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Part 4—Issues noted for possible future reform

THIS CONSULTATION IS NOW CLOSED.

Request for Submission; Introduction »
Part 1—The Revision process »
Part 2—The draft Bill »
Part 3—Nature of drafting change »
Part 4—Issues noted for possible future reform


 To locate the new provision in the Bill, refer to the comparative table in Schedule 3, Part 2.

Existing provision numberTitle of new provisionIssue for future reform
General
  Act binds the Crown See discussion in Part 2 of this document.
Contracts Privity Act 1982
No issues noted for future reform
Contractual Mistakes Act 1977
5 This subpart to be a code Is the Act a code?
There has been considerable academic debate about whether the 1977 Act is a code that supplants all pre-existing law about mistake. Much of the debate has been based on, or has referred to, the fact that the section 5 heading is not repeated in the section body. (See Law of Contract in New Zealand (4th` ed, Burrows, Finn, and Todd), [10.1.2]; and also R Sutton (2003) 9 NZBLQ 234 at p 260 and Law Commission Contract Statutes Review (NZLC R25, 1993, at [2.21].)
Because of the differing views on this issue, we consider a drafting change to clarify the position would be beyond a “minor amendment to clarify Parliament's intent”.

Has the Act repealed the common law rule of estoppel by representation?
Burrows, Finn, and Todd at [10.2.2] note that “although it is not clearly stated in the statute, it appears that the Contractual Mistakes Act provisions have impliedly repealed a rule of the common law, sometimes known as the doctrine of estoppel by representation”.
2 Interpretation Does mistake include a mistake as to matters of expectation?
Compcorp Ltd v Force Entertainment Limited (2003) 7 NZBLC 103, 996 dealt with the issue of mistakes as to “matters of expectation”. This issue was dealt with in a draft of the definition of “mistake” originally suggested by the Statutes Revision committee. See Burrows, Finn and Todd at [10.3.1].
Contractual Remedies Act 1979
6(2) Damages for misrepresentation (1) There is a question as to whether silence or non-disclosure can constitute misrepresentation.
See Burrows, Finn, and Todd at [11.2.1(e)].
See s 13(1) of the Financial Markets Conduct Act 2013 for one approach to the omission of information.
(2) There is some case law on the concept of inducement. Burrows, Finn and Todd at [11.2.4] notes that “the law now is that, despite the wording of s 6, there is no “inducement” to contract unless the representor intended such a result, or at least unless the representor wilfully used language which would induce a normal person”. There is a question whether the legislature should clarify the concept of inducement.
(3) Future consideration could be given to reflecting in the statute the fact that a misrepresentation is legally harmless if the plaintiff (a) never knew of its existence or (b) did not allow it to affect his or her judgment or (c) was aware of its untruth. See Burrows, Finn and Todd at [11.2.4].
7(3) Party may cancel contract if induced to enter into it by misrepresentation or if term is or will be broken The courts have rephrased this test. See for example Brooklands Motor Co Ltd v Bridge Wholesale Acceptance Corp (Australia) Ltd (1994) 7 NZCLC 260,449. See Burrows, Finn, and Todd at [18.2.1].
7(3), (4) Party may cancel contract if induced to enter into it by misrepresentation or if term is or will be broken Future reform could address the issue of “readiness and willingness to perform”.
See Burrows, Finn, and Todd at [18.3.3]: “Noble v Keenan [(2005) 6 NZCPR 433] thus settles the question of whether a person cancelling a contract under the Contractual Remedies Act 1979 must themselves be ready and willing to perform it”.
Burrows, Finn, and Todd acknowledge that it might be difficult to codify such a rule.
8(3) Effect of cancellation (1) A literal interpretation of s 8(3) can cause difficulties. For example, there is a question about whether an arbitration clause survives cancellation.
See Burrows, Finn and Todd at [18.3.5].
(2) There is also an issue about whether obligations that have fallen due for performance before the cancellation, but remain unperformed after it, can be enforced.
Brown v Langwoods Photo Stores Ltd [1991] 1 NZLR 173 at 176  suggests that “There is nothing, however, to suggest that it abrogates rights and liabilities accrued before cancellation... The provision does not abrogate any cause of action accrued unconditionally before cancellation, whether or not for debt.”
9(5), (6) Protection of purchaser of property in good faith and for valuable consideration Provisions in the other contracts statutes that give the court a power similar to one to “vest in a party, or direct a party to transfer or assign to any other party or to deliver to any other party the possession of, the whole or any part of any real or personal property that was the subject of the contract or was the whole or part of the consideration for it” do not have an equivalent of s 9(5) and (6). There is an issue about whether those provisions should apply more generally.
11(1) Remedies enforceable by or against assignee The Supreme Court has recently looked at assignment in relation to section 11(1) of the 1979 Act.
It held in Savvy Vineyards 3552 Ltd v Kakara Estate Ltd [2014] NZSC 121 at [92] that the words “or burden of a contract” may not have any effect as the common law does not allow for the burden of a contract to be assigned (and the common law had not been negated by the Act).
It is unclear what this ruling means for the rest of section 11.
Frustrated Contracts Act 1944
4(5)(c) This subpart does not apply in certain circumstances Burrows, Finn, and Todd at [20.3.2(d)(iii)(2)] describe s 4(5)(c) as “a little bewildering”. The text suggests that there “seems no reason why the statutory provisions for the apportionment of loss should not have been permitted in the case of any contract for the sale of goods”.
Further change may desirable in a substantive reform.
Illegal Contracts Act 1970
8 Restraints of trade There is a question as to whether the powers in s 8 are designed to be discretionary or whether a court must choose one of the three options in the provision.
Compare Burrows, Finn, and Todd at [13.9.1], citing C E Elley Ltd v Burgess (1997) 7 TCLR 582 and NZLC R25 at [3.43].
Minors’ Contracts Act 1969
No issues noted for future reform
Sale of Goods Act 1908
8 Contract void if goods have perished without seller's knowledge Laws of New Zealand, Sale of Goods [71] notes that the applicability of the Contractual Mistakes Act is not clear.
13(2) Conditions and warranties Laws of New Zealand, Sale of Goods [80] suggests that this can run the other way as well (ie a term called a “condition” can be a warranty).
16(a) Implied condition that goods are reasonably fit for purpose Section 8 of the Consumer Guarantees Act 1993 operates in a different manner.
Future reform may wish to align the two.
16(b) Implied condition that goods are of merchantable quality What is and what is not “merchantable quality” may be difficult for an ordinary user of the legislation to understand. Compare s 7 of the Consumers Guarantees Act 1993, which is much more explicit about what amounts to “acceptable quality”.
Laws of New Zealand, Sale of Goods [100] notes “In the United Kingdom, a statutory definition of ‘merchantable quality’ has been introduced, although no such definition has been enacted in New Zealand. However, this definition is largely declaratory, and has not affected any significant change in the law.”
Section 146 of the Sale of Goods Act 1979 (UK) provides: “Goods of any kind are of merchantable quality… if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances”.
If the above definition is truly declaratory rather than affecting a change in the law, there is a question whether such a definition of merchantable quality could be added to the Bill within the revision powers.
Alternatively, the sale of goods provision could be aligned with the Consumer Guarantees Act 1993 in a future reform.
17(1) Sale by sample Compare s 10 of the Consumer Guarantees Act 1993, which refers to a sample or “demonstration model”.
The sale of goods provision could be aligned with the Consumer Guarantees Act 1993 in a future reform.
27(2) [Seller or buyer] in possession after sale The link in this provision to mercantile agents may no longer be appropriate. Section 3(1) of the Mercantile Law Act refers to the agent acting in the ordinary course of business of a mercantile agent. This may be difficult to apply in the Sale of Goods Act context.
Sale of Goods (United Nations Convention) Act 1994
No issues noted for future reform
Electronic Transactions Act 2002
37 Authority to prescribe electronic forms and requirements for using electronic forms Sometimes when old Acts require a prescribed “form”, in practice, the department only wants to prescribe certain information (rather than an actual hard copy “form”). See s 116(2) of the Limited Partnerships Act 2008: “In subsection (1)(a) and (g), prescribing the form includes specifying the content, means of communication, or any other requirement of an application without necessarily specifying the use of a particular form.”
Carriage of Goods Act 1979
No issues noted for future reform
Mercantile Law Act 1908
1(4),13A(1) Application of this subpart Gault on Commercial Law at [ML13A.01] notes that the provisions do not apply to a number of documents (eg air waybills): “With the growth of air transport and mixed mode transport, these omissions may cause problems in the future.”
11 Saving of rights of true owner Section 11(c) refers to deducting the amount of the person’s lien.  In similar contexts, the costs of the sale are also deducted before the “balance” is paid. See, s 185(1)(a) and (2) of the Property Law Act 2007.
37 Lien of registered transferee of warrant or certificate ends on delivery of warrant or certificate in good faithand for value Gault on Commercial Law at [ML9.01] refers to problems with how this relates to s 9 of the Mercantile Law Act 1908 and s 48 of the Sale of Goods Act 1908.
Part 5 Unpaid vendors of warehoused goods See discussion in Part 2 of this document.
Additional Issue: technological advances
Paul Myburgh pointed out in “Bits, Bytes and Bills of Lading: EDI and New Zealand Maritime Law” (1993) NZLJ 324 that the way in which people communicate today is significantly different to when this Act was enacted. This has led to some inefficiencies, especially in maritime law, where contracts by electronic data interchange have raised questions as to the “definition of a ‘document’, the ‘signing of contracts', and the problem of the bill of lading as a negotiable document of title”.

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