Facts
- The case concerns a contract involving the Government of Zanzibar and British Aerospace (Lancaster House) Ltd regarding a leased aircraft, which was found to have defects.
- The Government of Zanzibar continued to make rental payments after identifying these defects, while simultaneously raising concerns and requesting repairs from the lessor.
- The dispute centered on whether the Government of Zanzibar’s actions amounted to acceptance of the contract, precluding the right to rescind.
- The background includes references to similar cases illustrating the principles of rescission and acceptance, such as Long v Lloyd and Peyman v Lanjani.
Issues
- Whether a party loses the right to rescind a contract by accepting or affirming it, and what constitutes valid acceptance in this context.
- Whether the Government of Zanzibar, by continuing to make payments and requesting repairs after discovering defects, demonstrated an unambiguous acceptance of the contract.
- How actual knowledge of both the facts justifying rescission and the right to rescind informs the validity of acceptance and loss of rescission rights.
Decision
- The Court held that for acceptance to bar rescission, the party must have actual knowledge of both the facts that justify rescission and their legal right to rescind.
- Conduct relied upon to affirm a contract must be clear and unambiguous, indicating a definite intention to uphold the contract.
- The Government of Zanzibar’s ongoing payments and requests for repairs did not constitute clear affirmation or acceptance of the contract.
- Superficial or ambiguous conduct does not alone suffice to establish acceptance and extinguish rescission rights; all circumstances must be assessed.
Legal Principles
- Acceptance that precludes a right to rescind requires actual (not presumed) awareness of both the basis for rescission and the legal right to exercise it.
- Unambiguous conduct—by words or deeds—affirming the contract is required before the right to rescind can be considered lost.
- Delay or inaction, without other clear indications of acceptance, is insufficient by itself to establish affirmation.
- The standard for valid acceptance is strict: uncertainty, ongoing negotiations, or actions aimed at resolving defects do not automatically eliminate rescission rights.
- The context of the parties’ relationship and conduct is critical in determining whether rescission is barred.
Conclusion
Government of Zanzibar v British Aerospace (Lancaster House) Ltd establishes that a party does not lose the right to rescind a contract unless it has actual knowledge of the facts and right to rescind and then clearly, unambiguously affirms the contract; superficial or equivocal conduct, such as seeking remedies or continued performance during negotiation, does not suffice to forfeit this remedy.
