New Zealand Law
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Generally when you cancel a contract, the other party is entitled to take some of the money paid as damages for cancelling the contract. The Contractual Remedies Act says that when someone cancels a contract without good reason, then the other party is entitled to damages. In this case if it was the agency was partly at fault, then they should contribute to the compensation. But you do need to ask them to identify precisely where the penalty applies, and precisely where in the terms and conditions there is such a penalty. Certainly under New Zealand law you cannot have a penalty like this unless it is specifically identified as a potential consequence of cancelling. So you do need to go back to them to get better information and more precise references to the appropriate terms and conditions, and identify where they told you about these. Once you have these you may be in a better position to seek a refund of a greater amount