In this article, we briefly consider a recent High Court decision involving the cancellation of a building contract (Van Der Wal Builders & Contractors Limited v Hanham [2013] NZHC 2284). The builder (Van Der Wal Builders & Contractors Limited (“WBC”)) had entered into a written contract on a “charge up” basis with Mr and Mrs Hanham (“Hanhams”) to carry out building work on the Hanhams’ property. The contract entered into was a standard form published by the Registered Master Builders Federation of New Zealand Inc. After the building works had started however, the Council required various works to be carried out to bring the existing house structure into compliance with the Building Code. The parties were not aware of the Council requirements (or the extent of them), when entering into the contract. The result of the Council’s requirements was a significant increase in the amount (and cost) of the building work needing to be done. The Hanhams decided they could not afford to continue with the building works and attempted to cancel the contract. In the District Court, WBC argued that the Hanhams did not have the right to cancel the contract in these circumstances. The District Court, however, held that the Hanhams were entitled to cancel on the basis of an implied term in the contract (as oppose to an express term in the contract). WBC successfully appealed that finding, with the High Court concluding that it was not appropriate to imply a term into the contract that would entitle the Hanhams to cancel the contract. The matter was remitted to the District Court for further proceedings.
This decision is a good read in that it provides a useful discussion on when the Court is prepared to imply terms into a contract (in this instance, a building contract). As this case illustrates, seeking to imply terms into contracts beyond the expressly agreed terms, is not always an easy hurdle to overcome and can raise interesting legal issues. Accordingly, in assessing what rights and obligations a party has under a contract, it is essential to first review and clearly understand the express terms of the contract itself. This is particularly true when considering cancelling a contract.