Key takeaway

URE Energy Ltd v Notting Hill Genesis [2025] EWCA Civ 1407 confirms that waiver by election requires actual knowledge of the right being waived. A party may know the facts giving rise to a contractual termination right, but unless it also knows that the right exists, continued performance will not necessarily amount to an election to affirm the contract.

Can you waive a termination right you do not know you have?

URE Energy Ltd v Notting Hill Genesis [2025] EWCA Civ 1407 is one of those cases that reads, at first blush, as an affront to commercial common sense. A renewable energy supplier learns of its counterparty’s corporate restructuring, carries on performing for seven months without a word of objection, and then invokes an obscure termination clause to walk away with £4 million. Yet the Court of Appeal upheld that result without hesitation. The reason is that waiver by election is not a moral doctrine. It is a structured legal principle with defined pre-conditions, and in this case those pre-conditions were simply not met.

What is waiver by election?

Waiver by election arises where a party finds itself entitled to choose between two inconsistent courses of action and, by its words or conduct, unequivocally commits to one of them. Once that choice is communicated, it is final and cannot be reversed.

The most common example arises when one party becomes entitled to terminate a contract, whether because of the other’s breach or because a specified contractual event has occurred. At that point the innocent party faces a choice: terminate and claim its remedies or affirm the contract and continue performing. If it chooses affirmation, expressly or by conduct sufficiently clear and unequivocal, it permanently loses the right to terminate on that ground.

For the doctrine to operate, three things must be present:

• First, there must be two genuinely inconsistent options available.

• Second, the party must have actual knowledge of both the facts giving rise to the right and the existence of the right itself.

• Third, the choice must be communicated to the other party in clear and unequivocal terms, whether by words or conduct.

It is the second of these requirements, actual knowledge of the right, that was at the heart of this case.

Read our article on standstill agreements and waiver of contractual enforcement for related analysis on how waiver arguments interact with the wider contractual scheme.

What was the background to URE Energy v Notting Hill Genesis?

URE Energy Ltd (“URE”), a small renewable energy business owned and run by Mr Ensor, had entered into a four-year electricity supply contract with Genesis Housing Association. The arrangement was conceived as a stepping stone to a longer 25-year deal, the economics of which underpinned Mr Ensor’s investment. Genesis, cautious about a quarter-century commitment, was careful to preserve its freedom to walk away from negotiations at any time.

About a year into the contract, Genesis merged with Notting Hill Housing Trust to form Notting Hill Genesis (“NHG”). Mr Ensor was notified, raised no objection, and simply asked his solicitors to update the contracting party’s name. No one paused to consider whether the amalgamation might trigger any contractual rights, including, critically, a clause permitting URE to terminate upon an amalgamation affecting the other party.

When relations later deteriorated and NHG decided not to pursue a long-term arrangement, URE eventually identified that clause. Some seven months after the merger had taken effect, it served a termination notice on that ground and claimed the £4 million contractual payment that early termination would trigger. NHG argued that URE had lost the right to do so by continuing to perform without objection throughout those months.

Did continued performance amount to waiver by election?

The central issue was whether URE’s continued performance amounted to a waiver by election of its right to terminate. NHG argued that a contracting party must be treated as knowing the express terms of its own contract. On that basis, URE should be deemed to have known of the amalgamation trigger, and its continued performance should have amounted to a knowing election to affirm.

The Decision

Both Mrs Justice Dias at first instance and the Court of Appeal rejected that argument. The governing authority is Peyman v Lanjani [1985] Ch 457, which establishes that waiver by election requires actual knowledge of both the facts giving rise to the right and the existence of the right itself. Lord Justice Males, delivering the leading judgment, held that this principle applies equally to express contractual termination rights as it does to rights arising at common law or in equity. One cannot elect between two options without knowing that a choice exists.

Read our article on terminating a contract and the importance of getting it right for a wider discussion of termination rights, repudiatory breach risk and the importance of reviewing the contractual framework before acting.

What kind of knowledge is required?

The Court also confirmed that only actual or ‘blind-eye’ knowledge will suffice. Constructive knowledge, the idea that a party ought reasonably to have known, is not enough. Blind-eye knowledge requires a deliberate decision not to make enquiries that the circumstances plainly demand. On the evidence, Mr Ensor had done neither.

Critically, the trial judge accepted Mr Ensor’s evidence that he had only skim-read the contract at the time it was concluded and had genuinely assumed that clause 10.2(d), the amalgamation trigger, was dealing with insolvency-related matters rather than a solvent merger. He was not a lawyer. He had no reason to suppose that a routine corporate restructuring might give URE a right to terminate, and he had received no legal advice on that provision. The judge found him to be a credible witness, and those findings of fact were not open to challenge on appeal. Notably, Males LJ observed that NHG had itself, at an earlier stage of the proceedings, argued that clause 10.2(d) did not apply to a solvent amalgamation at all, a position that lent some support to the view that Mr Ensor’s misreading of the clause was not unreasonable.

A further significant feature of the case was URE’s decision to waive privilege over its solicitors’ advice. This demonstrated that the scope of the retainer had not extended to reviewing termination rights arising from the amalgamation, thereby rebutting the presumption, confirmed by the Court as a presumption of fact rather than law, that a legally represented party knows its rights. The Court also confirmed that the motive behind exercising a termination right is legally irrelevant: a party that terminates primarily to secure a financial payment remains entitled to do so, provided the right exists and has not been validly waived.

For related contract drafting issues, read our article on why boilerplate clauses matter, including why standard clauses can carry significant weight when disputes arise.

What does the decision mean for commercial contracts?

The judgment is an important restatement of the law, but its practical reach is more limited than the headline result might suggest. The outcome depended on an unusual combination of factors: a small, owner-managed business; a non-lawyer whose evidence was accepted at trial; and a termination clause that was, on the court’s findings, effectively buried within a lengthy provision dealing primarily with insolvency. Males LJ was explicit that judicial scepticism would have considerably more force where the party claiming ignorance is larger, legally sophisticated, or had advisers who reviewed the contract in detail. The same argument will be much harder to run in those circumstances.

Any corporate event, a merger, change of control, or restructuring affecting either party, should prompt an immediate review of the contract to identify whether any rights or obligations have been triggered. That question is far easier to answer at the time than after months of continued performance.

Read our article on assignment clauses in commercial contracts for further analysis on contract provisions that can be overlooked until a transaction, restructuring or dispute brings them into focus.

How can parties avoid uncertainty over termination rights?

Parties should also consider whether their contracts contain express time limits on the exercise of termination rights. Had the clause in this case required the right to be exercised within a defined period of the triggering event, URE could not have succeeded. Such provisions offer a straightforward safeguard and are worth building into complex agreements as a matter of course.

Finally, any party facing a belated termination notice should consider whether the alternative doctrine of equitable estoppel is available. Unlike waiver by election, estoppel does not require the representor to have known of the right. If it can be shown that the counterparty relied on the other’s continued performance to its detriment, the termination right may be defeated regardless of the knowledge question. On the facts here, NHG could not establish that reliance, but the argument will remain open in appropriate cases.

Barnes Law’s Commercial Litigation and Dispute Resolution team advises clients on commercial contract disputes, termination rights, waiver, estoppel, contractual interpretation and litigation strategy. For more information, please contact our Commercial Litigation and Dispute Resolution team to discuss how we can support you.

Written by Barnes Law Managing Partner Yulia Barnes.