Government of Zanzibar v British Aerospace (Lancaster House)...

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

1. Whether a party loses the right to rescind a contract by accepting or affirming it, and what constitutes valid acceptance in this context.
2. Whether the Government of Zanzibar, by continuing to make payments and requesting repairs after discovering defects, demonstrated an unambiguous acceptance of the contract.
3. 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.