Introduction
Rescission is a legal remedy that returns parties to their original positions before a contract, ending it. This remedy applies to contracts affected by misrepresentation, duress, undue influence, or mistake. However, the right to rescind may be lost if the harmed party continues to uphold the contract after learning the basis for rescission. Government of Zanzibar v British Aerospace (Lancaster House) Ltd clarifies how acceptance impacts rescission rights, focusing on clear awareness and conduct. This case illustrates how rescission can be restricted when a contract remains in effect.
Acceptance and its Effect on Rescission
Acceptance occurs when a party with rescission rights clearly indicates—through words or conduct—they choose to uphold the contract after discovering the issue. This can be stated directly or inferred from behavior supporting the contract. Long v Lloyd [1948] 2 KB 110 shows acceptance through conduct, where continued use of a defective truck after finding faults counted as upholding the contract.
Knowledge as a Requirement for Acceptance
A central factor in acceptance is awareness. The party must know both the facts justifying rescission and their right to rescind. In Peyman v Lanjani [1985] Ch 457, the Court of Appeal held that understanding the right to rescind is necessary. Without this knowledge, actions appearing like acceptance do not prevent rescission. Government of Zanzibar states this awareness must be actual, not presumed.
Unambiguous Conduct: The Standard for Valid Acceptance
Actions affirming a contract must be clear and indicate a decision to keep it in force. Delay or inaction alone does not always constitute acceptance, particularly if the harmed party is still considering options or seeking legal advice. The Court in Government of Zanzibar emphasized that actions must be definite, showing no uncertainty about continuing the contract. The case involved a leased aircraft with defects. The Government of Zanzibar continued rental payments while reporting issues and requesting repairs. The Court ruled this conduct, while indicating concern, did not plainly confirm acceptance.
Delays and Their Role in Acceptance
While delays alone are not conclusive, they may influence whether acceptance exists. Extended delays in pursuing rescission, combined with ongoing contract performance, could suggest acceptance. Context determines the outcome. Leaf v International Galleries [1950] 2 KB 86 demonstrates this: a five-year delay in seeking rescission for a painting’s misrepresented origin prevented the remedy. Each case depends on contract terms and reasons for delay.
Government of Zanzibar: Defining Rescission Limits
The Government of Zanzibar decision is significant for establishing acceptance rules. The Court rejected relying solely on superficial conduct. It required evaluating all circumstances, including the harmed party’s awareness, actions, and context. This thorough approach avoids unfairly losing rescission rights, protecting parties attempting to resolve issues while considering options.
Conclusion
Government of Zanzibar v British Aerospace (Lancaster House) Ltd is a central case on rescission limits for active contracts. It confirms acceptance requires understanding the right to rescind and clear conduct to uphold the contract. The case shows that raising concerns or seeking repairs does not necessarily mean acceptance. By focusing on context and intent, Government of Zanzibar provides clear guidelines for balancing acceptance and rescission, ensuring fair application of remedies. Cases like Long v Lloyd and Peyman v Lanjani, alongside Government of Zanzibar, establish a structured method for determining rescission limits. This method supports consistent and fair outcomes under legal principles.
