) of the Sale of Goods Act 1908 refers to enactments relating to chattels transfer. Given the repeal of the Chattels Transfer Act 1924 (by the Personal Property Securities Act 1999), this reference has been omitted:

  • Part 4 of the Schedule of the Electronic Transactions Act 2002 (which lists various courts and tribunals) has a number of references that have been updated (for example, the reference to the Psychologists Board has been omitted as spent):

  • section 9(3)(a)(i) of the Carriage of Goods Act 1979 refers to goods delivered “in the manner expressed or implied in the contract” while other provisions use the expression “in accordance with the contract”. The provision has been amended for consistency:

  • section 25(2) of the Carriage of Goods Act 1979 refers to reasonable expenses incurred in conducting a sale while section 23(6)(b) refers to expenses reasonably incurred in arranging and conducting a sale. Minor amendments have been made to align the provisions for consistency:

  • the definition of mercantile agent in section 2 of the Mercantile Law Act 1908 uses the expression “customary course” while other provisions use “ordinary course”. The wording has been aligned for consistency:

  • outdated references to a trustee in bankruptcy in the Mercantile Law Act 1908 have been updated:

  • the definition of information technology in section 13 of the Mercantile Law Act 1908 has been updated for consistency with the Electronic Transactions Act 2002:

  • section 13C(2) of the Mercantile Law Act 1908 refers to “the operation of this subsection”. This is an error (in that it should have referred to section 13C(1)). The error has been remedied by referring to clause 325. It is noted that the equivalent provision in the Carriage of Goods by Sea Act 1992 (UK) (section 3(2)) refers to “the operation of this section” (which includes the equivalent of clause 325):

  • the Mercantile Law Act 1908 contains various references to other provisions that are rather unclear (for example, “Nothing herein” and “hereinafter mentioned”). These have been replaced with express cross-references:

  • archaic and inconsistent references have been replaced (for example, “mutatis mutandis” is replaced with “with all necessary modifications”):

  • Parts 4 and 5 of the Mercantile Law Act 1908 contain various provisions that are inconsistent with current Customs law and practice. These have been updated for consistency with the Customs and Excise Act 1996.

Note

Feedback is welcome on the approach that has been taken in relation to the various inconsistencies, anomalies, discrepancies, and omissions.

See also Schedule 2, which relates to minor amendments to clarify Parliament’s intent or reconcile inconsistencies.

Note

This Bill contains various notes that have been included only for the purposes of consultation. The notes will be deleted before the introduction of the Bill.

References to the Law of Contract in New Zealand are references to the book Law of Contract in New Zealand (Burrows, Finn, and Todd) 4 ed (2012).

Clause by clause analysis

Clause 1 is the Title clause.

Clause 2 provides for the commencement of the Bill on [to be determined].

Part 1Preliminary provisions

Clause 3 provides that the purpose of the Bill is to re-enact, in an up-to-date and accessible form, various Acts (see Schedule 3).

Clause 4 provides for the Bill to be a revision Act for the purposes of section 35 of the Legislation Act 2012. Section 35 provides that revision Acts are not intended to change the effect of the law (except to the extent expressly indicated).

Clause 5 is an overview of the Bill.

Clause 6 provides for the transitional, savings, and related provisions set out in Schedule 1.

Clause 7 provides that an example in the Bill is only illustrative of the provisions to which it relates.

Clause 8 provides for the Bill to bind the Crown.

Part 2Contracts legislation

Clause 9 defines the terms court and disposition for the purposes of this Part.

Subpart 1—Contractual privity

This subpart revises the Contracts (Privity) Act 1982. Clause 10 provides that the purpose of the subpart is to permit a person who is not a party to a deed or contract to enforce a promise made in it for the benefit of that person.

Clause 11 defines certain terms used in the subpart.

Clause 12 applies to a promise contained in a deed or contract that confers, or purports to confer, a benefit on a person who is not a party to the deed or contract (the beneficiary). The promisor is under an obligation, enforceable by the beneficiary, to perform the promise. However, under clause 13, this does not apply to a promise that, on the proper construction of the deed or contract, is not intended to create an obligation enforceable by the beneficiary.

Clause 14 provides that a variation or discharge of the promise requires the beneficiary’s consent in certain circumstances (for example, if the position of the beneficiary has been materially altered by reliance on the promise). However,—

  • under clause 15, a variation or discharge can be made by the parties to the deed or contract in accordance with an express provision in the deed or contract:

  • under clause 16, a court may, if it is just and practicable to do so, make an order authorising a variation or discharge.

Clause 17 provides for the obligation imposed on a promisor to be enforced by the beneficiary as if the beneficiary were a party to the deed or contract. The promisor, under clause 18, has available, by way of defence, counterclaim, set-off, or otherwise, any matter that would have been available to the promisor if the beneficiary had been a party to the deed or contract.

Clause 19 provides that the subpart does not apply to promises, contracts, or deeds governed by foreign law.

Clause 20 provides for savings (for example, where a right or remedy exists or is available apart from the subpart).

Subpart 2—Contractual mistakes

This subpart revises the Contractual Mistakes Act 1977. The purpose of the subpart is to mitigate the arbitrary effects of mistakes on contracts by giving courts appropriate powers to grant relief (clause 21).

Clause 22 provides that the subpart has effect in place of the rules of the common law and of equity governing the circumstances in which relief may be granted on the grounds of mistake.

Clause 23 defines the term mistake as being a mistake, whether of law or of fact.

Clause 24 allows a court to grant relief in certain circumstances, including where—

  • a party was influenced in his or her decision to enter into a contract by a mistake that was material to him or her, and the existence of the mistake was known to the other party; and

  • the mistake resulted, at the time of the contract, in a substantially unequal exchange of values.

Clause 25 provides that a mistake, in relation to a contract, does not include a mistake in its interpretation.

Clause 26 provides that a decision to enter into a contract is not influenced by a mistake if a party becomes aware of it before entering into the contract.

Clause 27 requires a court to take into account the extent to which the party seeking relief caused the mistake.

Clauses 28 to 30 give the court a broad power to make any order it thinks just (for example, cancellation of the contract, or relief by way of a variation of the contract or restitution or compensation).

Clause 31 protects the rights of certain third parties to whom a sale or other disposition of property is made if the third parties act in good faith.

Clause 32 provides that the subpart does not apply to promises, contracts, or deeds governed by foreign law.

Subpart 3—Contractual remedies

This subpart revises the Contractual Remedies Act 1979.

Clause 33 defines the term cancel.

Clause 34 provides that if a contract expressly provides for a remedy for misrepresentation, repudiation, or breach of contract, or expressly provides for any other matters to which clauses 35 to 49 relate, those clauses have effect subject to that provision.

Damages for misrepresentation

Clause 35 provides that a party to a contract who has been induced to enter into it by a misrepresentation made by another party is entitled to damages from the other party in the same manner and to the same extent as if the representation were a term of the contract that has been breached.

Cancellation

Clause 36 provides that a party to a contract may cancel it if another party repudiates it.

Clause 37 provides that a party to a contract may, in certain circumstances, cancel it if—

  • the party has been induced to enter into it by a misrepresentation made by another party; or

  • a term in the contract is or will be breached.

However, the right to cancel may be exercised by a person (A) if, and only if,—

  • the parties have agreed that the truth of the representation or the performance of the term is essential to A; or

  • the effect of the misrepresentation or breach is or will be to substantially reduce the benefit of the contract to A, to substantially increase A’s burden under the contract, or, in relation to A, to make the benefit or burden of the contract substantially different from that represented or contracted for.

Clause 38 provides that the contract cannot be cancelled by a party if, with full knowledge of the repudiation, misrepresentation, or breach, the party has affirmed the contract.

Clause 39 provides that 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.

Clause 40 provides for the provisions in the subpart to have effect in place of the rules of the common law and of equity.

Clause 41 provides for when the cancellation may take effect.

Clause 42 states that when a contract is cancelled no party is obliged or entitled to perform it further.

Power of court to grant relief

Clauses 43 to 49 provide a power for the court to grant relief when a contract is cancelled. The relief may include, for example, a direction for a party to pay to another party the sum that the court thinks just or to do or refrain from doing any act or thing that the court thinks just.

In considering whether to make an order, the court must have regard to various matters (for example, the terms of the contract, the extent to which any party to the contract was or would have been able to perform it, and any expenditure incurred by a party in performing the contract).

Provisions purporting to prevent court inquiry

Clause 50 applies if a contract contains a provision purporting to prevent a court from inquiring into or determining certain questions (for example, whether a statement, promise, or undertaking was made in the course of negotiations leading to the making of the contract or whether, if it was so made or given, it constituted a representation or a term of the contract). The court is not prevented from inquiring into and determining the question unless the court considers that it is fair and reasonable that the provision should be conclusive between the parties.

Clause 51 applies if a contract contains a provision purporting to prevent a court from inquiring into or determining the question of whether a person had the authority of a party to make or give a statement, promise, or undertaking. The court is not prevented by the provision from inquiring into and determining the question.

Clauses 52 and 53 contain miscellaneous provisions relating to contracts for the sale of goods and proceedings before a Disputes Tribunal.

Assignees

Clauses 54 to 57 contain provisions about assignees. If a contract, or the benefit or burden of a contract, is assigned, the remedies of damages and cancellation are enforceable by or against the assignee (except to the extent that it is otherwise provided in the assigned contract).

Miscellaneous provisions

Clause 58 provides that the subpart does not apply to promises, contracts, or deeds governed by foreign law.

Clause 59 provides for savings (for example, the law relating to specific performance or injunction and the law relating to mistake, duress, or undue influence).

Subpart 4—Frustrated contracts

This subpart revises the Frustrated Contracts Act 1944.

Clause 60 provides for the subpart to apply if a contract governed by New Zealand law has been frustrated and the parties have for that reason been discharged from the further performance of the contract.

Money paid or payable

Clauses 61 and 62 provide that all money paid to a party under the contract before the time of discharge is recoverable from the party and all money payable to a party under the contract before the time of discharge ceases to be payable. However, the court may allow a party who has incurred expenses to retain or recover sums.

Other valuable benefits

Clauses 63 and 64 allow a party to recover from another party the sum that the court considers just if the other party has obtained a valuable benefit and the benefit was obtained by reason of anything done by the first party for the purpose of performing the contract.

Expenses

Clause 65 provides for how expenses incurred by a party to the contract are to be estimated.

Insurance

Clause 66 provides that the court must not take into account any sums that have, by reason of the circumstances giving rise to the frustration, become payable to a party under a contract of insurance.

Other provisions relating to application

Clause 67 requires a court to give effect to certain provisions in the contract relating to circumstances that operate to frustrate the contract.

Clause 68 relates to parts of a contract that can be severed from the remainder of the contract.

Clause 69 provides that the subpart does not apply to certain contracts (for example, insurance contracts).

Subpart 5—Illegal contracts

This subpart revises the Illegal Contracts Act 1970.

Clauses 70 and 71 define the term illegal contract and certain other terms used in the subpart.

Clause 72 provides that a contract does not become illegal or unenforceable because its performance is in breach of an enactment (unless the enactment expressly so provides or its object clearly so requires).

Illegal contracts are of no effect

Clause 73 states that every illegal contract is of no effect. However, clause 74 protects a person who acquires property in good faith and without notice that the property was the subject of, or the consideration for, an illegal contract.

Court may grant relief

Clauses 75 to 82 give the court a power to grant the relief that the court thinks fit in relation to an illegal contract (including restitution, compensation, or variation of the contract). However, the court must not grant relief if it considers that to do so would not be in the public interest.

In considering whether to grant relief, and the nature and extent of any relief, the court must have regard to the conduct of the parties and, in the case of a breach of an enactment, the object of the enactment and the gravity of the penalty provided for any breach of the enactment.

Restraints of trade

Clause 83 gives the court certain powers in relation to a provision of a contract that constitutes an unreasonable restraint of trade (including the power to delete or modify the provision).

Clause 84 provides that nothing in the subpart affects the law relating to contracts that are in restraint of trade or that purport to oust the jurisdiction of a court (except as provided in clause 83).

Subpart 6—Minors’ contracts

This subpart revises the Minors’ Contracts Act 1969.

Clause 85 defines certain terms used in the subpart. In particular, a minor is a person who is under the age of 18 years and a person is of full age if he or she has reached the age of 18 years.

Contractual capacity of minors

Clauses 86 to 91 relate to contracts other than employment agreements and certain life insurance contracts. The basic rule is that a contract entered into by a minor is unenforceable against the minor but otherwise has effect as if the minor were of full age.

However, the court can inquire into the fairness and reasonableness of the contract and, if it finds that the contract was fair and reasonable, it can make certain orders (for example, to enforce the contract against the minor or to allow another party to the contract to cancel it). If it finds that the contract was not fair and reasonable, the court may cancel the contract, make an order allowing the minor to cancel it, or make an order for compensation or restitution of property.

The provisions do not apply to a contract approved by a District Court under clause 98.

Special rules for employment agreements and life insurance contracts

Clauses 92 to 94 relate to employment agreements and to life insurance contracts entered into by a minor who has reached the age of 16 years. The basic rule is that these contracts have effect as if the minor were of full age.

However, the court may make certain orders if it is satisfied that the consideration for a minor’s promise or act was so inadequate as to be unconscionable or that any provision of the contract that imposes an obligation on a minor was harsh or oppressive. For example, the court may cancel the contract, decline to enforce it against the minor, or declare that the contract is unenforceable against the minor, and in any case may make an order for compensation or restitution of property.

The provisions do not apply to a contract approved by a District Court under clause 98.

Compensation or restitution

Clause 95 allows the court to grant relief by way of compensation or restitution that the court thinks just if it may exercise a power under clauses 87 to 89 (whether or not it exercises the power) or it exercises a power under clause 93.

Other provisions relating to applications and orders

Clauses 96 and 97 relate to who may apply for an order and for the terms and conditions of orders.

Entering into contract with District Court’s approval

Clauses 98 to 101 provide for a contract entered into by a minor to have effect as if the minor were of full age if, before it is entered into, it is approved by a District Court.

Guarantees and indemnities

Clause 102 provides that a contract of guarantee or indemnity relating to a minor’s obligations under a contract is enforceable against the surety to the extent that it would be if the minor had been at all material times a person of full age.

Compromise or settlement of claims by minors

Clauses 103 to 107 apply to any money or damages that are claimed by or on behalf of a minor and concern the court’s approval of a compromise or settlement of a claim.

Court directed trust for minor

Clauses 108 and 109 relate to money or damages awarded to a minor in any cause or matter or any money to which a minor is entitled under an agreement, a compromise, or a settlement. The provisions allow the court to direct that the money or damages be held on trust for the minor.

Other provisions relating to clauses 103 to 109

Clauses 110 to 112 contain miscellaneous provisions relating to clauses 103 to 109.

Jurisdiction

Clauses 113 and 114 relate to the jurisdiction of District Courts and Disputes Tribunals.

Subpart to be code

Clause 115 provides that the subpart has effect in place of the rules of the common law and of equity relating to the contractual capacity of minors.

Agreements relating to trusts

Clause 116 relates to the effect of the subpart on trusts.

Clause 117 provides for court approval of an agreement to extinguish or vary a trust.

Part 3Sale of goods

This Part revises—

  • the Sale of Goods Act 1908; and

  • the Sale of Goods (United Nations Convention) Act 1994.

Clause 118 defines various terms used in the Part (including goods, which is defined as including all movable personal property but does not include money or things in action).

Subpart 1—Formation of contract

Subpart 1 provides for the formation of a contract of sale of goods, including providing—

  • that a contract of sale of goods is a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration (the price):

  • for the distinction between a sale and an agreement to sell:

  • that the capacity to buy and sell goods is regulated by the general law:

  • for how a contract of sale is made:

  • for the goods that may form the subject of the contract (being either existing goods or future goods that are to be manufactured or acquired by the seller after the contract is made):

  • for a contract to be void in certain circumstances where the goods perish:

  • for how the price may fixed or determined:

  • for conditions (which give rise to a right to treat the contract as repudiated) and warranties (that give rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated):

  • for various implied conditions and warranties, including—

    • an implied condition on the part of the seller that the seller has a right to sell the goods:

    • an implied warranty that the buyer will have and enjoy quiet possession of the goods:

    • an implied warranty that the goods are free from any undisclosed charge or encumbrance:

    • an implied condition for the sale of goods by description that the goods will correspond to the description:

    • an implied condition that the goods are reasonably fit for a purpose that the buyer makes known to the seller, if the purpose is made known so as to show that the buyer relies on the seller’s skill or judgement and it is in the course of the seller’s business to supply those goods:

    • an implied condition that the goods are of merchantable quality if the goods are bought by description from a seller who deals in goods of that description:

    • an implied warranty or condition as to quality or fitness that is treated as being included by the usage of trade:

    • an implied condition in a contract for sale by sample.

Subpart 2—Effects of contract

Subpart 2 provides for the effects of a contract of sale, including providing—

  • that no property in the goods is transferred to the buyer unless and until the goods are ascertained:

  • that the property in the goods is transferred to the buyer at the time that the parties to the contract intend it to be transferred:

  • the rules for ascertaining that intention:

  • for a seller to reserve the right of disposal of the goods until certain conditions are fulfilled:

  • that risk passes with the property in the goods unless otherwise agreed:

  • for whether title in the goods transfers in certain cases, including where—

    • the goods are sold by a person who is not the owner and does not sell the goods under the authority or with the consent of the owner:

    • a seller of goods has a voidable title to them:

    • the goods have been stolen or obtained by fraud or other wrongful means:

    • a seller or buyer is in possession of the goods after the sale and then delivers or transfers the goods to a third party under a sale, pledge, or other disposition:

  • that a writ of execution binds the property in the goods when the writ is delivered to a sheriff to be executed.

Subpart 3—Performance of contract

Subpart 3 provides for the performance of a contract of sale, including providing—

  • for the seller’s duty to deliver the goods, and the buyer’s duty to accept and pay for the goods, in accordance with the terms of the contract:

  • for various rules concerning the delivery of the goods, including—

    • that whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer is a question depending in each case on the contract (and that, apart from such a contract, the place of delivery is the seller’s place of business (if any) or the seller’s residence):

    • that the goods must be sent within reasonable time if no time for sending them is fixed:

    • that the seller must bear the expenses of putting the goods into a deliverable state:

    • the buyer’s options where the seller has delivered the wrong quantity of goods or mixed goods:

    • rules for instalment deliveries:

    • rules for delivery to a carrier:

    • the buyer’s right to examine the goods for the purpose of ascertaining whether they conform with the contract:

    • the buyer’s acceptance (or rejection) of the goods:

    • the buyer’s liability for neglecting or refusing to take delivery of the goods.

Subpart 4—Rights of unpaid seller against goods

Subpart 4 provides for the rights of an unpaid seller against the goods, including providing—

  • for the definition of an unpaid seller (a seller is an unpaid seller if the whole of the price has not been paid or tendered):

  • for a lien on the goods, or right to retain the goods for the price, while the seller is in possession of the goods:

  • for the termination of the unpaid seller’s lien (for example, when the buyer lawfully obtains possession of the goods):

  • in case of the buyer’s insolvency, for a right of stopping the goods in transit after the seller has parted with the possession of the goods. Under the right, the seller may resume possession of the goods as long as they are in transit and may retain them until payment or tender of the price:

  • for when the transit starts and ends:

  • for how the right of stopping the goods in transit is exercised (either by taking actual possession of the goods or giving notice of the seller’s claim to the carrier or other bailee who has possession of the goods):

  • that an unpaid seller’s right of lien, retention, or stopping goods in transit is not affected by any sale made by the buyer (unless the seller has assented to the sale). However, a transfer of a document of title to the goods to a person in good faith and for valuable consideration may defeat the right:

  • that if an unpaid seller who has exercised a right of lien, retention, or stopping goods in transit resells the goods, the buyer acquires a good title to the goods as against the original buyer:

  • for the resale of the goods if they are of a perishable nature or the unpaid seller has given notice to the buyer of the seller’s intention to resell the goods:

  • an express power of sale in the case of a defaulting buyer.

Subpart 5—Remedies for breach of contract

Subpart 5 provides for remedies for a breach of a contract of sale, including providing—

  • for a remedy for a seller to claim against the buyer—

    • for the price of the goods if the property in the goods has passed to the buyer but the buyer has wrongfully neglected or refused to pay for the goods:

    • damages for non-acceptance of the goods if the buyer wrongfully neglects or refuses to accept and pay for the goods:

  • for a remedy for a buyer to claim against the seller damages for non-delivery if the seller wrongfully neglects or refuses to deliver the goods:

  • for specific performance:

  • for a remedy for the buyer for a breach of warranty. In this case, the buyer may rely on the breach of warranty to obtain a reduction or satisfaction of the price, or claim damages.

Subpart 6—Supplementary matters

Subpart 6 provides for supplementary matters, including—

  • that a right, duty, or liability arising under a contract of sale by implication of law may be negatived or varied by express agreement, the course of dealing between the parties, or usage:

  • an exclusion from various provisions (for example, implied conditions and warranties) in the case of the supply of goods to which the Consumer Guarantees Act 1993 applies:

  • that a right, duty, or liability declared by the Part may be enforced by a proceeding unless the Part provides otherwise.

Subpart 7—United Nations Convention on Contracts for the International Sale of Goods

This subpart gives effect to the provisions of the United Nations Convention on Contracts for the International Sale of Goods (set out in Schedule 4). In particular, those provisions—

  • are given the force of law in New Zealand; and

  • in relation to contracts to which the Convention applies, are given effect in place of any other law of New Zealand that relates to contracts of sale of goods to the extent that the law is concerned with any matter that is governed by the Convention and that the application of the law is not expressly permitted by the Convention.

Part 4Electronic transactions

This Part revises the Electronic Transactions Act 2002.

Subpart 1—Preliminary provisions

Subpart 1 contains preliminary provisions, including—

  • the purpose of the Part. The purpose is to facilitate the use of electronic technology by—

    • reducing uncertainty regarding the legal effect of information that is in electronic form or that is communicated by electronic means; and

    • reducing uncertainty regarding the time and place of dispatch and receipt of electronic communications; and

    • providing that certain paper-based legal requirements may be met by using electronic technology:

  • an overview:

  • definitions of terms and expressions used in the Part.

Subpart 2—Improving certainty in relation to electronic information and electronic communications

Validity

Clause 210 provides that information is not denied legal effect solely because it is in electronic form or is in an electronic communication or is referred to in an electronic communication that is intended to give rise to that legal effect.

Default rules about dispatch and receipt of electronic communications

Clauses 211 to 216 contain rules that apply except to the extent that the parties to the communication otherwise agree or an enactment provides otherwise. The rules provide—

  • for when an electronic communication is taken to be dispatched or received; and

  • for where an electronic communication is taken to be dispatched from or received at; and

  • for the purpose of the formation of a contract, for when an acceptance by electronic communication of an offer is taken to be communicated to the offeror.

Subpart 3—Application of legal requirements to electronic transactions

Preliminary provisions

Clause 217 provides for the subpart to apply to enactments (but subject to exceptions specified in clause 217(2) and Schedule 5).

Clause 218 provides that a legal requirement can be met by electronic means if the applicable provisions in the subpart, and any applicable regulations made under the subpart, are complied with.

Clause 219 provides that nothing in the subpart requires a person to use, provide, or accept information in an electronic form without that person’s consent.

Clause 220 relates to when the integrity of information is maintained for the purposes of the subpart.

Legal requirement: writing

Clauses 221 and 222 relate to a legal requirement for information to be in writing or recorded in writing. The requirement is met if information in electronic form or recorded in that form is readily accessible so as to be usable for subsequent reference.

Clause 223 relates to a legal requirement to give information in writing. The requirement is met by giving the information in electronic form if the information is readily accessible so as to be usable for subsequent reference and the recipient consents to the information being given in electronic form and by means of an electronic communication, if applicable.

Clause 224 provides that in order to meet these requirements by electronic means, it is not necessary to comply with certain paper-based format requirements.

Legal requirement: signatures

Clauses 225 to 227 relate to the use of an electronic signature to satisfy a legal requirement for a signature. A key requirement is that the electronic signature is as reliable as is appropriate given the purpose for which, and the circumstances in which, the signature is required.

Legal requirement: retention

Clauses 228 to 230 relate to a legal requirement to retain information (whether that information is in paper or other non-electronic form or in electronic form). If the information is retained in electronic form, the key requirements are that the electronic form provides a reliable means of assuring that the integrity of the information is maintained and that the information is readily accessible so as to be usable for subsequent reference.

Legal requirement: provision and production of, and access to, information

Clauses 231 and 232 relate to a legal requirement to provide or produce information (whether that information is in paper or other non-electronic form or in electronic form). If the requirement is met by providing or producing the information in electronic form, the key requirements are that—

  • the form and means of the provision or production of the information reliably assure that the integrity of the information is maintained; and

  • the information is readily accessible so as to be usable for subsequent reference; and

  • the recipient consents to the information being provided or produced in an electronic form and, if applicable, by means of an electronic communication.

Clauses 233 and 234 relate to a legal requirement to provide access to information (whether that information is in paper or other non-electronic form or in electronic form). If the requirement is met by providing access to the information in electronic form, the key requirements are that—

  • the form and means of access reliably assure that the integrity of the information is maintained; and

  • the person to whom access is required to be provided consents to accessing the information in that electronic form.

Legal requirement: originals

Clause 235 relates to a legal requirement to compare a document with an original document.

Miscellaneous

Clause 236 provides that the subpart does not affect any legal requirement relating to the content of information.

Clause 237 relates to copyright.

Clause 238 allows regulations to be made for various purposes (for example, prescribing any conditions that must be complied with in order to meet a legal requirement by electronic means).

Clause 239 provides a general authority to prescribe electronic forms and requirements for using electronic forms.

Part 5Other commercial matters

This Part revises—

  • the Carriage of Goods Act 1979; and

  • the Mercantile Law Act 1908.

Subpart 1—Carriage of goods

Subpart 1 revises the Carriage of Goods Act 1979.

Clause 240 provides an overview of the subpart.

Clauses 241 to 243 determine that the subpart continues to determine who has liability in relation to the domestic carriage of goods. It applies to all goods carried by road, rail, sea, or air and to courier services (but not postal services). There are limited exceptions.

Clauses 244 and 245 define terms used in the subpart. Key definitions include carrier (which includes a person who, in the ordinary course of business, procures the carriage of goods owned by any other person as well as the actual carrier), carriage (which includes incidental services, such as those provided by stevedores and warehousemen), and unit of goods (by which the statutory caps on liability are calculated).

Clauses 246 to 262 set the core principles for liability for carriage of goods. Under clause 246, contracts are divided into 4 kinds of contract for liability purposes as follows:

  • a contract for carriage at owner’s risk (under which the carrier is only liable for intentional damage or loss to goods caused by the carrier):

  • a contract for carriage on declared terms (under which the carrier’s liability for damage or loss to goods is determined by the specific terms of the contract):

  • a contract for carriage at declared value risk (under which the carrier is liable for loss or damage to goods, regardless of fault, but only up to the amount specified in the contract):

  • a contract for carriage at limited carrier’s risk (under which the carrier is liable for loss or damage to goods, regardless of fault, up to a statutory cap set in clause 260).

A contract is, by default, a contract for carriage at limited carrier’s risk. However, the parties can contract on the basis that the contract is instead for carriage “at owner’s risk”, “on declared terms”, or “at declared value risk” if they meet the requirements for the relevant kind of contract. The key requirements set out in clauses 248 to 251 are that, in each case, the contract must be in writing and that—

  • for carriage at owner’s risk, the contract must state that it is “at owner’s risk” and be signed by the parties and the additional cost over and above a contract for carriage at limited carrier’s risk must be fair and reasonable:

  • for carriage on declared terms, the contract must be signed by the parties and be freely negotiated between the parties:

  • for carriage at declared value risk, the additional cost over and above a contract for carriage at limited carrier’s risk must be fair and reasonable.

Clause 254 determines that carriers are liable for loss or damage under contracts for carriage at declared value risk or at limited carrier’s risk regardless of fault. Clauses 255 to 259 determine when carriers are responsible for the goods for liability purposes.

Clauses 260 and 261 set the statutory cap at $2,000 per unit of goods (for contracts at limited carrier’s risk) and at the declared value set in the contract (for contracts at declared value risk). A “unit of goods” is, in essence, each separate item accepted by the carrier. Clause 262 sets out specific exclusions from carrier liability under contracts for carriage at limited carrier’s risk and at declared value risk. In particular, carriers are not liable for loss or damage directly resulting from an inherent defect in the goods, goods that were not properly prepared and packed, a legal requirement that was not met (for example, for the packing of dangerous goods), goods that were taken from the carrier by legal process, or incidents when the carrier was saving or trying to save life or property.

Clauses 263 to 267 provide for the liability of actual carriers to contracting carriers and how that liability is apportioned between actual carriers.

Clauses 268 and 269 enable a contracting party to proceed against an actual carrier if the contracting carrier is insolvent or cannot be found.

Clauses 270 and 271 set special rules for carrier liability for hand baggage.

Clauses 272 and 273 provide for liability under successive contracts of carriage by air.

Clause 274 ensures that carriers’ employees are not liable for loss or damage to goods except in the case of intentional loss or damage.

Clause 275 provides a statutory warranty from contracting parties to carriers as to the condition of the goods and their compliance with relevant enactments.

Clauses 276 to 287 set notice requirements and limitation periods for bringing a proceeding against a carrier. In essence, the claimant has 30 days from the date on which the carrier’s responsibility for the goods ends (or, in the case of an action by a contracting carrier against an actual carrier, 10 days) to give notice of the proceeding against a carrier and 12 months in which to bring a proceeding.

Clauses 288 to 298 contain the right of carriers to sue for recovery of freight and provide for the exercise of a lien over the goods.

Clauses 299 to 301 contain miscellaneous provisions.

Subpart 2—Mercantile agents

Subpart 2 revises Part 1 of the Mercantile Law Act 1908.

Clause 302 defines terms used in the subpart, including mercantile agent. A mercantile agent is an agent having, in the ordinary course of the agent’s business, authority to sell goods, consign goods for the purpose of sale, buy goods, or raise money on the security of goods.

Sales, pledges, and other dispositions by mercantile agents

Clause 303 provides that, if a mercantile agent is in possession of goods with the consent of the owner, a sale (or other disposition) of the goods made by the agent when acting in the ordinary course of business is as valid as if the agent were expressly authorised by the owner to make the sale (or other disposition). A third party will, however, obtain good title to the goods only if the third party acts in good faith and without notice that the agent does not have authority to make the sale or other disposition.

Clause 304 provides that a buyer must be treated as having notice that the mercantile agent has no authority to make the sale if the goods are subject to a perfected security interest.

Clause 305 provides that, if a mercantile agent is in possession of the goods with the consent of the owner, a sale (or other disposition) that would have been valid if the owner’s consent had continued is valid despite the withdrawal or expiry of the consent.

Clause 306 contains provisions relating to the owner’s consent.

Clauses 307 and 308 contain provisions relating to pledges of goods and of documents of title to goods.

Clause 309 relates to the consideration that is necessary for the validity of a sale, pledge, or other disposition of goods for the purposes of the subpart.

Clause 310 relates to agreements made with employees or other persons who are authorised in the ordinary course of business to make contracts of sale or pledges on a mercantile agent’s behalf.

Clause 311 concerns a situation where the owner of goods has given possession to another person (A) for the purpose of consignment or sale or has shipped the goods in the name of another person (A) and the consignee of the goods has not had notice that A is not the owner. In this case, the consignee, in respect of advances made to A, has the same lien on the goods as if A were the owner of the goods.

Clause 312 provides for the effect of a transfer of a document of title on a vendor’s lien or right of stopping goods in transit.

Miscellaneous provisions

Clauses 313 to 315 provide for various miscellaneous matters, including—

  • how a document may be transferred:

  • the rights of the true owner of the goods:

  • the fact that the subpart does not limit the common law powers of a mercantile agent.

Subpart 3—Bills of lading, sea waybills, and ship’s delivery orders

Subpart 3 revises Part 2 of the Mercantile Law Act 1908.

Clause 316 provides for the subpart to apply to bills of lading, sea waybills, and ship’s delivery orders.

Clause 317 states that the subpart does not limit the application of the Hague Rules (set out in Schedule 5 of the Maritime Transport Act 1994).

Interpretation

Clauses 318 and 319 relate to interpretation.

Rights under shipping documents

Clause 320 provides for a holder of a bill of lading (or a person to whom delivery is to be made in accordance with a sea waybill or a ship’s delivery order) to have rights under a contract of carriage. Under clause 321, those rights are not transferred in some cases where the holder of a bill of lading becomes the holder when possession of the bill no longer gives a right (as against the carrier) to possession of the relevant goods. Under clause 322, those rights, in the case of a ship’s delivery order, are subject to the terms of the order.

Clause 323 provides for those rights to be exercised for the benefit of a person who has suffered loss or damage because of a breach of the contract of carriage.

Clause 324 provides for the transfer of those rights to a person to extinguish the entitlement to those rights of another person (for example, a previous holder of the bill of lading).

Liabilities under shipping documents

Clauses 325 and 326 provide for a person in whom rights are vested under clause 320 to become subject to liabilities under the contract of carriage (for example, the liability for freight or other charges of the carrier).

Clause 327 states that the subpart does not limit or affect certain rights and liabilities (for example, any right of stopping goods in transit).

Clause 328 provides for a bill of lading in the hands of a shipper, a consignee, or an endorsee to be conclusive evidence of shipment as against the master or other signer of the bill. However, the clause provides for the master or signer to be relieved from liability for a misrepresentation caused without his or her fault.

Clause 329 allows regulations to be made providing for the application of the subpart to cases involving a network or other information technology.

Clause 330 provides for received for shipment bills of lading.

Subpart 4—Delivery of goods and lien for freight

Subpart 4 revises Part 4 of the Mercantile Law Act 1908.

Clause 331 provides for interpretation.

Clauses 332 to 336 allow a shipowner to make entry of and land or unship imported goods if the owner has failed to do so. The provisions specify the manner in which, and the conditions subject to which, the shipowner may act (including providing for the time of making entry of and landing or unshipping the goods and the place for landing the goods).

Clauses 337 to 346 provide for—

  • goods to remain subject to a lien for freight or other charges payable to a shipowner if the shipowner gives notice to the wharf or warehouse owner who has custody of the goods; and

  • the discharge of that lien (including if the owner deposits with the wharf or warehouse owner a sum equal to the amount claimed by the shipowner); and

  • the payment of the sum that has been deposited by the owner; and

  • the sale of the goods by public auction (if the lien is not discharged and no deposit is made); and

  • how the money arising from the sale is to be applied.

Subpart 5—Unpaid vendors of warehoused goods

Subpart 5 revises Part 5 of the Mercantile Law Act 1908.

Clause 347 provides for interpretation. The terms defined include warrant or certificate (being a receipt or an undertaking that is issued by a warehouse owner that acknowledges the receipt of goods to be held on behalf of a named and described person and contains an undertaking to deliver the goods to the endorsee, holder, or bearer of the warrant or certificate).

Clause 348 provides for the end of an unpaid vendor’s lien when certain warrants or certificates are delivered over in good faith and for value, on either a sale or pledge of the goods by a person who purchased the goods from the original bonder.

Clause 349 provides for possession of a warrant or certificate to be evidence of ownership of the goods.

Clause 350 provides that a holder of a warrant or certificate containing an undertaking to deliver the goods on presentation and demand is entitled to have delivery of the goods or to have the holder’s name entered in the warehouse keeper’s records as the owner of the goods. Under clause 351, if the holder’s name is entered in the records, the holder must be treated as being the owner (except in the case of fraud).

Clause 352 applies if a transfer is entered in the warehouse keeper’s records, the owner of the bonded goods delivers the warrant or certificate to a person on a sale or pledge, and the warrant or certificate is afterwards delivered to a subpurchaser or pledgee. In that case, the owner’s lien, as an unpaid vendor, must be treated as at an end from the time of the good faith delivery of the warrant or certificate to the first subpurchaser or pledgee for value.

Clauses 353 and 354 provide for provisions relating to ownership rights of goods stored in a bonded warehouse to apply to goods stored in a free warehouse.

Clause 355 provides that a vendor’s lien is not prejudiced by the subpart except in certain cases.

Clause 356 provides that goods must not be transferred in the warehouse records except on the production of the warrant or certificate that was originally issued.

Clause 357 relates to a special contract that restrains the negotiability of a warrant or certificate or provides a special method of transfer of the property in and possession of the goods.

Clause 358 provides that a warehouse owner’s lien is not prejudiced by the sale or transfer of goods stored in a bonded or free warehouse.

Part 6Repeals, consequential amendments, and miscellaneous provisions

This Part—

  • repeals the various Acts that are revised by the Bill (and revokes the Electronic Transactions Regulations 2003):

  • provides for consequential amendments to other enactments (in Schedule 6).

Hon Christopher Finlayson

Contract and Commercial Law Bill

Government Bill

Contents

Explanatory note
1 Title
2 Commencement
3 Purpose
4 Revision Act
5 Overview
6 Transitional, savings, and related provisions
7 Status of examples
8 Act binds the Crown
9 Interpretation
10 Purpose
11 Interpretation
12 Deed or contract for benefit of person who is not party to deed or contract
13 Section 12 does not apply if no intention to create obligation enforceable by beneficiary
14 Variation or discharge of promise may require beneficiary’s consent
15 Variation or discharge by agreement or in accordance with express provision
16 Court may authorise variation or discharge
17 Enforcement by beneficiary
18 Availability of defences
19 This subpart does not apply to promises, contracts, or deeds governed by foreign law
20 Savings
21 Purpose of this subpart
22 This subpart to be code
23 Interpretation
24 Relief may be granted if mistake by one party is known to another party or is common or mutual
25 Mistake does not include mistake in interpretation of contract
26 Decision to enter into contract not influenced by mistake if party aware of it
27 Mistake caused by party seeking relief
28 Nature of relief
29 Court may grant relief to person claiming through or under party
30 Persons who may apply
31 Rights of third persons not affected
32 This subpart does not apply to contracts governed by foreign law
33 Meaning of cancel
34 Remedy provided in contract
35 Damages for misrepresentation
36 Party may cancel contract if another party repudiates it
37 Party may cancel contract if induced to enter into it by misrepresentation or if term is or will be breached
38 No cancellation if contract is affirmed
39 Parties with substantially same interest
40 Sections 36 to 39 have effect in place of rules of common law and of equity
41 When cancellation may take effect
42 Effect of cancellation
43 Power of court to grant relief
44 Order for relief may be subject to terms and conditions
45 Matters court must have regard to
46 Protection of purchaser of property in good faith and for valuable consideration
47 Party who has altered position
48 Persons who may apply
49 Recovery of damages
50 Statement, promise, or undertaking during negotiations
51 Authority for making or giving statement, promise, or undertaking
52 Contracts for sale of goods
53 Proceeding before Disputes Tribunal
54 Remedies enforceable by or against assignee
55 Damages may not exceed value of performance of assigned contract
56 Assignee indemnified by assignor
57 Other provisions relating to assignees
58 This subpart does not apply to contracts governed by foreign law
59 Savings
60 Application
61 Money paid may be recovered and money payable ceases to be payable
62 Court may allow party who has incurred expenses to retain or recover money
63 Sum may be recovered if party has obtained valuable benefit
64 Benefit may be treated as being obtained
65 Estimates of expenses
66 Money payable under contract of insurance
67 Court must give effect to provision in contract
68 Court must treat performed part of contract that can be properly severed as separate contract
69 This subpart does not apply in certain circumstances
70 Interpretation
71 Illegal contract defined
72 Breach of enactment
73 Illegal contracts have no effect
74 Protection of persons who acquire property in good faith and without notice
75 Who may be granted relief
76 Court may grant relief
77 Order may be subject to terms and conditions
78 Matters court must have regard to
79 Court must not grant relief if not in public interest
80 Person acting with knowledge of facts or law giving rise to illegality
81 Persons who may apply
82 Restriction on granting relief otherwise than in accordance with this subpart
83 Restraints of trade
84 Law relating to restraint of trade and to ouster of jurisdiction not affected
85 Interpretation
86 Contracts unenforceable against minors but otherwise have effect
87 Court may inquire into fairness and reasonableness of contract
88 Court orders where contract was fair and reasonable
89 Court orders where contract was not fair and reasonable
90 Matters court must have regard to
91 Further provisions relating to application of sections 86 to 90
92 Employment agreements and life insurance contracts have effect as if minor were of full age
93 Court may make orders about unconscionable, harsh, or oppressive employment agreement or life insurance contract
94 Sections 92 and 93 do not apply in certain circumstances
95 Compensation or restitution
96 Applications under sections 87 to 89 or section 93
97 Terms and conditions of orders
98 Minor may enter into contract with approval of District Court
99 Persons who may apply
100 Referral of application
101 Contracts relating to property held on trust
102 Guarantees and indemnities
103 Application
104 Claim that is not subject of proceeding
105 Claim that has become subject of proceeding
106 Who may apply for approval
107 Court may refuse or grant approval
108 Money or damages to be held on trust
109 Payment on minor reaching 18 years or marrying or entering into civil union or de facto relationship
110 Provisions do not limit or affect certain other provisions
111 Variation of certain orders
112 Order may be made on court’s own motion or on application
113 Jurisdiction of District Courts
114 Jurisdiction of Disputes Tribunals
115 This subpart to be code
116 Effect of this subpart on trust
117 Agreement to extinguish or vary trust may be approved
118 Interpretation
119 Contract of sale of goods
120 Contracts of sale may be between one part-owner and another
121 Contracts of sale may be absolute or conditional
122 Sale and agreement to sell
123 Capacity to buy and sell
124 How contract of sale is made
125 Existing or future goods
126 Contract void if goods have perished without seller’s knowledge
127 Goods that perish before sale but after agreement to sell
128 Fixing contract price
129 Agreement to sell at valuation
130 Stipulations about time
131 Conditions and warranties
132 Breach of condition to be fulfilled by seller
133 Impossibility or other excuse
134 Implied condition and warranties as to title and quiet possession
135 Sale by description
136 Implied conditions or warranties as to quality or fitness
137 Implied condition that goods are reasonably fit for purpose
138 Implied condition that goods are of merchantable quality
139 Implied warranty or condition by usage of trade
140 Express warranty or condition
141 Sale by sample
142 Goods must be ascertained
143 Property is transferred when parties intend
144 Ascertaining parties’ intention
145 Rules for ascertaining parties’ intention
146 Reservation of right of disposal
147 Risk passes with property unless otherwise agreed
148 Sale by person who is not owner
149 Market overt
150 Sale under voidable title
151 Revesting of property in stolen goods on conviction of offender
152 Seller in possession after sale
153 Buyer in possession after sale
154 Effect of writs of execution
155 Duties of seller and buyer
156 Payment and delivery are concurrent conditions
157 Determining whether buyer to take possession of goods or seller to send goods
158 Place of delivery
159 Goods must be sent within reasonable time if no time is fixed
160 Goods in possession of third person
161 Demand or tender of delivery must be at reasonable hour
162 Seller must bear expenses of putting goods into deliverable state
163 Delivery of wrong quantity or of mixed goods
164 Buyer not bound to accept delivery by instalments
165 Instalment deliveries: breach of contract
166 Delivery to carrier
167 Risk where goods are delivered at distant place
168 Buyer’s right to examine goods
169 Acceptance of goods
170 Buyer not bound to return rejected goods
171 Liability of buyer for neglecting or refusing to take delivery of goods
172 Unpaid seller defined
173 Unpaid seller’s rights
174 Unpaid seller’s lien
175 Part delivery
176 When unpaid seller loses lien
177 Right to stop goods in transit
178 Duration of transit
179 Goods delivered to ship chartered by buyer
180 Part delivery
181 How right is exercised
182 Notice of seller’s claim
183 Redelivery of goods
184 Effect of subsale or pledge by buyer
185 Transfer of document of title to person in good faith and for valuable consideration
186 Sale not generally rescinded by lien or stopping goods in transit
187 Buyer’s title on resale
188 Resale in case of perishable goods or notice of intention to resell
189 Express power of sale
190 Claim for price
191 Damages for non-acceptance
192 Damages for non-delivery
193 Specific performance
194 Remedy for breach of warranty
195 Interest and special damages
196 Exclusion of implied terms and conditions
197 Exclusion where Consumer Guarantees Act 1993 applies
198 Reasonable price and reasonable time are questions of fact
199 Rights and duties enforceable by proceeding
200 Savings
201 Purpose
202 Interpretation
203 Convention to have force of law
204 Convention to be code
205 Certificates about Contracting States
206 Purpose
207 Overview
208 Interpretation
209 Further provision relating to interpretation
210 Validity of information
211 When default rules in sections 212 to 215 apply
212 Time of dispatch
213 Time of receipt
214 Place of dispatch
215 Place of receipt
216 Time of communication of acceptance of offer
217 When subpart applies
218 When legal requirement can be met by electronic means
219 Consent to use of electronic technology
220 When integrity of information maintained
221 Legal requirement that information be in writing
222 Legal requirement to record information in writing
223 Legal requirement to give information in writing
224 Legal requirements relating to layout and format of certain information and writing materials
225 Legal requirement for signature
226 Legal requirement that signature or seal be witnessed
227 Presumption about reliability of electronic signatures
228 Legal requirement to retain document or information that is in paper or other non-electronic form
229 Legal requirement to retain information that is in electronic form
230 Extra conditions for electronic communications
231 Legal requirement to provide or produce information that is in paper or other non-electronic form
232 Legal requirement to provide or produce information that is in electronic form
233 Legal requirement to provide access to information that is in paper or other non-electronic form
234 Legal requirement to provide access to information that is in electronic form
235 Originals
236 Legal requirement relating to content of information
237 Copyright
238 Regulations and Order in Council to amend Schedule 5
239 Authority to prescribe electronic forms and requirements for using electronic forms
240 Overview
241 This subpart applies to carriage of goods by carrier under contract
242 This subpart does not apply to international carriage, to postal services, or in certain other cases
243 Other remedies affected
244 Interpretation
245 Meaning of unit of goods
246 Liability depends on kind of contract of carriage
247 Particular kind of contract of carriage is matter for agreement subject to meeting requirements for that kind
248 Requirements for contract for carriage at owner’s risk
249 Requirements for contract for carriage on declared terms
250 Requirements for contract for carriage at declared value risk
251 How to determine whether difference between amounts charged is fair and reasonable for contract at owner’s risk or declared value risk
252 Contract between contracting carrier and actual carrier or between actual carriers
253 Application of sections 254 to 259
254 Liability of contracting carrier
255 When responsibility begins
256 When responsibility ends if goods are to be delivered to consignee
257 When responsibility ends if goods are to be collected by consignee
258 When responsibility ends if consignee’s whereabouts are unknown
259 When responsibility ends in case of international carriage
260 Carrier’s liability limited to $2,000 for each unit of goods or to declared value
261 Unit of goods for purpose of determining limit of liability
262 Carrier not liable in certain circumstances
263 Liability of actual carrier to contracting carrier
264 Liability where 1 actual carrier is involved
265 Liability where more than 1 actual carrier is involved
266 When actual carriers are jointly responsible or separately responsible
267 Provisions relating to joint liability of actual carriers
268 Contracting party has same rights where contracting carrier insolvent or cannot be found
269 Liquidator or assignee in bankruptcy holds money on trust
270 Special rules relating to liability of carrier in respect of baggage
271 Other rules relating to hand baggage
272 Contracts of successive carriage by air
273 When successive carriers are jointly responsible or separately responsible
274 Liability of carrier’s employee
275 Contracting party to warrant condition of goods and compliance with enactments
276 Contracting out permitted on notice and limitation provisions
277 Notice of claim against contracting carrier must be given
278 Notice of claim must be given within 30 days
279 Notice of claim against actual carrier must be given within 10 days
280 No notice required if carrier is or ought to be aware of damage or loss
281 Carrier may consent to non-notified proceeding being brought
282 Court may grant leave to bring non-notified proceeding if consent not given
283 Limitation on proceedings against carriers for loss of goods
284 Limitation on proceedings against carriers for damage to or partial loss of goods
285 Carrier may consent to proceeding being brought after limitation period
286 Court may grant leave to bring proceeding after limitation period if consent not given
287 Proceeding by consignee if not contracting party
288 Contracting out permitted on rights of carriers
289 Right to sue for freight
290 Proceeding for recovery of freight
291 Carrier’s lien
292 Notice of carrier’s claim
293 Carrier may store goods
294 Sale of goods by public auction
295 Storage and disposal of unclaimed or rejected goods
296 Disposal of perishable goods
297 Disposal of dangerous goods
298 Liability of carrier extinguished
299 Common carrier of goods abolished
300 Proceedings against New Zealand agents of overseas carriers
301 Certain other Acts not affected
302 Interpretation
303 Sale, pledge, or other disposition by agent in possession with owner’s consent is valid
304 Buyer, etc, has notice of lack of authority if goods subject to perfected security interest
305 Effect of withdrawal or expiry of owner’s consent
306 Provisions relating to consent
307 Effect of pledges of documents of title
308 Pledge of goods as security for existing debt or liability
309 Rights acquired by exchange of goods or documents
310 Agreements through employees or other authorised persons
311 Consignee’s lien
312 Effect of transfer of document of title to goods on vendor’s lien and right of stopping goods in transit
313 Mode of transferring documents
314 Saving of rights of true owner
315 Common law powers of mercantile agent
316 Application of this subpart
317 This subpart does not limit application of Hague Rules
318 Interpretation
319 Goods that cease to exist or cannot be identified
320 Holder of bill of lading or person to whom delivery is to be made has rights under contract of carriage
321 Rights where possession of bill of lading no longer gives right to possession of goods
322 Rights in relation to ship’s delivery order
323 Rights may be exercised for benefit of person who suffers loss or damage
324 Transfer extinguishes certain rights
325 Person in whom rights are vested becomes subject to liabilities
326 Liabilities exclude liabilities in respect of goods to which ship’s delivery order does not relate
327 Right of stopping goods in transit, or claims for freight, not affected
328 Bill of lading in hands of shipper, consignee, or endorsee is conclusive evidence as against master or other signer of bill
329 Regulations relating to network or other information technology
330 Special provisions about received for shipment bills of lading
331 Interpretation
332 Shipowner may enter and land goods in default of entry and landing by owner of goods
333 Place for landing goods
334 Owner who is ready and offers to land or take delivery of goods
335 Landing of goods at wharf where ship is discharged for purpose of sorting goods
336 Requirement for notice in certain circumstances
337 Continuation of lien for freight if shipowner gives notice
338 Discharge of lien on production of receipt and delivery of copy of receipt or release
339 Discharge of lien on deposit with warehouse owner
340 Right of wharf owner or warehouse owner, if no notice is given, to pay deposit to shipowner
341 Course to be taken if notice to retain is given
342 Wharf owner or warehouse owner may sell goods by public auction after 90 days
343 Notices of sale to be given
344 How money arising from sale is to be applied
345 Wharf owner’s or warehouse owner’s rent and expenses
346 Wharf owner’s or warehouse owner’s protection
347 Interpretation
348 Unpaid vendor’s lien ends on delivery of bond warrant to good faith holder for value
349 Possession of warrant or certificate is evidence of ownership
350 Holder of warrant or certificate entitled to delivery
351 Registered holder of warrant or certificate must be treated as owner
352 Lien of registered transferee of warrant or certificate ends on delivery of warrant or certificate in good faith and for value
353 Warrant or certificate of free goods put on same footing as bond warrants
354 Provisions apply to both bonded and free warehouses
355 Vendor’s lien not prejudiced except in certain cases
356 Goods not to be transferred in records except on production of warrant or certificate
357 Special contracts restraining negotiability of warrant or certificate
358 Warehouse owner’s lien not prejudiced by sale or transfer of goods
359 Repeals
360 Revocation
361 Amendments to other enactments

The Parliament of New Zealand enacts as follows:

1 Title

This Act is the Contract and Commercial Law Act 2015.

2 Commencement

This Act comes into force on [date].

Part 1 Preliminary provisions

3 Purpose

The purpose of this Act is to re-enact, in an up-to-date and accessible form, certain legislation relating to—

(a)

contracts; and

(b)

the sale of goods; and

(c)

electronic transactions; and

(d)

the carriage of goods; and

(e)

various other commercial matters.

4 Revision Act

(1)

This is a revision Act for the purposes of section 35 of the Legislation Act 2012 (which provides that revision Acts are not intended to change the effect of the law, except as expressly provided).

(2)

For the purposes of section 35(3) of the Legislation Act 2012, the provisions specified in Schedule 2 are intended to change the effect of the law in the manner specified in that schedule.

(3)

The Acts revised by this Act are specified in Part 1 of Schedule 3.

(4)

Part 2 of Schedule 3 is provided to assist readers to identify corresponding provisions at the commencement of this Act, but must not be interpreted as a definitive or ongoing guide to the correspondence of provisions.

5 Overview

In this Act,—

(a)

this Part provides for preliminary matters:

(b)

Part 2 relates to contracts, including matters relating to privity, contractual mistakes, contractual remedies, frustrated contracts, illegal contracts, and contracts entered into by minors:

(c)

Part 3 relates to the sale of goods, including matters relating to the formation, effects, and performance of a contract of sale, the rights of an unpaid seller, and remedies:

(d)

Part 4 relates to electronic transactions, including matters relating to the application of legal requirements to those transactions:

(e)

Part 5 relates to various other commercial matters, including the carriage of goods, mercantile agents, and bills of lading:

(f)

Part 6 relates to repeals, consequential amendments, and miscellaneous provisions.

6 Transitional, savings, and related provisions

The transitional, savings, and related provisions set out in Schedule 1 have effect according to their terms.

Note

The revised Acts have a number of transitional and savings provisions that have been moved to Schedule 1 in line with current drafting practice.

The general transitional approach that has been taken is that the new Act will apply to contracts entered into before or after commencement of the new Act. This is on the basis that there has been no change in the effect of the law (other than minor amendments to clarify Parliament’s intent, or reconcile inconsistencies between provisions).

An alternative approach could be that the former Acts continue to apply to contracts entered into before commencement while the new Act only applies to contacts entered into after commencement.

Feedback on the approach to transitionals is welcome (see the Explanatory material and request for submissions).

7 Status of examples

(1)

An example used in this Act is only illustrative of the provisions to which it relates. It does not limit those provisions.

(2)

If an example and a provision to which it relates are inconsistent, the provision prevails.

8 Act binds the Crown

(1)

This Act binds the Crown.

Note

See the Explanatory material and request for submissions.

(2)

This section is subject to section 242(1)(c) (application of carriage of goods provisions to the New Zealand Defence Force and the Ministry of Defence).

Compare: 1944 No 20 s 4(2); 1969 No 41 s 3; 1970 No 129 s 4; 1977 No 54 s 3; 1979 No 11 s 3; 1979 No 43 s 4; 1982 No 132 s 3; 1994 No 60 s 3; 2002 No 35 s 7

Part 2 Contracts legislation

9 Interpretation

(1)

In this Part, unless the context otherwise requires,—

court

(a)

means, in relation to any matter, the court, tribunal, or arbitral tribunal by or before which the matter falls to be determined; but

(b)

in subpart 6, has the meaning set out in section 85

disposition means—

(a)

a conveyance, transfer, assignment, settlement, delivery, payment, or other alienation of property, whether at law or in equity:

(b)

the creation of a trust:

(c)

the grant or creation of any lease, mortgage, charge, servitude, licence, power, or other right, estate, or interest in or over any property, whether at law or in equity:

(d)

the release, discharge, surrender, forfeiture, or abandonment, at law or in equity, of any debt, contract, or thing in action, or of any right, power, estate, or interest in or over any property:

(e)

the exercise of a general power of appointment in favour of any person other than the donee of the power:

(f)

a transaction that a person enters into with intent to diminish, directly or indirectly, the value of the person’s own estate and to increase the value of the estate of any other person.

(2)

For the purpose of paragraph (d) of the definition of disposition, a debt, contract, or thing in action, or a right, power, estate, or interest in or over any property, must be treated as having been released or surrendered when it has become irrecoverable or unenforceable through the lapse of time.

Note

The definition of “disposition” appears in the Contractual Mistakes Act and the Illegal Contracts Act. In both cases, paragraph (d) contains a list of items. However, in both of those Acts the words relating to the lapse of time (now in subclause (2) above) refer to a shorter list of items: “a debt, or any other right, estate, or interest” (ie it does not refer to a contract, thing in action, or power). Subclause (2) has been amended to refer to a contract, power, or thing in action for consistency with paragraph (d). This is a minor amendment under section 31(2)(i) of the Legislation Act 2012.

Compare: 1944 No 20 s 2; 1970 No 129 ss 2, 6(2); 1977 No 54 ss 2, 8(3); 1979 No 11 s 2; 1982 No 132 s 2

Subpart 1—Contractual privity

10 Purpose

The purpose of this subpart is to permit a person who is not a party to a deed or contract to enforce a promise made in it for the benefit of that person.

Compare: 1982 No 132 Long Title

Note

This is from the Long Title of the Contracts (Privity) Act 1982.

In line with current drafting practice, Long Titles are sometimes replaced by a purpose provision. In the case of some contracts statutes, the Long Title simply refers to “An Act to reform the law relating to ...”. For example, the Long Title of the Contractual Remedies Act 1979 is “An Act to reform the law relating to remedies for misrepresentation and breach of contract.” It is doubtful that converting a Long Title of this nature into a purpose provision is useful. Accordingly, the Long Titles of these Acts have been omitted without being replaced by a corresponding purpose provision.

11 Interpretation

In this subpart, unless the context otherwise requires,—

beneficiary, in relation to a promise to which section 12 applies, means the person described in section 12(1)

benefit includes—

(a)

any advantage; and

(b)

any immunity; and

(c)

any limitation or other qualification of—

(i)

an obligation to which a person (other than a party to the deed or contract) is or may be subject; or

(ii)

a right to which a person (other than a party to the deed or contract) is or may be entitled; and

(d)

any extension or other improvement of a right or rights to which a person (other than a party to the deed or contract) is or may be entitled

contract includes a contract—

(a)

made by deed or in writing, orally, or partly in writing and partly orally; or

(b)

implied by law

promisee, in relation to a promise to which section 12 applies, means a person who is both—

(a)

a party to the deed or contract; and

(b)

a person to whom the promise is made or given

promisor, in relation to a promise to which section 12 applies, means a person who is both—

(a)

a party to the deed or contract; and

(b)

a person by whom the promise is made or given.

Compare: 1982 No 132 s 2

12 Deed or contract for benefit of person who is not party to deed or contract

(1)

This section applies to a promise contained in a deed or contract that confers, or purports to confer, a benefit on a person, designated by name, description, or reference to a class, who is not a party to the deed or contract.

(2)

The promisor is under an obligation, enforceable by the beneficiary, to perform the promise.

(3)

This section applies whether or not the person referred to in subsection (1) is in existence when the deed or contract is made.

Compare: 1982 No 132 s 4

13 Section 12 does not apply if no intention to create obligation enforceable by beneficiary

Section 12 does not apply to a promise that, on the proper construction of the deed or contract, is not intended to create, in respect of the benefit, an obligation enforceable by the beneficiary.

Compare: 1982 No 132 s 4

14 Variation or discharge of promise may require beneficiary’s consent

(1)

A promise to which section 12 applies and the obligation imposed by that section may not be varied or discharged without the consent of a beneficiary if—

(a)

the position of the beneficiary has been materially altered by the reliance of the beneficiary or any other person on the promise; or

(b)

the beneficiary has obtained against the promisor judgment on the promise; or

(c)

the beneficiary has obtained against the promisor the award of an arbitral tribunal on a submission that relates to the promise.

(2)

Subsection (1)(a) applies whether or not the beneficiary or other person has knowledge of the precise terms of the promise.

(3)

For the purposes of subsection (1)(b) and (c),—

(a)

an award of an arbitral tribunal or a judgment must be treated as having been obtained when it is pronounced even if—

(i)

some act, matter, or thing needs to be done to record or perfect it; or

(ii)

on application to a court or on appeal, it is varied:

(b)

if an award of an arbitral tribunal or a judgment is set aside on application to a court or on appeal, the award or judgment must be treated as having never been obtained.

(4)

This section is subject to sections 15 and 16.

Compare: 1982 No 132 s 5

15 Variation or discharge by agreement or in accordance with express provision

Nothing in this subpart prevents a promise to which section 12 applies or an obligation imposed by that section from being varied or discharged at any time—

(a)

by agreement between the parties to the deed or contract and the beneficiary; or

(b)

by any party or parties to the deed or contract if—

(i)

the deed or contract contained, when the promise was made, an express provision to that effect; and

(ii)

the provision is known to the beneficiary (whether or not the beneficiary has knowledge of the precise terms of the provision); and

(iii)

the beneficiary had not materially altered the beneficiary’s position in reliance on the promise before the provision became known to the beneficiary; and

(iv)

the variation or discharge is in accordance with the provision.

Compare: 1982 No 132 s 6

16 Court may authorise variation or discharge

(1)

This section applies if—

(a)

the variation or discharge of a promise or an obligation is prevented by section 14(1)(a); or

(b)

it is uncertain whether the variation or discharge of a promise or an obligation is prevented by section 14(1)(a).

Note

Section 7(1)(b) of the 1982 Act only refers to “that promise” while the rest of s 7 refers to “or obligation” as well. For consistency, paragraph (b) above has been amended to refer to an obligation. This is a minor amendment under section 31(2)(i) of the Legislation Act 2012.

(2)

A court may, on application by the promisor or promisee and if it is just and practicable to do so, make an order authorising the variation or discharge of the promise or obligation or both.

(3)

The order may be made on the terms and conditions that the court thinks fit.

(4)

Subsection (5) applies if a court—

(a)

makes an order under this section; and

(b)

is satisfied that the beneficiary has been injuriously affected by the reliance of the beneficiary or any other person on the promise or obligation.

(5)

The court must make it a condition of the order that the promisor pay to the beneficiary, by way of compensation, the sum that the court thinks just.

Compare: 1982 No 132 s 7

17 Enforcement by beneficiary

(1)

The obligation imposed on a promisor by section 12 may be enforced by the beneficiary as if the beneficiary were a party to the deed or contract.

(2)

Relief in respect of the promise may not be refused on the ground—

(a)

that the beneficiary is not a party to the deed or contract in which the promise is contained; or

(b)

that, as against the promisor, the beneficiary is a volunteer.

(3)

In subsection (2), relief includes damages, specific performance, or an injunction.

Compare: 1982 No 132 s 8

18 Availability of defences

(1)

This section applies only if, in a proceeding brought in a court, a claim is made in reliance on this subpart by a beneficiary against a promisor.

(2)

The promisor has available, by way of defence, counterclaim, set-off, or otherwise, any matter that would have been available to the promisor—

(a)

if the beneficiary had been a party to the deed or contract in which the promise is contained; or

(b)

if—

(i)

the beneficiary were the promisee; and

(ii)

the promise to which the proceeding relates had been made for the benefit of the promisee; and

(iii)

the proceeding had been brought by the promisee.

(3)

However, the promisor may, in the case of a set-off or counterclaim arising by virtue of subsection (2) against the promisee, avail himself, herself, or itself of the set-off or counterclaim against the beneficiary only if the subject matter of the set-off or counterclaim arises out of, or in connection with, the deed or contract in which the promise is contained.

(4)

In a counterclaim brought under subsection (2) or (3) against a beneficiary,—

(a)

the beneficiary is not liable on the counterclaim, unless the beneficiary elects, with full knowledge of the counterclaim, to proceed with the beneficiary’s claim against the promisor; and

(b)

if the beneficiary so elects to proceed, the beneficiary’s liability on the counterclaim may not exceed the value of the benefit conferred on the beneficiary by the promise.

(5)

Subsections (2) and (3) are subject to subsection (4).

Compare: 1982 No 132 s 9

19 This subpart does not apply to promises, contracts, or deeds governed by foreign law

This subpart does not apply to any promise, contract, or deed, or any part of a promise, contract, or deed, that is governed by a law other than New Zealand law.

Compare: 1982 No 132 s 13A

20 Savings

Nothing in this subpart limits or affects—

(a)

any right or remedy that exists or is available apart from this subpart; or

(b)

subpart 2 of Part 2 of the Property Law Act 2007 or any other enactment that requires any contract to be in writing or to be evidenced by writing; or

(c)

the law of agency; or

(d)

the law of trusts.

Compare: 1982 No 132 s 14(1)

Subpart 2—Contractual mistakes

21 Purpose of this subpart

(1)

The purpose of this subpart is to mitigate the arbitrary effects of mistakes on contracts by giving courts appropriate powers to grant relief in the circumstances mentioned in section 24.

(2)

These powers—

(a)

are in addition to, and not in substitution for, existing powers to grant relief in respect of matters other than mistakes; and

(b)

must not be exercised in a way that prejudices the general security of contractual relationships.

Compare: 1977 No 54 s 4

22 This subpart to be code

(1)

This subpart has effect in place of the rules of the common law and of equity governing the circumstances in which relief may be granted, on the grounds of mistake, to—

(a)

a party to a contract; or

(b)

a person claiming through or under a party to a contract.

(2)

Subsection (1) applies except as otherwise expressly provided in this subpart.

(3)

Nothing in this subpart affects—

(a)

the doctrine of non est factum:

Example

Person A is blind. A written contract is falsely read over to A. The contract is of a nature that is altogether different from what is read to A. A signs the contract. A is not careless in any way.

Under the doctrine of non est factum, A’s signature is invalid. Therefore, A has not entered into the contract.

(b)

the law relating to the rectification of contracts:

(c)

the law relating to undue influence, fraud, breach of fiduciary duty, or misrepresentation, whether fraudulent or innocent:

(d)

subpart 4 (frustrated contracts):

(e)

subpart 5 (illegal contracts):

(f)

sections 94A and 94B of the Judicature Act 1908.

Note

Section 5(2)(d) of the 1977 Act refers to ss 94A and 94B of the Judicature Act 1908. Clause 558 of the Judicature Modernisation Bill amends the Property Law Act 2007 to insert new sections 74A and 74B as replacements for ss 94A and 94B. References to the Judicature Act will be updated following enactment of the Judicature Modernisation Bill.

(4)

Nothing in this subpart deprives a court of the power to exercise its discretion to withhold a decree of specific performance in any case.

Compare: 1977 No 54 s 5

23 Interpretation

(1)

In this subpart, unless the context otherwise requires, mistake means a mistake, whether of law or of fact.

(2)

For the purposes of this subpart, a mistake in the interpretation of a document is a mistake of law.

(3)

Subsection (2)

(a)

does not limit the meaning of the term mistake of law; but

(b)

is subject to section 25.

(4)

There is a contract for the purposes of this subpart where a contract would have come into existence but for circumstances of the kind described in section 24(1)(a).

Compare: 1977 No 54 s 2

24 Relief may be granted if mistake by one party is known to another party or is common or mutual

(1)

A court may grant relief under section 28 to a party to a contract if,—

(a)

in entering into the contract,—

(i)

the party was influenced in the party’s decision to enter into the contract by a mistake that was material to that party, and the existence of the mistake was actually known to the other party or to 1 or more of the other parties to the contract; or

Note

The Law of Contract in New Zealand (at para 10.4.1) states that “It is now clear that the ‘knowledge’ here means actual knowledge; constructive knowledge is insufficient.” See Tri-Star Customs and Forwarding Ltd v Denning [1999] 1 NZLR 33.

For clarity, the word “actually” has been added as an accurate reflection of the existing law and as a minor amendment to clarify Parliament’s intent under s 31(2)(i) of the Legislation Act 2012.

(ii)

all the parties to the contract were influenced in their respective decisions to enter into the contract by the same mistake; or

(iii)

the party and at least 1 other party were each influenced in their respective decisions to enter into the contract by a different mistake about the same matter of fact or of law; and

(b)

the mistake or mistakes resulted, at the time of the contract,—

(i)

in a substantially unequal exchange of values; or

(ii)

in a benefit being conferred, or an obligation being imposed or included, that was, in all the circumstances, a benefit or an obligation substantially disproportionate to the consideration for the benefit or obligation; and

(c)

in a case where the contract expressly or by implication provides for the risk of mistakes, the party seeking relief (or the party through or under whom relief is sought) is not obliged by a term of the contract to assume the risk that that party’s belief about the matter in question might be mistaken.

(2)

The relief may be granted in the course of any proceeding or on application made for the purpose.

(3)

For the purposes of subsection (1)(a)(i) and (iii), the other party or other parties must not be a party or parties who have substantially the same interest under the contract as the party seeking relief.

Compare: 1977 No 54 s 6(1)

25 Mistake does not include mistake in interpretation of contract

For the purposes of relief under section 28 in respect of a contract, a mistake, in relation to that contract, does not include a mistake in its interpretation.

Note

Section 6(1) of the 1977 Act contains the expression “in the course of any proceedings or on application made for the purpose”. In contrast, section 6(2) only refers to “For the purposes of an application for relief” (ie a reference is not made to “in the course of any proceedings”).

The rules in s 6(2)(a) and (b) are substantive rules that are probably intended to apply whether the court acts “in the course of any proceedings” or “on application made for the purpose”. To that end, the wording “For the purposes of relief under section 28 ...” has been used so that the rules apply in each case.

The change is suggested on the basis of a “minor amendment to clarify Parliament’s intent, or reconcile inconsistencies between provisions” (See s 31(2)(i) of the Legislation Act).

Compare: 1977 No 54 s 6(2)(a)

26 Decision to enter into contract not influenced by mistake if party aware of it

For the purposes of relief under section 28 in respect of a contract, the decision of a party to the contract to enter into it is not made under the influence of a mistake if, before the party enters into it and at a time when the party can elect not to enter into it, the party becomes aware of the mistake but elects to enter into the contract despite the mistake.

Compare: 1977 No 54 s 6(2)(b)

27 Mistake caused by party seeking relief

The extent to which the party seeking relief (or the party through or under whom relief is sought) caused the mistake is one of the considerations that must be taken into account by the court in deciding whether to grant relief under section 28.

Compare: 1977 No 54 s 7(2)

28 Nature of relief

(1)

If, under sections 24 to 26, the court has power to grant relief under this section, the court may make any order that it thinks just.

Note

Section 7 of the 1977 refers to a “discretion”. Under current drafting style, this would normally be expressed simply as “the court may....”. Some other contract statutes do not include an express reference to a discretion. For consistency, the reference to “discretion” has been dropped in favour of a more modern approach.

(2)

In particular, but without limiting subsection (1), the court may do 1 or more of the following things:

(a)

declare the contract to be valid and subsisting in whole or in part or for any particular purpose:

(b)

cancel the contract:

(c)

grant relief by way of variation of the contract:

(d)

grant relief by way of restitution or compensation.

(3)

The court may, by any order made under this section,—

(a)

vest the whole or any part of any relevant property in a party; or

(b)

direct a party to transfer or assign the whole or any part of any relevant property to any other party; or

(c)

direct a party to deliver the whole or any part of the possession of any relevant property to any other party.

Note

A number of the contract statutes have a similar provision (see s 7(5) of the Contractual Mistakes Act 1977, s 9(2)(a) of the Contractual Remedies Act 1979, s 7(5) of the Illegal Contracts Act 1970, and s 7(2) of the Minors’ Contracts Act 1969).

Section 9(2)(a) of the Contractual Remedies Act 1979 has a number of differences as compared to the other examples:

  • it refers to “real or personal property” rather than just property:

  • it refers to orders in respect of “the whole or any part of” that property:

  • it includes a direction “to deliver to him the possession of” the property.

The various provisions in this revision Bill have been aligned for consistency. It is considered that this is a minor amendment to clarify Parliament’s intent or reconcile inconsistencies between provisions as referred to s 31(2)(i) of the Legislation Act.

(4)

In subsection (3),—

party means a party to the proceeding

relevant property means real or personal property that was the subject of the contract or was the whole or part of the consideration for the contract.

(5)

An order may be made on the terms and conditions that the court thinks fit.

Note

Various contracts statutes refer to orders being made on terms and conditions. For example, s 7(1) of the Contracts (Privity) Act provides that “a court ... may ... make an order .... on such terms and conditions as the court thinks fit”. This formulation does include a reference to “any provision of any such order” or the words “subject to” (as in s 7(6) of the 1977 Act). Minor drafting changes have been made to remove inconsistencies.

Compare: 1977 No 54 s 7(3), (5), (6)

29 Court may grant relief to person claiming through or under party

If, under sections 24 to 26, the court has power to grant relief to a party to a contract, it may grant relief not only to that party but also to any person claiming through or under that party.

Compare: 1977 No 54 s 7(1)

30 Persons who may apply

An application for relief to be granted under section 28 may be made by—

(a)

any person to whom the court may grant that relief; or

(b)

any other person if it is material for that person to know whether relief under section 28 will be granted.

Compare: 1977 No 54 s 7(4)

31 Rights of third persons not affected

(1)

Nothing in an order made under this subpart invalidates a disposition of property referred to in subsection (2) if the person to whom the disposition was made—

(a)

was not a party to the mistaken contract; and

(b)

had not, at the time of the disposition, notice that the property was the subject of, or the whole or part of the consideration for, a mistaken contract; and

(c)

otherwise acted in good faith.

(2)

The dispositions are—

(a)

a disposition of property by a party to a mistaken contract for valuable consideration:

(b)

a disposition of property made by or through a person who became entitled to the property under a disposition to which paragraph (a) applies.

(3)

Nothing in an order made under this subpart affects subpart 5 of Part 2 of the Property Law Act 2007 (which relates to the assignment of things in action).

(4)

In this section, mistaken contract means a contract entered into in the circumstances described in section 24(1)(a).

Compare: 1977 No 54 s 8

32 This subpart does not apply to contracts governed by foreign law

This subpart does not apply to any contract, or any part of any contract, that is governed by a law other than New Zealand law.

Compare: 1977 No 54 s 11A

Subpart 3—Contractual remedies

33 Meaning of cancel

In this subpart, unless the context otherwise requires, cancel, in relation to a contract, means cancel in accordance with sections 36 to 40.

Note

The definition previously provided that “and cancelled and cancellation have corresponding meanings”. These words have been omitted in light of s 32 of the Interpretation Act 1999.

Compare: 1979 No 11 s 2

34 Remedy provided in contract

If a contract expressly provides for a remedy for misrepresentation, repudiation, or breach of contract, or makes express provision for any of the other matters to which sections 35 to 49 relate, those sections have effect subject to that provision.

Compare: 1979 No 11 s 5

Damages for misrepresentation

35 Damages for misrepresentation

(1)

If a party to a contract (A) has been induced to enter into the contract by a misrepresentation, whether innocent or fraudulent, made to A by or on behalf of another party to that contract (B),—

(a)

A is entitled to damages from B in the same manner and to the same extent as if the representation were a term of the contract that has been breached; and

Note

The term “broken” has been replaced in various places with the more commonly used term “breached”. Also, “breach” is more consistent with other provisions in the subpart.

(b)

A is not, in the case of a fraudulent misrepresentation, or of an innocent misrepresentation made negligently, entitled to damages from B for deceit or negligence in respect of the misrepresentation.

(2)

Subsection (1) applies to contracts for the sale of goods—

(a)

despite sections 196 and 200(2); but

(b)

subject to section 34.

Compare: 1979 No 11 s 6

Cancellation

36 Party may cancel contract if another party repudiates it

(1)

A party to a contract may cancel the contract if, by words or conduct, another party (B) repudiates the contract by making it clear that B does not intend to—

(a)

perform B’s obligations under the contract; or

(b)

complete the performance of B’s obligations under the contract.

(2)

This section is subject to the rest of this subpart.

Compare: 1979 No 11 s 7(2)

37 Party 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—

(a)

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

(b)

a term in the contract is breached by another party to the contract; or

(c)

it is clear that a term in the contract will be breached by another party to the contract.

(2)

If subsection (1)(a), (b), or (c) applies, a party may exercise the right to cancel the contract 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 the cancelling party; or

Note

Section 7(4)(a) of the 1979 Act refers to “essential to him”. In contrast, s 7(4)(b) refers to the “cancelling party”. For consistency, paragraph (a) has been amended to refer to the cancelling party.

(b)

the effect of the misrepresentation or breach of the contract 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.

(3)

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

Compare: 1979 No 11 s 7(3), (4)

38 No cancellation if contract is affirmed

A party is not entitled to cancel the contract if, with full knowledge of the repudiation, misrepresentation, or breach, the party has affirmed the contract.

Compare: 1979 No 11 s 7(5)

39 Parties with substantially same interest

(1)

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.

(2)

The court may, on application made for the purpose, grant leave under subsection (1) if it thinks it is just to do so.

(3)

The leave may be granted on the terms and conditions that the court thinks fit.

Compare: 1979 No 11 s 7(6), (7)

40 Sections 36 to 39 have effect in place of rules of common law and of equity

(1)

Sections 36 to 39 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, repudiation, or breach.

(2)

This section applies except as otherwise expressly provided in this subpart.

Compare: 1979 No 11 s 7(1)

41 When cancellation may take effect

(1)

The cancellation of a contract by a party does 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 shows, by some clear means that is 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 other party’s conduct in relation to the contract.

Note

Section 8(1) uses “shall not take effect”. The word “shall” is now very rarely used in New Zealand legislation. Although “shall” is used to impose a duty or a prohibition, it is also used to indicate the future tense. This can lead to confusion. In the above case, the word has been replaced by “does”.

The word “overt” has been replaced with a plainer “clear”.

The word “evinces” has been replaced with a plainer “shows”. This is consistent with similar provisions (eg, s 28(1) of the Credit Contracts and Consumer Finance Act 2003).

(2)

The cancellation may be made known by words or by conduct showing an intention to cancel, or both. It is not necessary to use any particular form of words, so long as the intention to cancel is made known.

Compare: 1979 No 11 s 8(1), (2)

42 Effect of cancellation

(1)

When a contract is cancelled, the following provisions apply:

(a)

to the extent that the contract remains unperformed at the time of the cancellation, no party is obliged or entitled to perform it further:

(b)

to the extent that the contract has been performed at the time of the cancellation, no party is, by reason only of the cancellation, divested of any property transferred or money paid under the contract.

(2)

This section is subject to the rest of this subpart.

(3)

Nothing in this section affects the right of a party to recover damages for a misrepresentation or the repudiation or breach of the contract by another party.

Compare: 1979 No 11 s 8(3), (4)

Power of court to grant relief

43 Power of court to grant relief

(1)

When a contract is cancelled by any party, the court may, if it is just and practicable to do so, make an order or orders granting relief under this section.

Note

The reference to “from time to time” in s 9(1) of the 1979 Act has been omitted in line with current drafting practice. See s 16 of the Interpretation Act 1999.

(2)

The relief may be granted in the course of any proceeding or on application made for the purpose.

(3)

An order under this section may—

(a)

direct a party to pay to any other party the sum that the court thinks just (subject to section 35); or

(b)

direct a party to do or refrain from doing, in relation to any other party, any act or thing that the court thinks just; or

(c)

vest the whole or any part of any relevant property in a party; or

(d)

direct a party to transfer or assign the whole or any part of any relevant property to any other party; or

(e)

direct a party to deliver the whole or any part of the possession of any relevant property to any other party.

(4)

In subsection (3),—

party means a party to the proceeding

relevant property means real or personal property that was the subject of the contract or was the whole or part of the consideration for the contract.

Compare: 1979 No 11 s 9(1), (2)

44 Order for relief may be subject to terms and conditions

(1)

An order under section 43 may be made on the terms and conditions that the court thinks fit.

(2)

However, a term or condition must not have the effect of preventing a claim for damages by any party.

Compare: 1979 No 11 s 9(3)

45 Matters court must have regard to

In considering whether to make an order under section 43, and in considering the terms of any order it proposes to make, the court must have regard to—

(a)

the terms of the contract; and

(b)

the extent to which any party to the contract was or would have been able to perform it in whole or in part; and

(c)

any expenditure incurred by a party in, or for the purpose of, performing the contract; and

(d)

the value, in the court’s opinion, of any work or services performed by a party in, or for the purpose of, performing the contract; and

(e)

any benefit or advantage obtained by a party because of anything done by another party in, or for the purpose of, performing the contract; and

(f)

any other matters that the court thinks proper.

Compare: 1979 No 11 s 9(4)

46 Protection of purchaser of property in good faith and for valuable consideration

No order may be made under section 43(3)(c) to (e) that would have the effect of depriving a person, not being a party to the contract, of the possession of, or any estate or interest in, any property acquired by the person in good faith and for valuable consideration.

Compare: 1979 No 11 s 9(5)

47 Party who has altered position

(1)

No order may be made under section 43 concerning any property if any party to the contract has so altered the party’s position in relation to the property that, having regard to all relevant circumstances, it would, in the opinion of the court, be inequitable to any party to make the order.

(2)

This section applies whether the party altered the party’s position before or after the cancellation of the contract.

Compare: 1979 No 11 s 9(6)

48 Persons who may apply

An application for relief to be granted under section 43 may be made by—

(a)

a party to the contract; or

(b)

a person claiming through or under a party to the contract; or

(c)

any other person if it is material for the person to know whether relief under section 43 will be granted.

Compare: 1979 No 11 s 9(7)

49 Recovery of damages

(1)

A party to a contract is not prevented by the cancellation of the contract, or by the granting of relief under section 43, from recovering damages for a misrepresentation or the repudiation or breach of the contract by another party to the contract.

(2)

However, the value of any relief granted under section 43 must be taken into account in assessing those damages.

(3)

Subsection (1) is subject to sections 34, 35, and 50 to 53.

(4)

Any sum ordered to be paid by a party to the contract to any other party to the contract under section 43(3) may be set off against any damages payable by the party to that other party.

Compare: 1979 No 11 s 10

Provisions purporting to prevent court inquiry

50 Statement, promise, or undertaking during negotiations

(1)

This section applies if a contract, or any other document, contains a provision purporting to prevent a court from inquiring into or determining the question of—

(a)

whether a statement, promise, or undertaking was made or given, either in words or by conduct, in connection with or in the course of negotiations leading to the making of the contract; or

(b)

whether, if it was so made or given, it constituted a representation or a term of the contract; or

(c)

whether, if it was a representation, it was relied on.

(2)

The court is not, in any proceeding in relation to the contract, prevented by the provision from inquiring into and determining any question referred to in subsection (1) unless the court considers that it is fair and reasonable that the provision should be conclusive between the parties.

(3)

For the purpose of subsection (2), the court must have regard to all the circumstances of the case, including—

(a)

the subject matter and value of the transaction; and

(b)

the respective bargaining strengths of the parties; and

(c)

whether any party was represented or advised by a lawyer at the time of the negotiations or at any other relevant time.

Note

The word “solicitor” has been replaced with “lawyer”. This is considered to “express better the spirit and meaning of the law” and is consistent with terminology in the Lawyers and Conveyancers Act.

Compare: 1979 No 11 s 4(1)

51 Authority for making or giving statement, promise, or undertaking

(1)

This section applies if a contract, or any other document, contains a provision purporting to prevent a court from inquiring into or determining the question of whether, in respect of any statement, promise, or undertaking made or given by any person, that person had the actual or ostensible authority of a party to make or give it.

(2)

The court is not, in any proceeding in relation to the contract, prevented by the provision from inquiring into and determining the question.

Compare: 1979 No 11 s 4(2)

52 Contracts for sale of goods

Despite sections 196 and 200(2), sections 50 and 51 apply to contracts for the sale of goods.

Compare: 1979 No 11 s 4(3)

53 Proceeding before Disputes Tribunal

In any proceeding properly before a Disputes Tribunal, sections 50 and 51 do not limit the powers of the Tribunal under section 18(7) of the Disputes Tribunals Act 1988.

Compare: 1979 No 11 s 4(4)

Assignees

54 Remedies enforceable by or against assignee

(1)

If a contract, or the benefit or burden of a contract, is assigned, the remedies of damages and cancellation are enforceable by or against the assignee (except to the extent that it is otherwise provided in the assigned contract).

Note

See the Explanatory material for a discussion relating to the reference to assigning a burden of a contract.

(2)

This section is subject to sections 55 to 57.

Compare: 1979 No 11 s 11(1)

55 Damages may not exceed value of performance of assigned contract

(1)

The assignee is not liable in damages, whether by way of set-off, counterclaim, or otherwise, for a sum exceeding the value of the performance of the assigned contract to which the assignee is entitled because of the assignment.

(2)

This section applies except to the extent that it is otherwise agreed by the assignee or provided in the assigned contract.

Compare: 1979 No 11 s 11(2)

56 Assignee indemnified by assignor

(1)

The assignee is entitled to be indemnified by the assignor against any loss suffered by the assignee and arising out of—

(a)

any term of the assigned contract that was not disclosed to the assignee before or at the time of the assignment; or

(b)

any misrepresentation that was not so disclosed.

(2)

This section applies unless it is otherwise agreed between the assignor and the assignee.

Compare: 1979 No 11 s 11(3)

57 Other provisions relating to assignees

(1)

Sections 54 to 56 are subject to,—

(a)

in the case of a mortgage of land, subpart 8 of Part 3 of the Property Law Act 2007:

(b)

in the case of a contract for the supply of goods or services to a consumer, section 46 of the Consumer Guarantees Act 1993.

(2)

Nothing in sections 54 to 56 affects the law relating to negotiable instruments.

Compare: 1979 No 11 s 11(4), (5)

Miscellaneous provisions

58 This subpart does not apply to contracts governed by foreign law

This subpart does not apply to any contract, or any part of any contract, that is governed by a law other than New Zealand law.

Compare: 1979 No 11 s 14A

59 Savings

(1)

Nothing in this subpart affects—

(a)

the law relating to specific performance or injunction:

(b)

the law relating to mistake, duress, or undue influence:

(c)

the doctrine of non est factum (see section 22(3)(a)):

(d)

subpart 4 (frustrated contracts):

(e)

Part 3 (sale of goods):

(f)

sections 253 to 260 of the Property Law Act 2007 (which relate to relief against the cancellation of leases for a breach of a covenant or condition):

(g)

the Consumer Guarantees Act 1993:

(h)

any other enactment to the extent that it prescribes or governs terms of contracts or remedies available in respect of contracts, or governs the enforcement of contracts.

(2)

Subsection (1) applies except as provided in sections 35(2) and 52.

Compare: 1979 No 11 s 15

Subpart 4—Frustrated contracts

60 Application

(1)

Sections 61 to 66 apply if—

(a)

a contract governed by New Zealand law has become impossible to perform or has been otherwise frustrated; and

(b)

the parties to the contract have for that reason been discharged from the further performance of the contract.

Example

A person (A) agrees to hire a hall to a person (B) for a concert.

The hall accidently burns down before the concert.

A and B cannot complete their contract.

The contract is frustrated and A and B are discharged from their obligations.

Note

This example is based on Taylor v Caldwell (1863) 3 B&S 826.

(2)

Subsection (1) and sections 61 to 66 are subject to sections 67 to 69.

(3)

In this subpart, time of discharge means the time at which the parties to the contract were discharged as referred to in subsection (1).

Compare: 1944 No 20 s 3(1), (2)

Money paid or payable

61 Money paid may be recovered and money payable ceases to be payable

(1)

All money paid to a party (A) under the contract before the time of discharge is recoverable from A as money received by A for the use of the party who paid it.

Note

Various references to “sums” have been replaced with references to money in order to add clarity.

(2)

All money payable to a party under the contract before the time of discharge ceases to be payable.

Compare: 1944 No 20 s 3(2)

62 Court may allow party who has incurred expenses to retain or recover money

(1)

This section applies if the party to whom the money was paid or payable under the contract incurred expenses before the time of discharge in, or for the purpose of, performing the contract.

(2)

The court may, if it considers it just to do so having regard to all the circumstances, allow the party to retain or recover the whole or any part of the money that was paid or payable.

(3)

However, the amount to be retained or recovered must not exceed the expenses that were incurred.

Compare: 1944 No 20 s 3(2)

Other valuable benefits

63 Sum may be recovered if party has obtained valuable benefit

(1)

This section applies if—

(a)

a party to the contract (A) has obtained a valuable benefit before the time of discharge; and

(b)

the benefit was obtained because of anything done by another party to the contract (B) in, or for the purpose of, performing the contract.

(2)

B may recover from A the sum (if any) that the court considers just.

(3)

For the purposes of subsection (2), the court must have regard to all the circumstances and, in particular,—

(a)

the amount of any expenses incurred before the time of discharge by A in, or for the purpose of, performing the contract, including any money paid or payable by A to any other party under the contract and retained or recoverable by that party under section 62; and

(b)

the effect, in relation to the benefit, of the circumstances that gave rise to the frustration of the contract.

(4)

The sum that is recoverable must not exceed the value of the benefit to A.

(5)

In this section and section 64, a benefit does not include a payment of money to which section 61 applies.

Compare: 1944 No 20 s 3(3)

64 Benefit may be treated as being obtained

(1)

For the purposes of section 63, the court may, if in all the circumstances the court considers it just to do so, treat a benefit conferred on a person (C) as a benefit obtained by a person (A) if A has assumed obligations under the contract in consideration of the benefit being conferred on C by any other party to the contract.

(2)

Subsection (1) applies whether or not C is a party to the contract.

Compare: 1944 No 20 s 3(6)

Expenses

65 Estimates of expenses

(1)

For the purposes of sections 61 to 64, in estimating the amount of expenses incurred by a party to the contract, the court may include the amount that appears to be reasonable for—

(a)

overhead expenses; and

(b)

any work or services performed by that party.

Note

The 1944 Act refers to “performed personally by the said party”. This has been revised as “performed by that party”. The word “personally” may cause confusion where the party is a body corporate. It is considered that the revised wording reflects Parliament’s intent.

(2)

Subsection (1) does not limit sections 61 to 64.

Compare: 1944 No 20 s 3(4)

Insurance

66 Money payable under contract of insurance

(1)

This section applies when a court considers whether an amount ought to be recovered or retained under sections 61 to 64 by a party to the contract.

(2)

The court must not take into account any money that has become payable to the party under a contract of insurance if the money is payable because of the circumstances that gave rise to the frustration of the contract.

(3)

Subsection (2) does not apply if there was an obligation to insure that was imposed by an express term of the frustrated contract or by or under any enactment.

Compare: 1944 No 20 s 3(5)

Other provisions relating to application

Note

Section 4(2) of the 1944 Act provides that “This Act shall apply to contracts to which the Crown is a party in like manner as to contracts between subjects.”

The Law of Contract in New Zealand on page 811 notes that “the Act binds the Crown”.

Consistent with current drafting practice, s 4(2) is covered by clause 8 of this Bill (“Act binds the Crown”).

67 Court must give effect to provision in contract

(1)

This section applies if a contract to which this subpart applies contains a provision that, on the true construction of the contract, is—

(a)

intended to have effect in the event of circumstances arising that operate, or would but for the provision operate, to frustrate the contract; or

(b)

intended to have effect whether those circumstances arise or not.

(2)

The court must—

(a)

give effect to the provision; and

(b)

give effect to sections 60 to 66 only to the extent (if any) that appears to the court to be consistent with the provision.

Compare: 1944 No 20 s 4(3)

68 Court must treat performed part of contract that can be properly severed as separate contract

(1)

This section applies if—

(a)

the court considers that a part of a contract to which this subpart applies can properly be severed from the remainder of the contract; and

(b)

that part of the contract was—

(i)

wholly performed before the time of discharge; or

(ii)

wholly performed before the time of discharge except for the payment, in respect of that part of the contract, of money that is or can be ascertained under the contract.

(2)

The court must treat—

(a)

the part of the contract described in subsection (1) as if it—

(i)

were a separate contract; and

(ii)

had not been frustrated; and

(b)

sections 60 to 66 as applying only to the remainder of the contract.

Compare: 1944 No 20 s 4(4)

69 This subpart does not apply in certain circumstances

This subpart does not apply to—

(a)

a contract for the carriage of goods by sea or a charter party (except a time charter party or a charter party by way of demise); or

(b)

a contract of insurance, except as provided by section 66; or

(c)

a contract to which section 127 applies, or to any other contract for the sale, or for the sale and delivery, of specific goods, where the contract is frustrated because the goods have perished.

Compare: 1944 No 20 s 4(5)

Subpart 5—Illegal contracts

70 Interpretation

In this subpart, unless the context otherwise requires,—

enactment

(a)

means any provision of any Act, regulations, rules, bylaws, Order in Council, or Proclamation; and

(b)

includes any provision of any notice, consent, approval, or direction that is given by any person under a power conferred by any Act or regulations

property

(a)

means land, money, goods, things in action, goodwill, and every valuable thing, whether real or personal, and whether situated in New Zealand or elsewhere; and

(b)

includes obligations, easements, and every description of estate, interest, and profit, present or future, vested or contingent, arising out of or incidental to property.

Compare: 1970 No 129 s 2

Note

The definition of “Act” in s 2 of the 1970 Act provides “Act means any Act of the Parliament of New Zealand; and includes any Act of the Parliament of England, of the Parliament of Great Britain, or of the Parliament of the United Kingdom, which is in force in New Zealand”. The definition of “Act” in s 29 of the Interpretation Act 1999 is “Act means an Act of the Parliament of New Zealand or of the General Assembly; and includes an Imperial Act that is part of the law of New Zealand”. The definition has been omitted from this subpart on the basis that it is adequately covered by the Interpretation Act 1999.

71 Illegal contract defined

(1)

In this subpart, illegal contract

(a)

means a contract governed by New Zealand law that is illegal at law or in equity, whether the illegality arises from the creation or the performance of the contract; and

(b)

includes a contract that contains an illegal provision, whether that provision is severable or not.

Examples

A contract under which the parties agree to the commission of a serious crime.

A contract under which one party agrees to pay money to a witness to a crime in return for the witness withholding information from the police and the courts.

A contract to use improper influence to affect the award of a public honour.

(2)

This section is subject to section 72.

Compare: 1970 No 129 s 3

72 Breach of enactment

A contract lawfully entered into does not become illegal or unenforceable by any party because its performance is in breach of an enactment, unless the enactment expressly so provides or its object clearly so requires.

Example

Certain traffic regulations require a car to have a current warrant of fitness when it is sold.

A person sells a car without a warrant of fitness in breach of the regulations.

The object of the regulations relates to promoting safety rather than protecting consumers.

The contract is not an illegal contract. Upholding the contract does not frustrate the object of the regulations.

Compare: 1970 No 129 s 5

Note

The example is based on Automobile Centre (Auckland) Ltd v Facer [1974] 2 NZLR 767.

Illegal contracts are of no effect

73 Illegal contracts have no effect

(1)

Every illegal contract is of no effect.

(2)

No person is entitled to any property under a disposition made by or under an illegal contract.

(3)

This section and section 74 apply—

(a)

despite any rule of law or equity to the contrary; but

(b)

subject to the provisions of this subpart and of any other enactment.

Compare: 1970 No 129 s 6(1)

74 Protection of persons who acquire property in good faith and without notice

(1)

Nothing in section 73 invalidates a disposition of property referred to in subsection (2) if the person to whom the disposition was made—

(a)

was not a party to the illegal contract; and

(b)

had not, at the time of the disposition, notice that the property was the subject of, or the whole or any part of the consideration for, an illegal contract; and

(c)

otherwise acted in good faith.

(2)

The dispositions are—

(a)

a disposition of property by a party to an illegal contract for valuable consideration:

(b)

a disposition of property made by or through a person who became entitled to the property under a disposition to which paragraph (a) applies.

Compare: 1970 No 129 s 6(1)

Court may grant relief

75 Who may be granted relief

Relief under section 76 may be granted to—

(a)

a party to an illegal contract; or

(b)

a party to a contract who is disqualified from enforcing it because of the commission of an illegal act in the course of its performance; or

(c)

a person claiming through or under a party referred to in paragraph (a) or (b).

Compare: 1970 No 129 s 7(1)

76 Court may grant relief

(1)

The court may grant to a person referred to in section 75 any relief that the court thinks just, including (without limitation)—

(a)

restitution; or

(b)

compensation; or

(c)

variation of the contract; or

(d)

validation of the contract in whole or in part or for any particular purpose.

(2)

The relief may be granted in the course of any proceeding or on application made for the purpose.

(3)

Subsection (1) and section 75 apply—

(a)

despite sections 73 and 74; but

(b)

subject to the express provisions of any other enactment.

(4)

The court may, by any order made under this section,—

(a)

vest the whole or any part of any relevant property in a party; or

(b)

direct a party to transfer or assign the whole or any part of any relevant property to any other party; or

(c)

direct a party to deliver the whole or any part of the possession of any relevant property to any other party.

(5)

In subsection (4),—

party means a party to the proceeding

relevant property means real or personal property that was the subject of the contract or was the whole or part of the consideration for the contract.

Note

Section 7(5) of the 1970 Act refers to an “illegal contract”. However, s 7(1)(b) appears to refer to other contracts in addition to illegal contracts referred to in s 7(1)(a). The definition of “relevant property” above only refers to “the contract” for consistency with the fact that relief can be granted to a party under a contract referred to in cl 75(b) (s 7(1)(b) of the 1970 Act).

Compare: 1970 No 129 s 7(1), (5)

77 Order may be subject to terms and conditions

An order under section 76 may be made on the terms and conditions that the court thinks fit.

Compare: 1970 No 129 s 7(6)

78 Matters court must have regard to

In considering whether to grant relief under section 76, and the nature and extent of any relief to be granted, the court must have regard to—

(a)

the conduct of the parties; and

(b)

in the case of a breach of an enactment, the object of the enactment and the gravity of the penalty expressly provided for any breach of the enactment; and

(c)

any other matters that the court thinks proper.

Compare: 1970 No 129 s 7(3)

79 Court must not grant relief if not in public interest

The court must not grant relief under section 76 if it considers that to do so would not be in the public interest.

Compare: 1970 No 129 s 7(3)

80 Person acting with knowledge of facts or law giving rise to illegality

(1)

The court may make an order under section 76 even if the person granted relief entered into the contract, or committed an unlawful act or unlawfully omitted to do an act, with knowledge of the facts or law giving rise to the illegality.

(2)

However, the court must take that knowledge into account in exercising its discretion under section 76.

Compare: 1970 No 129 s 7(4)

81 Persons who may apply

An application for relief to be granted under section 76 may be made by—

(a)

any person to whom the court may grant relief under that section; or

(b)

any other person if it is material for that person to know whether relief will be granted under that section.

Compare: 1970 No 129 s 7(2)

82 Restriction on granting relief otherwise than in accordance with this subpart

(1)

No court may, in respect of an illegal contract, grant relief to a person otherwise than in accordance with this subpart.

(2)

This section is subject to the express provisions of any other enactment.

Compare: 1970 No 129 s 7(7)

Restraints of trade

83 Restraints of trade

(1)

The court may, if a provision of a contract constitutes an unreasonable restraint of trade,—

(a)

delete the provision and give effect to the contract as amended; or

(b)

modify the provision so that, at the time the contract was entered into, the provision as modified would have been reasonable, and give effect to the contract as modified; or

(c)

decline to enforce the contract if the deletion or modification of the provision would so alter the bargain between the parties that it would be unreasonable to allow the contract to stand.

Note

The Law of Contract in New Zealand suggests at para 13.9.12 that “The word ‘may’ in subs (1) is to be read as meaning ‘shall’ so that the Court must choose one of three statutory options of enforcement of the restraint ...”. The word “shall” is used very rarely in modern statutes (instead the word “must” is used in the case of a duty).

However, NZLC R25 (at 3.43) suggests the powers are discretionary and there would be room for refusing relief in a case of blatant abuse.

Whether “may” should be replaced with “must”, is considered to be a matter for future reform (rather than this revision bill).

(2)

The court may modify a provision even if the modification cannot be effected by deleting words from the provision.

Compare: 1970 No 129 s 8

84 Law relating to restraint of trade and to ouster of jurisdiction not affected

(1)

Nothing in this subpart affects the law relating to contracts, or provisions of contracts,—

(a)

that are in restraint of trade; or

(b)

that purport to oust the jurisdiction of any court, whether or not that court is a court within the meaning of this subpart.

(2)

This section applies except as provided in section 83.

Compare: 1970 No 129 s 11(1)

Subpart 6—Minors’ contracts

85 Interpretation

In this subpart, unless the context otherwise requires,—

court means the High Court or a District Court that has jurisdiction under section 113 or a Disputes Tribunal that has jurisdiction under section 114

employment agreement means a contract of service

minor means a person who is under the age of 18 years, and a person is of full age if he or she has reached the age of 18 years

property

(a)

means land, money, goods, things in action, goodwill, and every valuable thing, whether real or personal, and whether situated in New Zealand or elsewhere; and

(b)

includes obligations, easements, and every description of estate, interest, and profit, present or future, vested or contingent, arising out of or incidental to property.

Compare: 1969 No 41 s 2

Contractual capacity of minors

86 Contracts unenforceable against minors but otherwise have effect

(1)

Every contract entered into by a minor is unenforceable against the minor but otherwise has effect as if the minor were of full age.

(2)

Subsection (1) does not apply to a contract to which section 92(1) applies.

(3)

This section is subject to sections 87 to 91.

Compare: 1969 No 41 s 6(1)

87 Court may inquire into fairness and reasonableness of contract

(1)

The court may, in the course of any proceeding or on application made for the purpose, inquire into the fairness and reasonableness of a contract to which section 86 applies at the time the contract was entered into.

(2)

Sections 88 and 89 do not impose a duty on the court to exercise a power under those sections.

Compare: 1969 No 41 s 6(2)

88 Court orders where contract was fair and reasonable

The court may, if it finds under section 87 that the contract was fair and reasonable at the time the contract was entered into,—

(a)

enforce the contract against the minor:

(b)

declare that the contract is binding on the minor, whether in whole or in part:

(c)

make an order allowing the other parties to the contract, on the conditions that the court thinks just, to cancel the contract:

(d)

make an order for compensation or restitution of property under section 95 that it thinks just.

Compare: 1969 No 41 s 6(2)(a)

89 Court orders where contract was not fair and reasonable

The court may, if it finds under section 87 that the contract was not fair and reasonable at the time the contract was entered into,—

(a)

cancel the contract:

(b)

make an order allowing the minor, on the conditions that the court thinks just, to cancel the contract:

(c)

make an order for compensation or restitution of property under section 95 that it thinks just.

Compare: 1969 No 41 s 6(2)(b)

90 Matters court must have regard to

In exercising its discretion under sections 87 to 89, the court must have regard to—

(a)

the circumstances surrounding the making of the contract:

(b)

the subject matter and nature of the contract:

(c)

in the case of a contract relating to property, the nature and the value of the property:

(d)

the age and the means (if any) of the minor:

(e)

all other relevant circumstances.

Compare: 1969 No 41 s 6(3)

91 Further provisions relating to application of sections 86 to 90

(1)

Nothing in sections 86 to 90 applies to—

(a)

a contract approved by a District Court under section 98; or

(b)

the compromise or settlement of any claim for money or damages made by or on behalf of a minor (whether alone or in conjunction with any other person).

(2)

Nothing in sections 86 to 90 limits or affects section 20 of the Trustee Act 1956.

Compare: 1969 No 41 s 6(4), (5)

Special rules for employment agreements and life insurance contracts

92 Employment agreements and life insurance contracts have effect as if minor were of full age

(1)

The following contracts have effect as if the minor were of full age:

(a)

an employment agreement entered into by a minor:

Note

Rather than referring to a contract of service, this refers to an employment agreement (defined as a contract of service). This is on the basis that it is more understandable to most users. See the definition of “employment agreement” in s 5 of the Employment Relations Act 2000.

(b)

a contract entered into under section 66B of the Life Insurance Act 1908 by a minor who has reached the age of 16 years.

(2)

This section is subject to sections 93 and 94.

Compare: 1969 No 41 s 5(1)

93 Court may make orders about unconscionable, harsh, or oppressive employment agreement or life insurance contract

(1)

This section applies if the court is satisfied in respect of a contract to which section 92 applies that, at the time the contract was entered into,—

(a)

the consideration for a minor’s promise or act was so inadequate as to be unconscionable; or

(b)

any provision of the contract that imposes an obligation on a party to the contract who was a minor was harsh or oppressive.

(2)

The court—

(a)

may, in the course of any proceeding or on application made for the purpose, cancel the contract, decline to enforce the contract against the minor, or declare that the contract is unenforceable against the minor, whether in whole or in part; and

(b)

in any case may make an order for compensation or restitution of property under section 95 that it thinks just.

(3)

For the purposes of this section, the court may receive evidence of commercial practice in contracts of the same kind.

Compare: 1969 No 41 s 5(2), (3)

94 Sections 92 and 93 do not apply in certain circumstances

(1)

Nothing in section 92 or 93 applies to—

(a)

a contract approved by a District Court under section 98; or

(b)

the compromise or settlement of any claim for money or damages made by or on behalf of a minor (whether alone or in conjunction with any other person).

(2)

Nothing in section 93 applies to any agreement entered into under section 4A of the Maori Housing Amendment Act 1938.

Note

Section 5(4) contains references to section 29 of the Shipping and Seamen Act 1952 (repealed by the Maritime Transport Act 1994), section 95 of the Defence Act 1990 (repealed by the Defence Amendment Act 1999), section 222A of the Post Office Act 1959 (repealed by the Post Office Act Repeal Act 1987), section 83B of the Government Railways Act 1949 (repealed by the New Zealand Railways Corporation Act 1981), section 175B of the Coal Mines Act 1925 (repealed by the Coal Mines Act 1979), and section 70 of the State Services Act 1962 (repealed by the State Sector Act 1988).

All of these references have been omitted as spent.

Compare: 1969 No 41 s 5(4), (5)

Compensation or restitution

95 Compensation or restitution

(1)

The court may grant relief by way of compensation or restitution of property that the court thinks just if it—

(a)

may exercise a power under sections 87 to 89 (whether or not it exercises any power under those sections); or

(b)

exercises a power under section 93.

(2)

The relief may be granted to—

(a)

a party to the contract; or

(b)

a guarantor or indemnifier under a contract of guarantee or indemnity that relates to a contract to which section 86(1) or 92(1) applies; or

(c)

a person claiming through or under or on behalf of a person referred to in paragraph (a) or (b).

(3)

The court may, by any order made under this section,—

(a)

vest the whole or any part of any relevant property in a party; or

(b)

direct a party to transfer or assign the whole or any part of any relevant property to any other party; or

(c)

direct a party to deliver the whole or any part of the possession of any relevant property to any other party.

(4)

In subsection (3),—

party means a party to the proceeding

relevant property means real or personal property that was the subject of the contract or was the whole or part of the consideration for the contract.

Compare: 1969 No 41 s 7

Other provisions relating to applications and orders

96 Applications under sections 87 to 89 or section 93

An application under sections 87 to 89 or section 93 may be made by—

(a)

any person to whom the court may grant relief under section 95; or

(b)

any other person if it is material for that person to know whether the court will exercise the powers granted to it by sections 87 to 89 or section 93.

Compare: 1969 No 41 s 8(1)

97 Terms and conditions of orders

An order under any of sections 87 to 89, 93, and 95 may be made on the terms and conditions that the court thinks fit.

Compare: 1969 No 41 s 8(2)

Entering into contract with District Court’s approval

98 Minor may enter into contract with approval of District Court

Every contract entered into by a minor has effect as if the minor were of full age if, before the contract is entered into by the minor, it is approved under this section by a District Court.

Compare: 1969 No 41 s 9(1)

99 Persons who may apply

An application for approval under section 98 may be made—

(a)

by the minor or any other person who will be a party to the proposed contract; or

(b)

by a guardian of the minor.

Note

The words “(if the minor is under 18 years of age)” from s 9(2)(b) have been omitted as redundant. On enactment of the 1969 Act, a “minor” could be over 18. However, under the Minors’ Contracts Amendment Act 2005 a new definition of “minor” was inserted, but these words were not consequentially omitted.

Compare: 1969 No 41 s 9(2)

100 Referral of application

(1)

The court may refer an application under section 99

(a)

to a guardian of the minor; or

(b)

if the court considers it necessary for the purposes of the application, to—

(i)

a lawyer nominated by the court; or

(ii)

Public Trust; or

(iii)

the Māori Trustee; or

(iv)

any other person.

(2)

The court may make any order that it thinks fit for the payment of the reasonable costs and expenses of any person to whom the application is referred.

(3)

A person to whom an application is referred may—

(a)

file a report in the District Court that—

(i)

sets out the results of the person’s consideration and examination of the application; and

(ii)

makes the recommendations that the person thinks proper; and

(b)

appear and be heard at the hearing of the application.

(4)

A person to whom an application is referred is not required to consider or examine the application until the person’s reasonable costs and expenses have been paid or secured to the person’s satisfaction.

Compare: 1969 No 41 s 9(3), (4)

101 Contracts relating to property held on trust

A District Court must not approve a contract under section 98 if—

(a)

the contract relates to property held on trust; and

(b)

the court considers that it would be more appropriate for an application to be made under section 64 or 64A of the Trustee Act 1956 (relating to authorising dealings with trust property and variations of trust).

Compare: 1969 No 41 s 9(5)

Guarantees and indemnities

102 Guarantees and indemnities

(1)

Every contract of guarantee or indemnity by which a person (other than a minor) undertakes to accept liability if a minor fails to carry out his or her obligations under a contract is enforceable against that person (the surety) to the extent that it would be enforceable if the minor had been at all material times a person of full age.

(2)

The liability is not affected by—

(a)

any other provision of this subpart; or

(b)

any order made under this subpart.

(3)

However, the liability of the minor to the surety and the surety’s right of subrogation against the minor may be affected by the other provisions of this subpart or by an order made under any of sections 87 to 89, 93, and 95.

Compare: 1969 No 41 s 10

Compromise or settlement of claims by minors

103 Application

Sections 104 and 105 apply if any money or damages are claimed by or on behalf of a minor (whether alone or in conjunction with any other person).

Compare: 1969 No 41 s 12(1)

104 Claim that is not subject of proceeding

(1)

An agreement for the compromise or settlement of a claim is binding on the minor if—

(a)

the agreement was entered into by the minor, or on the minor’s behalf by a person who in the opinion of a specified court is a fit and proper person to do so; and

(b)

the claim is not the subject of a proceeding before any court in New Zealand; and

(c)

the agreement or a release of the claim is in writing and is approved by a specified court.

(2)

In this section, specified court means—

(a)

a court (other than a Disputes Tribunal) in which a proceeding could be taken to enforce the claim; or

(b)

in the case of a claim that could not be the subject of a proceeding in New Zealand, a court in which a proceeding could be taken to enforce a similar claim in New Zealand.

Compare: 1969 No 41 s 12(1)(a), (7)

105 Claim that has become subject of proceeding

(1)

If the claim has not been compromised or settled in accordance with section 104, and has become the subject of a proceeding before a court in New Zealand, no settlement, compromise, or payment and no acceptance of money paid into court is valid (to the extent that it relates to the minor’s claim) without the approval of the court.

(2)

Subsection (1) applies whenever the settlement, compromise, payment, or acceptance is entered into or made.

Compare: 1969 No 41 s 12(1)(b)

106 Who may apply for approval

An application for the approval of the court under section 104 or 105 may be made—

(a)

by or on behalf of the minor; or

(b)

by any other party to the agreement or proceeding.

Compare: 1969 No 41 s 12(2)

107 Court may refuse or grant approval

The court may—

(a)

refuse an application for its approval under section 104 or 105; or

(b)

grant its approval—

(i)

unconditionally; or

(ii)

on or subject to the conditions and directions that it thinks fit, whether as to the terms of the agreement or of the compromise or settlement, or as to the amount, payment, securing, application, or protection of the money paid or to be paid, or otherwise.

Compare: 1969 No 41 s 12(3)

Court directed trust for minor

108 Money or damages to be held on trust

(1)

In this section, money or damages means—

(a)

any money or damages awarded to a minor in any cause or matter; or

(b)

any money to which a minor is entitled under an agreement, a compromise, or a settlement approved under section 104 or 105.

(2)

If the court directs that the whole or any part of any money or damages must be held on trust for the minor under this section by Public Trust or any other person,—

(a)

the amount must be invested and held by the trustee on trust—

(i)

to make a payment (if any) to the minor out of the income and capital of the amount that the court may specify; and

(ii)

to apply the income and capital of the amount, or so much of the income and capital that the trustee from time to time thinks fit, for or towards the maintenance or education (including past maintenance or education) or the advancement or benefit of the minor:

(b)

the minor has no power, either by himself or herself or in conjunction with any other person or persons, to terminate the trusts on which the amount is held or to modify or extinguish those trusts:

(c)

the interest of the minor in the income and capital of the amount may not, while it remains in the hands of the trustee,—

(i)

be alienated; or

(ii)

pass by bankruptcy; or

(iii)

be liable to be seized, sold, attached, or taken in execution by process of law.

(3)

Subsection (2)(a) to (c)

(a)

applies except to the extent that the court directs any immediate payment from the money or damages or orders otherwise; and

(b)

is subject to any directions or conditions given or imposed by the court.

(4)

This section does not limit section 107.

Compare: 1969 No 41 s 12(4)

109 Payment on minor reaching 18 years or marrying or entering into civil union or de facto relationship

(1)

The balance of an amount that is held on trust for a minor’s benefit under section 108 and of the income from that amount remaining in the hands of the trustee must be paid to the minor on the minor—

(a)

reaching the age of 18 years; or

(b)

marrying or entering into a civil union or a de facto relationship before reaching the age of 18 years.

(2)

Subsection (1) applies except to the extent that the court may have ordered, before the payment is made, that the whole or any part of the amount must continue to be held on trust under section 108.

(3)

Despite subsection (1), if the trustee has made an application, or received notice that an application has been made, to the court for an order referred to in subsection (2), the trustee must not make any payment under subsection (1) until the application has been disposed of.

Compare: 1969 No 41 s 12(5)

Other provisions relating to sections 103 to 109

110 Provisions do not limit or affect certain other provisions

Nothing in sections 103 to 109 limits or affects—

(a)

the Deaths by Accidents Compensation Act 1952; or

(b)

section 50 of the District Courts Act 1947; or

(c)

the Accident Compensation Act 2001; or

(d)

section 149(3A) of the Employment Relations Act 2000.

Compare: 1969 No 41 s 12(8)

111 Variation of certain orders

(1)

The court may vary any order made by it—

(a)

under sections 103 to 109; or

(b)

in respect of a minor under Part 9A of the Protection of Personal and Property Rights Act 1988.

(2)

Subsection (1) applies—

(a)

whether or not the order has already been varied under this section or section 13 of the Minors’ Contracts Act 1969:

(b)

to the extent that the order relates to the payment, investment, or application of money held on trust or to the income from that money.

Note

Section 13 of the 1969 Act refers to a number of repealed Acts. Consultation with various government agencies suggests that it is possible that orders referred to in s 13 are still in force. For that reason, a transitional provision has been included in Sch 1 to preserve the application of s 13 to those orders.

Compare: 1969 No 41 s 13(1)

112 Order may be made on court’s own motion or on application

An order under section 111 may be made by the court on its own motion or on an application made by—

(a)

the minor; or

(b)

the trustee; or

(c)

any other person who provides proof of circumstances that, in the opinion of the court, make it proper that he or she should make the application.

Compare: 1969 No 41 s 13(2)

Jurisdiction

113 Jurisdiction of District Courts

(1)

A District Court has jurisdiction to exercise any of the powers conferred by sections 86 to 95 if—

(a)

the occasion for the exercise of the power arises in the course of any civil proceeding (other than an application made for the purposes of sections 87 to 89 or section 93) properly before the court; or

(b)

the value of the consideration for the promise or act of any minor under the contract is not more than $200,000; or

(c)

the parties agree, in accordance with section 37 of the District Courts Act 1947, that a District Court has jurisdiction to hear and determine the application.

(2)

For the purposes of section 43 of the District Courts Act 1947, an application made to a District Court under sections 87 to 89 or section 93 must be treated as a proceeding.

Note

Section 14(2) of the Minors’ Contracts Act referred to “an action”. This was the terminology previously used in s 43 of the District Courts Act. That provision now refers to “a proceeding”. This anomaly has been corrected.

See clause 118 for more information relating to references to “an action”.

Compare: 1969 No 41 s 14

114 Jurisdiction of Disputes Tribunals

(1)

A Disputes Tribunal established under the Disputes Tribunals Act 1988 has jurisdiction to exercise the powers conferred by sections 86 to 95 if—

(a)

the occasion for the exercise of the power arises in the course of any proceeding properly before that Tribunal; and

(b)

the total amount for which an order of the Tribunal is sought does not exceed $15,000.

(2)

An order of a Disputes Tribunal under section 95 may not—

(a)

require a person to pay an amount exceeding $15,000:

(b)

declare that a person is not liable to any other person for an amount exceeding $15,000:

(c)

vest any property that exceeds $15,000 in value in any person:

(d)

direct the transfer, assignment, or delivery of possession of any property that exceeds $15,000 in value.

(3)

An order of a Disputes Tribunal that exceeds a restriction in subsection (2) is entirely of no effect.

(4)

Despite subsection (1)(b) and (2), if, in respect of a proceeding properly before a Disputes Tribunal, the jurisdiction of the Tribunal has been extended under an agreement made under section 13 of the Disputes Tribunals Act 1988, subsections (1) and (2) must be read as if every reference in those subsections to $15,000 were a reference to $20,000.

Compare: 1969 No 41 s 14A

Subpart to be code

115 This subpart to be code

(1)

This subpart has effect in place of the rules of the common law and of equity relating to—

(a)

the contractual capacity of minors; and

(b)

the effect, validity, avoidance, repudiation, and ratification of contracts entered into by minors; and

(c)

any contract of guarantee or indemnity in respect of contracts entered into by minors.

(2)

Nothing in this subpart limits or affects any provision of any other enactment under which a contract is made binding on a minor, and nothing in sections 86 to 94 applies to the contract.

(3)

Nothing in this subpart limits or affects the rule of law under which a minor is not liable in tort for procuring a contract by fraudulent representations as to his or her own age or any other matter.

(4)

However, the court must take a representation referred to in subsection (3) into account in deciding whether to exercise any of its powers under sections 87 to 89 or section 93 or 95.

Compare: 1969 No 41 s 15(1), (3), (4)

Agreements relating to trusts

116 Effect of this subpart on trust

(1)

Nothing in this subpart entitles—

(a)

a trustee to pay money or deliver property to a minor otherwise than in accordance with the terms of the trust:

(b)

a minor to enter into an agreement by which a trust is extinguished or the terms of a trust are varied.

(2)

Nothing in subsection (1) prevents any contract approved under section 98 or 117 from having effect according to its tenor.

Compare: 1969 No 41 s 16(1)

117 Agreement to extinguish or vary trust may be approved

(1)

Every agreement entered into by a minor who is or has been married, in a civil union, or in a de facto relationship and under which a trust is extinguished or the terms of a trust are varied has effect as if the minor were of full age if, before the agreement is entered into by the minor, it is approved by a District Court.

(2)

An application to a District Court under this section may be made by—

(a)

the minor; or

(b)

any other person who will be a party to the proposed agreement; or

(c)

the trustee or trustees of the trust.

(3)

Sections 100 and 101 apply to applications under this section (with any necessary modifications).

Compare: 1969 No 41 s 16(2)–(4)

Part 3 Sale of goods

118 Interpretation

(1)

In this Part, unless the context otherwise requires,—

buyer means a person who buys or agrees to buy goods

contract of sale includes an agreement to sell as well as a sale

deliverable state has the meaning set out in subsection (4)

delivery means voluntary transfer of possession from one person to another

document of title to goods includes—

(a)

a bill of lading, a dock warrant, a warehouse keeper’s certificate, and a warrant or an order for the delivery of goods; and

(b)

any other document that—

(i)

is used in the ordinary course of business as proof of the possession or control of goods; or

(ii)

authorises or purports to authorise, either by endorsement or by delivery, the person who possesses the document to transfer or receive the goods represented by the document

fault means a wrongful act or default

future goods has the meaning set out in section 125(1)(b)

good faith has the meaning set out in subsection (2)

goods

(a)

includes—

(i)

all kinds of movable personal property, including animals; and

Note

The 1908 Act refers to “all chattels personal other than money or choses in action; and”.

The definition of “chattels” in Butterworths New Zealand Law Dictionary provides that “Chattels personal are movables.”

The wording in subparagraph (i) above is consistent with the definition of “goods” in the Customs and Excise Act 1996. It is also consistent with the revised definitions of “goods” in subparts 2 to 5 of Part 5. See the note to clause 302.

(ii)

emblements, growing crops, and things attached to, or forming part of, the land that are agreed to be severed before sale or under the contract of sale; and

(iii)

computer software; but

(b)

does not include money or things in action

Note

The reference to “other than money or choses in action” has been moved to this subparagraph. The expression “choses in action” has been replaced by “things in action”. This is consistent with terms used in the various contract statutes.

insolvent has the meaning set out in subsection (3)

mercantile agent has the same meaning as in section 302

perfected security interest means a security interest (within the meaning of section 17 of the Personal Property Securities Act 1999) that has been perfected under that Act

plaintiff includes a counterclaiming defendant

price has the meaning set out in section 119

property means the general property in goods, and not merely a special property

quality of goods includes the state or condition of the goods

right to claim includes a right to claim by way of counterclaim or set-off

Note

This replaces the definition of “action” in the 1908 Act. See the note at the end of this clause.

sale includes a bargain and sale, as well as a sale and delivery

seller means a person who sells or agrees to sell goods

specific goods means goods identified and agreed on at the time a contract of sale is made

warranty means an agreement with reference to goods that are the subject of a contract of sale, but collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages, but not to a right to reject the goods and treat the contract as repudiated

writ of execution means a writ of sale, warrant to seize property, or other writ or warrant of execution under which goods may be seized or taken to satisfy a process issued out of any court.

(2)

A thing must be treated as having been done in good faith within the meaning of this Part when it is done honestly, whether or not it is done negligently.

(3)

A person must be treated as being insolvent within the meaning of this Part if the person has ceased to pay the person’s debts in the ordinary course of business, or cannot pay the person’s debts as they become due, whether or not the person has committed an act of bankruptcy.

(4)

Goods are in a deliverable state within the meaning of this Part if—

(a)

the goods are in a particular state; and

(b)

the buyer is bound under the contract to take delivery of the goods when they are in that state.

Compare: 1908 No 168 ss 2, 27(3)

Note

Section 2(1) of the 1908 Act includes a definition “action includes counterclaim and set-off”. The 1908 Act uses “action” in various provisions (in particular, Part 5 of the 1908 Act — subpart 5 of this Part of this Bill).

Gault on Commercial Law notes (at SG58.01) that “The Act is a little out of date, in that action is no longer a term used in the Judicature Act: it has been replaced with the phrase ‘civil proceedings’”.

The District Courts Amendment Act 1991 replaced references to “action” with references to “proceeding” (being any application to the court for the exercise of the civil jurisdiction of the court other than an interlocutory application).

Some other enactments that are revised in this Bill use “proceedings” rather than “action”.

In light of the above, some references to “action” have been replaced with references to a proceeding. For example, clause 199 (replacing section 58 of the 1908 Act) refers to enforcing rights by a proceeding.

In other places, references to an action have instead been replaced with a reference to right to claim (references to maintaining a proceeding or commencing a proceeding are not quite right in this context). For example, s 51 of the 1908 Act provided that a “seller may maintain an action against him for damages for non-acceptance”. In clause 191 this has been replaced by “A seller has, against the buyer, a right to claim damages for non-acceptance ...”.

Subpart 1—Formation of contract

Contract of sale

119 Contract of sale of goods

A contract of sale of goods is a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration (the price).

Compare: 1908 No 168 s 3(1)

120 Contracts of sale may be between one part-owner and another

A contract of sale may be between one part-owner and another.

Compare: 1908 No 168 s 3(2)

121 Contracts of sale may be absolute or conditional

A contract of sale may be absolute or conditional.

Compare: 1908 No 168 s 3(3)

122 Sale and agreement to sell

(1)

A contract of sale is a sale if, under the contract, the property in the goods is transferred from the seller to the buyer.

(2)

A contract of sale is an agreement to sell if the transfer of the property in the goods is to take place at a future time or subject to a condition or conditions to be fulfilled at a future time.

(3)

An agreement to sell becomes a sale when the time for the transfer of the property to take place elapses or the condition or conditions of the transfer of the property are fulfilled.

Compare: 1908 No 168 s 3(4), (5)

123 Capacity to buy and sell

(1)

Capacity to buy and sell goods is regulated by the general law concerning capacity—

(a)

to contract; and

(b)

to transfer and acquire property.

(2)

However, if necessaries are sold and delivered to a person who because of mental incapacity or intoxication is incompetent to contract, he or she must pay a reasonable price for the goods.

Note

The term “drunkenness” has been replaced by “intoxication”.

This term goes beyond impairment as a result of alcohol to include impairment as a result of drugs.

Impairment as a result of drugs may already be covered by “mental incapacity”. However, the change has been made in order to use a “modern style of expression” and “express better the spirit and meaning of the law” as referred to in s 31(2)(e) of the Legislation Act 2012. This is also considered to be making “minor amendments to clarify Parliament’s intent” referred to in s 31(2)(i).

(3)

In this section, necessaries means goods suitable to the person’s—

(a)

condition in life; and

(b)

actual requirements at the time of the sale and delivery.

Compare: 1908 No 168 s 4

Contractual formalities

124 How contract of sale is made

(1)

A contract of sale may be—

(a)

made in writing (either with or without seal); or

(b)

made orally; or

(c)

made partly in writing and partly orally; or

(d)

implied from the conduct of the parties.

(2)

This section is subject to the provisions of this Act and of any other Act.

Compare: 1908 No 168 s 5

Note

Section 5 of the 1908 Act contained a proviso “provided that nothing in this section shall affect the law relating to corporations.” Gault on Commercial Law at SG5.01 notes that “Although the proviso excludes s 5 from applying to ‘corporations’, companies have full contract making power with no formalities prescribed by the Companies Act 1993.”

The proviso has been omitted on the basis that it is no longer necessary. Clause 124(1) is, in any event, subject to the provisions of other Acts.

Subject matter of contract

125 Existing or future goods

(1)

The goods that form the subject of a contract of sale may be—

(a)

existing goods that are owned or possessed by the seller; or

(b)

goods that are to be manufactured or acquired by the seller after the contract of sale is made (future goods).

(2)

There may be a contract for the sale of goods, the acquisition of which by the seller depends on a contingency that may or may not happen.

(3)

A contract of sale must be treated as an agreement to sell if, by the contract, the seller purports to effect a present sale of future goods.

Compare: 1908 No 168 s 7

126 Contract void if goods have perished without seller’s knowledge

A contract for the sale of specific goods is void if the goods, without the seller’s knowledge, have perished at the time when the contract is made.

Example

A person (A) sells 100 tons of table potatoes to another person (B).

Without A’s knowledge, the potatoes, at the date of the contract, had become unfit for human consumption because of second growth.

The contract between A and B is void.

Compare: 1908 No 168 s 8

Note

The example is based on Rendell v Turnbull (1908) 27 NZLR 1067.

127 Goods that perish before sale but after agreement to sell

(1)

This section applies if there is an agreement to sell specific goods and, subsequently, the goods, without any fault on the part of the seller or the buyer, perish before the risk passes to the buyer.

(2)

The agreement becomes void when the goods perish.

Note

The reference to “thereby avoided” in s 9 of the 1908 Act has been replaced with “becomes void”.

(3)

See section 69 (which provides that subpart 4 of Part 2 (frustrated contracts) does not apply to a contract to which subsection (1) applies).

Compare: 1908 No 168 s 9; 1944 No 20 s 4(5)(c)

Contract price

128 Fixing contract price

(1)

The price in a contract of sale may be—

(a)

fixed by the contract; or

(b)

left to be fixed in a manner agreed in the contract; or

Note

“thereby agreed” is replaced by “agreed in the contract”.

(c)

determined by the course of dealing between the parties.

(2)

The buyer must pay a reasonable price if the price is not determined in accordance with subsection (1) (see section 198(1)).

Note

Section 10(3) of the 1908 Act has been moved to cl 198(1).

Compare: 1908 No 168 s 10(1), (2)

129 Agreement to sell at valuation

(1)

An agreement to sell goods is avoided if—

(a)

the agreement is on the terms that the price is to be fixed by the valuation of a third party; and

(b)

the third party cannot or does not make the valuation.

(2)

However, if the goods or any part of the goods have been delivered to and appropriated by the buyer, the buyer must pay a reasonable price for the goods or that part of the goods.

(3)

If the third party is prevented from making the valuation by the fault of the seller or the buyer, the party not at fault has a right to claim damages against the party who is at fault.

Note

See the notes for clauses 118 and 191 for an explanation relating to replacing references to “maintain an action”.

Compare: 1908 No 168 s 11

Conditions and warranties

130 Stipulations about time

(1)

Stipulations as to the time of payment are not of the essence of a contract of sale, unless a different intention appears from the terms of the contract.

(2)

Whether any other stipulation as to time is of the essence of the contract depends on the terms of the contract.

(3)

In a contract of sale, unless the context otherwise requires, month means a calendar month.

Note

A reference to “prima facie” has been replaced with “unless the context otherwise requires”. This is consistent with s 23 of the Property Law Act 2007 (Construction of instruments).

The Acts being revised contain various references to “prima facie”. It would be preferable to use a plain English alternative if possible. In some cases, the exact meaning of “prima facie” is unclear. The term has been replaced in this draft in order to “express better the spirit and meaning of the law” under s 31(2)(e) of the Legislation Act. Feedback on the wording of the replacement in each case is welcome.

Compare: 1908 No 168 s 12

131 Conditions and warranties

(1)

A breach of a condition in a contract of sale may give rise to a right to treat the contract as repudiated.

(2)

A breach of a warranty in a contract of sale may give rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated.

(3)

Whether a stipulation in a contract of sale is a condition or a warranty depends in each case on the construction of the contract.

(4)

A stipulation in a contract of sale may be a condition even if it is called a warranty in the contract.

Compare: 1908 No 168 s 13(2)

132 Breach of condition to be fulfilled by seller

(1)

If a contract of sale is subject to a condition to be fulfilled by the seller, the buyer may waive the condition, or may elect to treat the breach of the condition as a breach of warranty, and not as a ground for treating the contract as repudiated.

(2)

If a contract of sale is not severable, and the buyer has accepted the goods or part of the goods, the breach of a condition to be fulfilled by the seller can be treated only as a breach of warranty, and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect.

Compare: 1908 No 168 s 13(1), (3)

133 Impossibility or other excuse

Sections 131 and 132 do not affect a situation where the fulfilment of a condition or warranty is excused by law because of impossibility or otherwise.

Compare: 1908 No 168 s 13(4)

134 Implied condition and warranties as to title and quiet possession

(1)

In a contract of sale there is—

(a)

an implied condition on the part of the seller that,—

(i)

in the case of a sale, the seller has a right to sell the goods; and

(ii)

in the case of an agreement to sell, the seller will have a right to sell the goods at the time when the property is to be transferred:

(b)

an implied warranty that the buyer will have and enjoy quiet possession of the goods:

(c)

an implied warranty that the goods are free from any charge or encumbrance that is in favour of any third party and that is not declared or known to the buyer before or at the time when the contract is made.

(2)

The implied condition and warranties in subsection (1) apply unless the circumstances of the contract show a different intention.

Compare: 1908 No 168 s 14

135 Sale by description

(1)

In a contract for the sale of goods by description, there is an implied condition that the goods will correspond to the description.

(2)

If the sale of goods is by sample as well as by description, it is not sufficient that the bulk of the goods corresponds to the sample if the goods do not also correspond to the description.

(3)

See section 141 (which relates to contracts for sale by sample).

Compare: 1908 No 168 s 15

136 Implied conditions or warranties as to quality or fitness

(1)

There is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale except as set out in sections 137 to 140.

(2)

This section and sections 137 to 140 are subject to the provisions of this Part and of any other Act.

Compare: 1908 No 168 s 16

137 Implied condition that goods are reasonably fit for purpose

(1)

This section applies if—

(a)

the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller’s skill or judgement; and

(b)

the goods are of a description that it is in the course of the seller’s business to supply (whether or not the seller is the manufacturer).

(2)

There is an implied condition in the contract of sale that the goods are reasonably fit for the purpose referred to in subsection (1)(a).

(3)

However, in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition that the article is fit for any particular purpose.

Compare: 1908 No 168 s 16(a)

138 Implied condition that goods are of merchantable quality

(1)

There is an implied condition in a contract of sale that the goods are of merchantable quality if the goods are bought by description from a seller who deals in goods of that description (whether or not the seller is the manufacturer).

(2)

However, if the buyer has examined the goods, there is no implied condition with respect to defects that the examination ought to have revealed.

Compare: 1908 No 168 s 16(b)

139 Implied warranty or condition by usage of trade

An implied warranty or condition as to quality or fitness for a particular purpose may be treated as being included by the usage of trade.

Note

The reference to “annexed” in s 16(c) has been replaced with “treated as being included”.

Compare: 1908 No 168 s 16(c)

140 Express warranty or condition

An express warranty or condition in a contract of sale does not negate a warranty or condition implied by this Part unless it is inconsistent with the implied warranty or condition.

Compare: 1908 No 168 s 16(d)

Sale by sample

141 Sale by sample

(1)

There is an implied condition in a contract for sale by sample—

(a)

that the bulk corresponds to the sample in quality; and

(b)

that the buyer will have a reasonable opportunity to compare the bulk to the sample; and

(c)

that the goods are free from any defect that makes them unmerchantable and that would not be apparent on reasonable examination of the sample.

(2)

A contract of sale is a contract for sale by sample if there is a term in the contract, express or implied, to that effect.

Compare: 1908 No 168 s 17

Subpart 2—Effects of contract

Transfer of property between seller and buyer

142 Goods must be ascertained

Under a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained.

Example

A person (A) agrees to buy 1 000 gold coins from Gold Suppliers Limited.

Gold Suppliers Limited stores its gold in bulk without allocating it to individual buyers.

While the gold is stored as part of an undifferentiated bulk, ownership of the gold coins does not pass to A.

Compare: 1908 No 168 s 18

Note

The example is based on Re Goldcorp Exchange Limited [1994] 3 NZLR 385.

143 Property is transferred when parties intend

(1)

Under a contract for the sale of specific or ascertained goods, the property in the goods is transferred to the buyer at the time that the parties to the contract intend it to be transferred.

(2)

For the purpose of ascertaining the intention of the parties, regard must be had to—

(a)

the terms of the contract; and

(b)

the conduct of the parties; and

(c)

the circumstances of the case.

Compare: 1908 No 168 s 19

Note

Section 19 of the 1908 Act refers to the property in the goods being “transferred”. In contrast, s 20 (and other provisions) refer to property “passing”. For consistency, references to “pass” etc have been replaced with references to transfer.

144 Ascertaining parties’ intention

Unless a different intention appears, the rules in section 145 are the rules for ascertaining the intention of the parties as to the time at which the property in the goods is to transfer to the buyer.

Compare: 1908 No 168 s 20

145 Rules for ascertaining parties’ intention
Rule 1

(1)

Under an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods transfers to the buyer when the contract is made.

(2)

For the purposes of subsection (1), it is immaterial whether the time of payment or the time of delivery, or both, is postponed.

Rule 2

(3)

If there is a contract for the sale of specific goods, and the seller is bound to do something to the goods for the purpose of putting the goods into a deliverable state, the property in the goods does not transfer to the buyer until—

(a)

the thing is done; and

(b)

the buyer has notice that the thing is done.

Rule 3

(4)

If there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test, or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property in the goods does not transfer to the buyer until—

(a)

the act or thing is done; and

(b)

the buyer has notice that the act or thing is done.

Rule 4

(5)

If goods are delivered to the buyer on approval, or on sale or return or other similar terms, the property in the goods transfers to the buyer—

(a)

when the buyer indicates the buyer’s approval or acceptance to the seller, or does any other act adopting the transaction:

Note

The reference to “signifies” has been replaced with “indicates”.

(b)

if the buyer does not indicate the buyer’s approval or acceptance to the seller, but retains the goods without giving notice of rejection,—

(i)

when the time (if any) that is fixed for the return of the goods expires:

(ii)

when a reasonable time expires (if no time has been fixed for the return of the goods).

Note

Rule 4 in s 20 of the 1908 Act provides “What is a reasonable time is a question of fact.” This has been omitted because it is covered by cl 198(2) (which replaces s 57 of the 1908 Act). This approach is also consistent with other references to a “reasonable time” throughout the Part.

Rule 5

(6)

Subsection (7) applies if there is a contract for the sale of unascertained or future goods by description.

(7)

The property in the goods transfers to the buyer when goods of that description that are in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller.

(8)

For the purposes of subsection (7),—

(a)

the assent may be expressed or implied and may be given either before or after the appropriation is made:

(b)

the seller must be treated as having unconditionally appropriated the goods to the contract if,—

(i)

in performing the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer; and

Note

The 1908 Act refers to “in pursuance of the contract”. As a plainer alternative, this has been replaced with “in performing the contract”. Other alternatives may be “under the contract” or “in accordance with the contract”.

(ii)

the seller does not reserve the right of disposal.

Compare: 1908 No 168 s 20

146 Reservation of right of disposal

(1)

Under a contract for the sale of specific goods or if goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled.

(2)

If the seller reserves the right of disposal as referred to in subsection (1), the property in the goods does not transfer to the buyer until the conditions imposed by the seller are fulfilled (despite the delivery of the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer).

(3)

The seller is (unless the circumstances indicate otherwise) presumed to have reserved the right of disposal if the goods are shipped and, by the bill of lading, the goods are deliverable to the order of the seller or the seller’s agent.

Note

Section 21(3) refers to “prima facie”. See the note to clause 130.

In this case, the wording has been replaced with a reference to a presumption (unless circumstances indicate otherwise). Para 344 of the Laws of New Zealand suggests that “this inference ... may be rebutted by other circumstances” and refers to Socony Proprietary Ltd v Begg [1931] NZLR 567; [1931] GLR 58 (terms of contract and surrounding circumstances indicated that parties intended property to pass on payment).

(4)

If the seller draws a bill of exchange on the buyer for the price, and sends the bill of exchange and bill of lading to the buyer together to secure acceptance or payment of the bill of exchange,—

(a)

the buyer must return the bill of lading if the buyer does not honour the bill of exchange; and

(b)

the property in the goods does not transfer to the buyer if the buyer wrongfully retains the bill of lading.

Note

Section 21(4) of the 1908 Act refers to “Where the seller of goods draws on the buyer for the price”. This has been clarified by reference to the seller drawing a bill of exchange.

Compare: 1908 No 168 s 21

147 Risk passes with property unless otherwise agreed

(1)

Unless otherwise agreed,—

(a)

goods remain at the seller’s risk until the property in the goods is transferred to the buyer; but

(b)

when the property in the goods is transferred to the buyer, the goods are at the buyer’s risk (whether or not delivery has been made).

(2)

However, if delivery has been delayed through the fault of either the buyer or the seller, the goods are at the risk of the party at fault with respect to any loss that might not have occurred but for the fault.

(3)

This section does not affect the duties or liabilities of either the seller or the buyer as a bailee of the goods of the other party.

Compare: 1908 No 168 s 22

Transfer of title

148 Sale by person who is not owner

(1)

This section applies if goods are sold by a person who—

(a)

is not the owner of the goods; and

(b)

does not sell the goods under the authority or with the consent of the owner.

(2)

The buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by the owner’s conduct precluded from denying the seller’s authority to sell.

(3)

Subsection (2) is subject to the rest of this Part.

(4)

Subparts 1 to 6 do not affect—

(a)

subparts 2 to 5 of Part 5 or any other enactment enabling the apparent owner of goods to dispose of the goods as if that person were the true owner of the goods:

(b)

the validity of a contract of sale under a special common law or statutory power of sale, or under the order of a court of competent jurisdiction:

Examples

A pawnbroker acting under section 63 of the Secondhand Dealers and Pawnbrokers Act 2004.

A sale of goods seized in execution under a warrant under section 89 of the District Courts Act 1947.

(c)

the provisions of the Personal Property Securities Act 1999 that enable a purchaser of goods to acquire good title to the goods.

Compare: 1908 No 168 s 23

149 Market overt

The law relating to market overt does not apply in New Zealand.

Compare: 1908 No 168 s 24

150 Sale under voidable title

(1)

This section applies if—

(a)

a seller of goods has a voidable title to the goods; but

(b)

the seller’s title has not been avoided at the time of the sale.

(2)

The buyer acquires a good title to the goods if the buyer buys the goods in good faith and without notice of the seller’s defect of title.

Compare: 1908 No 168 s 25

151 Revesting of property in stolen goods on conviction of offender

(1)

The property in stolen goods revests in the person who was the owner of the goods (or that person’s personal representative) if the offender is convicted, despite any intermediate dealing with the goods.

Note

The reference to “market overt” has been omitted given that it no longer applies in New Zealand. See clause 149, which replaces s 24 of the Sale of Goods Act 1908. Section 24 was replaced, on 1 December 1961, by section 2 of the Sale of Goods Amendment Act 1961 (but s 26 of the Sale of Goods Act was not consequentially amended at that time).

(2)

Despite any other enactment, the property in goods obtained by fraud or other wrongful means that does not amount to theft does not revest in the person who was the owner of the goods (or that person’s personal representative) by reason only of the conviction of the offender.

Compare: 1908 No 168 s 26

152 Seller in possession after sale

(1)

This section applies if—

(a)

a person (A) has sold goods to another person (B); and

(b)

A continues or is in possession of the goods or of the documents of title to the goods; and

(c)

A, or a mercantile agent acting for A, delivers or transfers the goods or documents of title under any sale, pledge, or other disposition, or under any agreement for sale, pledge, or other disposition, to another person (C); and

(d)

C receives the goods or documents in good faith and without notice of the previous sale to B.

(2)

The delivery or transfer to C has the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the delivery or transfer.

(3)

Subsection (2) does not apply to a delivery or transfer of goods or documents of title to the goods by a person who is, with the consent of the holder of a perfected security interest, in possession of the goods or documents of title to the goods.

Compare: 1908 No 168 s 27(1), (1A)

153 Buyer in possession after sale

(1)

This section applies if—

(a)

a person (A) has bought or agreed to buy goods; and

(b)

A obtains, with the consent of the seller (B), possession of the goods or the documents of title to the goods; and

(c)

A, or a mercantile agent acting for A, delivers or transfers the goods or documents of title under any sale, pledge, or other disposition, or under any agreement for sale, pledge, or other disposition, to another person (C); and

(d)

C receives the goods or documents in good faith and without notice of any lien or other right of B in respect of the goods.

(2)

The delivery or transfer to C has the same effect as if the person making the delivery or transfer were a mercantile agent in possession of the goods or documents of title with the consent of the owner.

(3)

See subpart 2 of Part 5 (which relates to sales, pledges, or other dispositions by mercantile agents).

(4)

Subsection (2) does not apply to a delivery or transfer of goods or documents of title to the goods by a person who is, with the consent of the holder of a perfected security interest, in possession of the goods or documents of title to the goods.

Compare: 1908 No 168 s 27(2), (2A)

154 Effect of writs of execution

(1)

A writ of execution against goods binds the property in the goods of the execution debtor from the time when the writ is delivered to the sheriff to be executed.

(2)

To record the time when a writ of execution is delivered, the sheriff must, without fee, on receiving the writ, endorse on the back of the writ the hour, day, month, and year when he or she received it.

(3)

However, no writ of execution prejudices the title to goods acquired by a person in good faith and for valuable consideration, unless, when the person acquired the person’s title, the person had notice that the writ (or any other writ under which the goods of the execution debtor might be seized or attached) had been delivered to, and remained unexecuted in the hands of, the sheriff.

(4)

In this section, sheriff includes any officer charged with the enforcement of a writ of execution.

Compare: 1908 No 168 s 28

Subpart 3—Performance of contract

155 Duties of seller and buyer

The seller must deliver the goods, and the buyer must accept and pay for the goods, in accordance with the terms of the contract of sale.

Compare: 1908 No 168 s 29

156 Payment and delivery are concurrent conditions

(1)

Delivery of the goods and payment of the price are concurrent conditions that apply as follows:

(a)

the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price; and

(b)

the buyer must be ready and willing to pay the price in exchange for possession of the goods.

(2)

This section applies unless otherwise agreed.

Compare: 1908 No 168 s 30

Rules of delivery

157 Determining whether buyer to take possession of goods or seller to send goods

Whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer is a question depending in each case on the contract, express or implied, between the parties.

Compare: 1908 No 168 s 31(1)

158 Place of delivery

(1)

Apart from a contract referred to in section 157, the place of delivery is—

(a)

the seller’s place of business (if the seller has one); or

(b)

the seller’s residence (if the seller has no place of business).

(2)

However, if the contract is for the sale of specific goods that, to the knowledge of the parties when the contract is made, are in some other place, that place is the place of delivery rather than the place that applies under subsection (1).

Compare: 1908 No 168 s 31(2)

159 Goods must be sent within reasonable time if no time is fixed

If, under the contract of sale, the seller must send the goods to the buyer but no time for sending them is fixed, the seller must send them within a reasonable time.

Compare: 1908 No 168 s 31(3)

160 Goods in possession of third person

(1)

If the goods at the time of sale are in the possession of a third person (A), there is no delivery by the seller to the buyer unless and until A acknowledges to the buyer that A holds the goods on the buyer’s behalf.

(2)

However, sections 157 to 162 do not affect the operation of the issue or transfer of any document of title to goods.

Compare: 1908 No 168 s 31(4)

161 Demand or tender of delivery must be at reasonable hour

(1)

Demand or tender of delivery may be treated as having no effect unless made at a reasonable hour.

(2)

What is a reasonable hour is a question of fact.

Compare: 1908 No 168 s 31(5)

162 Seller must bear expenses of putting goods into deliverable state

(1)

The seller must bear the expenses of, and incidental to, putting the goods into a deliverable state.

(2)

This section applies unless otherwise agreed.

Compare: 1908 No 168 s 31(6)

163 Delivery of wrong quantity or of mixed goods

(1)

The buyer may reject the goods if the seller delivers to the buyer a quantity of goods that is less than the seller contracted to sell, but if the buyer accepts those goods, the buyer must pay for the goods at the contract rate.

Example

A person (A) agrees to deliver to another person (B) 3 000 lambs that have been shorn and docked.

A delivers 3 000 lambs to B. However, 160 lambs have not been shorn and 150 have not been docked.

B may reject the whole of the goods.

Note

The example is based on Farley and Farley v Loughnan [1917] NZLR 588.

(2)

If the seller delivers to the buyer a quantity of goods larger than the seller contracted to sell, the buyer may—

(a)

accept the goods included in the contract and reject the rest; or

(b)

reject the whole of the goods; or

(c)

accept the whole of the goods (in which case the buyer must pay for the goods at the contract rate).

Example

A person (A) agrees to deliver to another person (B) 10 barrels of wine at $1,000 per barrel.

A delivers 15 barrels to B.

B may—

  • accept 10 barrels and reject 5; or

  • reject all of the barrels; or

  • accept all 15 barrels and pay $15,000.

Note

The example is based on Cunliffe v Harrison (1851) 6 Exch 903.

(3)

If the seller delivers to the buyer the goods that the seller contracted to sell mixed with goods of a different description not included in the contract, the buyer may—

(a)

accept the goods that are in accordance with the contract and reject the rest; or

(b)

reject the whole of the goods.

(4)

This section is subject to any usage of trade, special agreement, or course of dealing between the parties.

Compare: 1908 No 168 s 32

164 Buyer not bound to accept delivery by instalments

Unless otherwise agreed, the buyer of goods is not bound to accept delivery of the goods by instalments.

Compare: 1908 No 168 s 33(1)

165 Instalment deliveries: breach of contract

(1)

This section applies if—

(a)

there is a contract for the sale of goods to be delivered by stated instalments, which are to be paid for separately; and

(b)

either or both of the following occur:

(i)

the seller makes defective deliveries in respect of 1 or more instalments:

(ii)

the buyer neglects or refuses to take delivery of, or pay for, 1 or more instalments.

(2)

Whether the breach of contract is a repudiation of the whole contract or whether it is a severable breach that gives rise to a claim for compensation but not to a right to treat the whole contract as repudiated depends on the terms of the contract and the circumstances of the case.

Compare: 1908 No 168 s 33(2)

166 Delivery to carrier

(1)

If, under a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is presumed (unless the circumstances indicate otherwise) to be a delivery of the goods to the buyer.

Note

The reference to “prima facie” is replaced with a presumption (unless circumstances indicate otherwise). See the note to clause 130.

(2)

The seller must, unless otherwise authorised by the buyer, make a contract with the carrier on behalf of the buyer that is reasonable, having regard to the nature of the goods and the other circumstances of the case.

(3)

The buyer may hold the seller responsible in damages, or decline to treat the delivery to the carrier as a delivery to the buyer, if—

(a)

the seller does not comply with subsection (2); and

(b)

the goods are lost or damaged in the course of transit.

(4)

Unless otherwise agreed, if goods are sent by the seller to the buyer by a route involving sea transit, under circumstances in which it is usual to insure goods, the seller must give enough notice to the buyer to enable the buyer to insure the goods during the sea transit.

(5)

The goods must be treated as at the seller’s risk during the sea transit if the seller does not comply with subsection (4).

Compare: 1908 No 168 s 34

167 Risk where goods are delivered at distant place

(1)

This section applies if a seller of goods agrees to deliver the goods at the seller’s own risk to a place other than the place where the goods are sold.

(2)

Unless otherwise agreed, the buyer must take any risk of deterioration in the goods that is necessarily incidental to the course of transit.

Compare: 1908 No 168 s 35

168 Buyer’s right to examine goods

(1)

If goods are delivered to the buyer without the buyer previously examining them, the buyer is not treated as having accepted them unless and until the buyer has had a reasonable opportunity to examine them for the purpose of ascertaining whether they conform with the contract.

(2)

Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, the seller must, on request, give the buyer a reasonable opportunity to examine the goods for the purpose of ascertaining whether the goods conform with the contract.

Compare: 1908 No 168 s 36

169 Acceptance of goods

(1)

The buyer must be treated as having accepted the goods when—

(a)

the buyer indicates to the seller that the buyer has accepted the goods; or

Note

The term “intimates” has been replaced with a plainer “indicates”.

(b)

the goods have been delivered to the buyer and the buyer does any act in relation to the goods that is inconsistent with the ownership of the seller; or

(c)

after a reasonable time has elapsed, the buyer retains the goods without indicating to the seller that the buyer has rejected the goods.

(2)

Subsection (1)(b) does not apply if section 168 provides otherwise.

Compare: 1908 No 168 s 37

170 Buyer not bound to return rejected goods

(1)

This section applies if—

(a)

the buyer refuses to accept goods that have been delivered; and

(b)

the buyer has a right to refuse to accept the goods.

(2)

Unless otherwise agreed, the buyer is not bound to return the goods to the seller, and it is sufficient if the buyer indicates to the seller that the buyer refuses to accept the goods.

Compare: 1908 No 168 s 38

171 Liability of buyer for neglecting or refusing to take delivery of goods

(1)

This section applies if—

(a)

the seller is ready and willing to deliver the goods; and

(b)

the seller requests that the buyer take delivery of the goods; and

(c)

the buyer does not, within a reasonable time after the request, take delivery of the goods.

(2)

The buyer is liable to the seller for—

(a)

any loss caused by the buyer’s neglect or refusal to take delivery of the goods; and

Note

The reference to “occasioned” has been replaced with “caused”.

(b)

a reasonable charge for the care and custody of the goods.

(3)

However, nothing in this section affects the rights of the seller if the buyer’s neglect or refusal to take delivery of the goods amounts to a repudiation of the contract.

Compare: 1908 No 168 s 39

Subpart 4—Rights of unpaid seller against goods

172 Unpaid seller defined

(1)

A seller of goods must be treated as being an unpaid seller, within the meaning of this Part,—

(a)

if the whole of the price has not been paid or tendered:

(b)

if a bill of exchange or other negotiable instrument has been received as a conditional payment but the condition on which it was received has not been fulfilled because of the dishonour of the instrument or otherwise.

(2)

In this subpart, seller includes a person who is in the position of a seller (for example, an agent of the seller to whom the bill of lading has been endorsed or a consignor or an agent who has paid or is directly responsible for the price).

Compare: 1908 No 168 s 40

173 Unpaid seller’s rights

(1)

An unpaid seller of goods has, by implication of law,—

(a)

a lien on the goods, or right to retain the goods for the price, while the seller is in possession of the goods:

(b)

if the buyer is insolvent, a right to stop the goods in transit after the seller has parted with the possession of the goods:

Note

Section 41(1)(b) of the 1908 Act refers to “a right of stopping the goods in transitu”. The expression “in transitu” has been updated to “in transit”. In addition, the Bill refers to the right to stop the goods in transit as a plainer alternative to referring to “stoppage”. Feedback on this approach is welcome.

(c)

a right of resale, as limited by this Part.

(2)

Subsection (1) applies even though the property in the goods may have transferred to the buyer.

(3)

Subsection (1) is subject to the rest of this Part and to the provisions of any Act.

(4)

If the property in goods has not transferred to the buyer, the unpaid seller has, in addition to the seller’s other remedies, a right of withholding delivery similar to, and co-extensive with, the seller’s rights of lien and to stop the goods in transit where the property has transferred to the buyer.

Compare: 1908 No 168 s 41

Unpaid seller’s lien

174 Unpaid seller’s lien

(1)

An unpaid seller of goods who is in possession of them may retain possession of them until payment or tender of the price if—

(a)

the goods have been sold without any stipulation as to credit:

(b)

the goods have been sold on credit, but the term of credit has expired:

(c)

the buyer becomes insolvent.

(2)

Subsection (1) is subject to the rest of this Part.

(3)

The seller may exercise the seller’s right of lien even if the seller is in possession of the goods as agent or bailee for the buyer.

Compare: 1908 No 168 s 42

175 Part delivery

An unpaid seller of goods who has made part delivery of the goods may exercise the seller’s right of lien or retention on the remainder of the goods, unless the part delivery has been made under circumstances that show an agreement to waive the lien or right of retention.

Compare: 1908 No 168 s 43

176 When unpaid seller loses lien

(1)

An unpaid seller of goods loses the seller’s lien or right of retention on the goods—

(a)

when the seller delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods:

(b)

when the buyer or the buyer’s agent lawfully obtains possession of the goods:

(c)

by waiver of the lien or right of retention.

(2)

The unpaid seller of goods who has a lien or right of retention on the goods does not lose that lien or right just because the seller has obtained judgment for the price of the goods.

Compare: 1908 No 168 s 44

Stopping goods in transit

177 Right to stop goods in transit

(1)

When a buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right to stop them in transit.

(2)

The right in subsection (1) means that the seller may resume possession of the goods as long as they are in transit and may retain them until payment or tender of the price.

(3)

This section is subject to the rest of this Part.