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If you are a business owner, you have likely dealt with contracts. Contracts are the basis of many business transactions and are used to outline agreements legally. These agreements can be between anyone, and they outline the rights and obligations of each party. If either party were to breach the contract terms, then the other party can seek a remedy in court. One way a party will potentially breach a contract is through repudiation. This article will answer some common questions about contract repudiation in New Zealand.

What Is Repudiation?

One of the most common questions about contract repudiation is what it actually is. Repudiation occurs when one party is unable or does not want to uphold its obligations under a contract. If this occurs, the other party can cancel the contract. Indeed, there are several ways a party can repudiate a contract. One such way is through their conduct. The courts will look at how someone acted when deciding whether they were repudiating their contract. Furthermore, the courts will also look at someone’s words and whether there was any ambiguity that created a basis for repudiation. The courts will generally need to see clear evidence that a party has repudiated their contract to rule that way.

Repudiation can also occur when a party refuses to uphold part of an obligation. If a party refuses to uphold any part of their contract, they could be declared to be in repudiation. 

What Happens After I Repudiate?

After a party has repudiated their contract, the other party has several options. One of these is to cancel the contract. Cancelling the contract means that both parties are under no obligations to perform any obligations that the contract previously outlined. However, you can still claim damages through the court if you accept your contracting party’s repudiation. In this case, you will not be able to enforce the contract.

Another option is to enforce the contract. This means you have not accepted your contracting party’s repudiation and want the other party to perform their obligations. This can be a difficult outcome to achieve. Indeed, if your contracting party has repudiated, it is likely they are unable to perform an obligation. A good idea is to discuss with your contracting party whether they can pay a form of compensation to get out of the contract. If this does not work, you can seek a remedy through the court that forces the party to uphold their obligation.

What Happens if I Cancel My Contract Too Early?

A common mistake that many people make is cancelling their contract too soon after they believe the other party has repudiated. You must be absolutely sure that your contracting party has repudiated before you take any further action. This is because if you believe that your contracting party has repudiated and you preemptively cancel the contract, you could be liable for repudiation yourself if your contracting party is proven to have not repudiated. If the court finds you repudiated your contract, you may be liable for damages under a breach of contract claim. This is why it is always a good idea to consult a lawyer before making any legal decisions.

What Is the Consequence of Repudiation?

There are no future consequences for repudiation other than the potential for damages and/or court order. However, if you have repudiated your contract, it may be difficult to secure future contracts. This is because your reputation may have suffered, and many businesses may not want to risk going into business with someone who may let them down. Therefore, it is always best to try and discuss a solution with your contracting party before repudiating it. This may be re-negotiating the contract or finding a new contracting party. 

Key Takeaways

There are many questions about contract repudiation. Ultimately, a stable contract is the best way to stay protected when conducting business agreements. When repudiation occurs, the other party must either cancel the contract or enforce the contract. If you decide to cancel the contract, you can still claim damages from any loss incurred through the repudiation. If you decide to enforce the contract, you can seek a court order requiring the repudiating party to complete their obligations. Is it essential that you ensure your contracting party has actually repudiated? Otherwise, you may be found to have repudiated the contract yourself. 

If you need any legal assistance with contract repudiation, contact LegalVision’s contract lawyers on 0800 005 570 or fill out the form on this page.

 Frequently Asked Questions

Can I impliedly repudiate a contract?

Yes, your conduct can imply repudiation, so you must be careful with what you say and how you act.

Can I backtrack on a repudiation?

If you have repudiated, then you may be able to negotiate with your contracting party about trying to continue your contract.

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