Contracts often include clauses allowing a party to terminate if certain events occur or if the other side breaches the agreement. But what happens if that event occurs and the party with the right to terminate continues with the contract, perhaps not realising they could have ended it? Have they given up (or waived) their right to terminate by carrying on?
A recent Court of Appeal decision has clarified that a party cannot lose a contractual right it did not know it had. In other words, a business will not be treated as having waived its right to end a contract unless it actually knew that right existed. While this outcome might seem surprising, it provides important guidance for contracting parties and highlights the importance of understanding contract terms and termination provisions.
In this blog, we explore the background of the case, why the court decided the way it did and what it means for businesses going forward.
Background of the case
The dispute in URE Energy Ltd v Notting Hill Genesis [2025] EWCA Civ 1407 arose from a tender process intended to lead to a long-term commercial relationship, but which ultimately did not.
In 2017, Genesis Housing Association (which later became part of Notting Hill Genesis, NHG) began exploring options for its future electricity supply. It launched a tender process which included the opportunity to bid for a 25-year contract.
URE Energy won the bid. However, the parties were not in a position to conclude a long-term contract at that stage and URE Energy still needed to secure funding for the proposed infrastructure works. The parties therefore agreed to enter into a 4-year contract, intended to operate as a temporary arrangement while discussions continued.
Importantly, the tender documents made clear that Genesis was not obliged to proceed with a long-term agreement and remained free to withdraw from negotiations. The 4-year contract included a number of termination provisions, one of which later became central to the dispute.
The merger and the termination provisions
The 4-year contract gave URE Energy a range of termination rights. Some were linked to breach of the agreement, while others were triggered by specific events regardless of fault. One such event-based right allowed URE Energy to terminate if Genesis merged with another organisation without URE Energy’s consent.
If exercised, URE Energy could terminate the contract either in full or in respect of particular supply premises. In those circumstances, Genesis was required to pay URE Energy a termination sum equal to 50% of the remaining contract value for the affected supplies. Genesis did not have any equivalent right to compensation if it chose to terminate under its own termination provisions.
The contract also included a ‘no waiver’ clause, providing that a delay in exercising contractual rights would not, by itself, amount to a waiver of those rights. This clause took on particular significance once a merger occurred and URE Energy did not immediately seek to end the contract.
In 2018, Genesis merged with another housing association to form NHG, without seeking URE Energy’s consent. Although URE Energy was aware of the merger, it continued performing the contract and did not seek to terminate at that time, apparently because it had not appreciated that the merger triggered a termination right.
Several months later, after the commercial relationship had deteriorated and NHG indicated it would not proceed with the proposed long-term agreement, URE Energy sought legal advice. Following a review of the contract, URE Energy relied on the merger-related clause to terminate the agreement and claim the contractual termination payment.
NHG rejected this, arguing that URE Energy had lost the right to terminate by continuing with the contract after the merger.
The legal principle: waiver by election
Waiver by election (sometimes described as affirmation) arises where a party has a right to terminate a contract but, knowing of that right, instead chooses to continue with the agreement. In those circumstances, the contract is treated as affirmed and the termination right is waived.
However, a party will only be taken to have made that election if it knew both:
- the facts giving rise to the termination right; and
- that the termination right itself existed
A party cannot waive a right it did not know it had. The central issue in this case was therefore whether URE Energy’s continued performance after the merger amounted to a waiver, given its claim that it was unaware of the merger-related termination clause at the time.
High Court decision
The High Court agreed with URE Energy. Applying the principles in Peyman v Lanjani [1985] Ch. 457, the judge held that URE Energy had not waived its right to terminate because it did not know the right existed when it continued performing the contract.
Although URE Energy knew about the merger, its managing director only became aware of the relevant termination clause in November 2018 after receiving legal advice. URE Energy’s earlier continuation of the contract was therefore not an informed decision to give up its rights, but the result of not realising a termination option was available.
Because URE Energy lacked the necessary knowledge of the termination right at the time, there was no valid election to affirm the contract. This meant that URE Energy was entitled to terminate once it became aware of the clause, despite the delay.
Court of Appeal decision
NHG appealed the decision, arguing that the High Court had been too lenient. While it accepted that waiver by election generally requires knowledge of the right to terminate, NHG contended that this principle should not apply to express contractual rights. It argued that a party should be deemed to know the terms of a contract it has signed, relying on L’Estrange v F Graucob Ltd [1934] 2 K.B. 394, which says when you sign a contract, you are bound by its terms whether or not you read them.
The Court of Appeal rejected this argument. Lord Justice Males held that Peyman v Lanjani states a general principle that applies equally to contractual rights and rights arising under general law. There is no special rule that a party is automatically treated as knowing every clause in a contract for the purposes of waiver by election.
The court noted that while a party is certainly bound by a contract term it did not read, that is a separate issue from whether it has chosen to waive a right under that term. Waiver by election requires an informed choice and a party cannot choose to give up a right unless it actually knows that right exists.
The Court of Appeal reaffirmed the core principle that a party will not be held to have elected to continue a contract (thereby waiving a termination right) unless it knew both the facts and the right when it decided to carry on.
Applying that principle, the court confirmed that URE Energy’s continued performance did not amount to waiver because, at the relevant time, URE Energy was unaware that the merger triggered a termination right. The judges agreed that had URE Energy known of the clause in April 2018 and continued regardless, the outcome would likely have been different.
The court also highlighted the fairness rationale behind the rule. It ‘rests on the principle of fairness that a person who has a right to choose between alternative courses of action should not lose that right if they do not even know that they have it.’ It would be fundamentally unfair to penalise a party for not exercising a right that it did not realise was available to it.
The court acknowledged that commercial parties are generally expected to know their contracts. In fact, there is an evidential presumption that where a party has taken professional legal advice, it will be aware of its contractual rights. URE Energy had to overcome that presumption by producing evidence, including waiving legal privilege to show that the advice it received did not identify the relevant termination clause. In this case, the clause was ‘buried in the small print of a detailed contract’ among multiple termination grounds. These factors made URE Energy’s claimed lack of knowledge more credible.
The court also considered the effect of the contract’s no waiver clause, which provided that any delay or omission in exercising contractual rights would not amount to a waiver. Because the court found that URE Energy did not have the relevant knowledge at the time, it was unnecessary to decide whether that clause would otherwise have prevented a waiver. However, Lord Justice Males made clear that if URE Energy had known about the termination right, its continued and positive conduct in performing the contract would not have been a case of mere delay or omission. In those circumstances, the no waiver clause would not have prevented a waiver by election from arising, highlighting that such clauses have limits where a party knowingly continues to affirm a contract.
The appeal was dismissed. URE Energy had not waived its contractual right to terminate and it was entitled to the termination payment of nearly £4 million. While the result was undoubtedly harsh for NHG, the court applied established legal principles.
KEY TAKEAWAYS:
• You cannot waive a right you did not know you had: The Court of Appeal confirmed that a party will not lose a contractual termination right simply by continuing to perform the contract, unless it knew both the facts giving rise to the right and that the right itself existed.
• Knowledge is critical: Waiver by election depends on informed choice. If a party is unaware that a particular event (such as a merger) triggers a termination right, continuing with the contract will not, on its own, amount to a waiver.
• Delay does not automatically mean waiver: Even a lengthy period of continued performance will not necessarily prevent termination, particularly where a contract includes a ‘no waiver’ clause. However, delay can still create risk and should be handled carefully.
• Understand your termination rights early: This case highlights the importance of reviewing contracts promptly when significant events occur, such as restructurings or mergers, to ensure rights are identified and exercised correctly.
• Drafting: Clear termination provisions and well-drafted no waiver clauses can have a significant impact on the outcome of disputes.
How EM Law can help
Waiver, termination rights and contract breaches can be tricky, particularly for SMEs without in-house legal support. At EM Law, we help businesses understand and protect their contractual rights – whether that involves terminating an agreement, negotiating a commercial solution or ensuring rights are properly preserved. We also advise on drafting clear, robust contracts to avoid uncertainty. If you are unsure where you stand or a dispute has already arisen, our team can guide you through your options and provide practical, tailored advice to protect your business. Do not hesitate to contact us here or contact our Neil Williamson or Colin Lambertus directly.
