We have adopted a specialist team approach to our practices for many years. We feel that this is the way our clients want us to work, and that specialisation leads to the provision of a better service.
We have adopted a specialist team approach to our practices for many years. We feel that this is the way our clients want us to work, and that specialisation leads to the provision of a better service.
Insights
19/12/2025
Hugh Sims KC, James Wibberley and Zachariah Pullar
On Monday 10 November 2025, the Court of Appeal handed down judgment in URE Energy Ltd v Notting Hill Genesis, dismissing NHG’s appeal from the order of Dias J awarding URE c.£4m by way of a contractual termination payment.
On appeal, the central question was how the common law principle of waiver by election works when applied to express contractual rights; and in particular how the requirement that a waivor must have actual knowledge of the right waived, applying the earlier decision of the Court in Peyman v Lanjani [1985] Ch 457, applies to such rights (hereafter, the “Peyman principle”). Can a party with an express contractual right to terminate the contract in particular circumstances be deemed to have elected to affirm the contract (and to have waived its right to terminate) if it lacks actual knowledge that it has such a right, on the basis that a party is deemed to know the meaning of the express terms of its contract?
The Court held the answer is no. Whether the right arises at common law, equity, or under the terms of a contract, the general principle is the same: one cannot elect to waive a right of which one is ignorant.
URE Energy Ltd is an energy company. It was bought out of a box by Mr Gary Ensor with the aim and purpose of supplying electricity on a long-term basis to Genesis Housing Association (“Genesis”), and duly succeeded in a tender process for a 25-year contract with Genesis. Pending negotiations for that long-term contract (“LTC”), on 29 September 2017, URE and Genesis entered into a short-term ‘placeholder’ supply contract (“the Contract”). The Contract contained a termination clause in URE’s favour entitling it to terminate the Contract on the happening of certain events: one of these was the passing by Genesis of a resolution for its solvent amalgamation not approved in advance by URE as supplier (cl. 10.2(d)). Clause 10.5 entitled URE to claim a termination payment in the event of such a termination.
On 1 February 2018, Genesis passed a resolution to merge with another housing association – becoming NHG. Genesis informed URE of this, but did not seek its approval in advance.
By October of the same year, the parties’ relationship had begun to sour, culminating in NHG pulling the plug on negotiations for the LTC. Mr Ensor sought advice from Burges Salmon on URE’s rights, and, in a telephone conversation on 5 November 2018, was advised that URE could have a right under cl. 10.2(d) to terminate the Contract in consequence of the amalgamation. This was (as Dias J found below) the first time Mr Ensor appreciated the Contract gave URE such a right.
URE sent NHG a letter exercising its right to terminate and consequently to a termination payment a few days later. NHG replied alleging that this itself constituted a repudiatory breach of contract and contending (amongst other things) that solvent amalgamations were not caught by the clause in question. This latter point was disposed of against NHG by Moulder J on a summary judgment application, such that it was found that a termination right had been triggered, but the question of whether or not URE had knowledge of this, and when, so as to give rise to a defence of waiver by election was a matter which needed to go to trial. An alternative defence by NHG, of waiver by estoppel, was also rejected by Moulder J, on the basis that NHG could not show detrimental reliance (the prices which URE was supplying the electricity to NHG under the Contract was in fact more beneficial to NHG). The scene was set therefore for a trial focussed mainly on the issue of whether URE had actual knowledge of its termination right and if so when. URE decided to waive privilege in its solicitors files so that the Court could examine the advice it had received both in relation to the negotiation of the Contract and the ongoing negotiations for the LTC.
After trial Dias J held that, notwithstanding URE’s continued performance of the Contract over the months in between the amalgamation and its termination letter, URE had not elected to waive its right to terminate, on account of its (via Mr Ensor’s) ignorance of its right to do so. NHG appealed contending that she erred in applying the wrong test, and in cases of express contract a party was deemed to know the terms of the contract, such that URE was deemed to know of the rights which were triggered by the insolvent amalgamation. Permission to appeal to the Court of Appeal was given on this (and other grounds).
The Court (Males LJ, with whom Zacaroli and Miles LJJ agreed) dismissed NHG’s appeal. Its principal (and the most important) ground of appeal contended that the Peyman principle needed to be modified when the right in question is contained in an express term of a contract. It argued that the decision in Peyman – generally understood to be authority for the proposition that such knowledge is required, coupled with knowledge of the facts giving rise to the right to terminate and an unequivocal election – applies only to termination rights arising at common law or equity, and did not apply in relation to express contractual rights. As a matter of law, NHG contended a contracting party should be deemed to know the terms of his contract for the purposes of waiver by election, and cannot take advantage of his ignorance of his rights: a proposition said to be supported by the well-known incorporation of terms case of L’Estrange v Graucob [1934] 2 KB 394, and the importance, generally, of certainty in commercial dealings.
The Court rejected this argument. In the first place, the Peyman principle is, and was intended by the Court in that case to be a general principle. Nor would NHG’s rule be fair. Whilst there will be cases in which contracting parties can fairly be assumed to know the terms of their contracts and the import of those terms, it is plainly unrealistic to suppose this holds in all cases, as the vast body of case law on contractual interpretation might be thought to suggest (and as confirmed in this case, where the meaning of cl. 10.2(d) was disputed at an earlier stage of the proceedings). Nor did the rule in L’Estrange support NHG’s position, being a rule about incorporation of terms, quite irrespective of knowledge, and not waiver by election.
As the Court identified, there exist different ways in which any potential unfairness in the operation of the Peyman principle for a non-waiving party is mitigated: for instance, where a contracting party is legally advised, he will be presumed (rebuttably, subject to disclosure of that advice and waiver of privilege, as occurred in this case) to know the terms of his contract; the “healthy scepticism of first instance judges” (as the Court put it at §83) is also an important safeguard, which may help to explain the decisions reached in many of the cases concerning waiver of a landlord’s express right of re-entry in a lease. But actual knowledge of one’s rights is a question of fact in all cases.
The Court also emphasised the distinct role played by waiver by estoppel. As an equitable doctrine, this mitigates the rigours of the common law doctrine: a party will still be held to his election (given sufficiently unequivocal conduct), even where there is no relevant knowledge to found a waiver by election, provided the non-waiving party has relied to his detriment. NHG was unable to show any detrimental reliance in this case, the point having already been disposed of summarily before trial.
The Court also clarified that the requisite knowledge might be supplied through ‘obviously available means’ – a phrase derived from the judgment of Rix LJ in Kosmar Villa Holidays Plc v Trustees of Syndicate 1243 [2008] EWCA Civ 147 – which was taken to mean in this context ‘blind-eye’ or wilful knowledge, where the waivor deliberately chooses not to discover knowledge which is obviously available to it (and likely a reference back to the judgment of Mance J in Insurance Corpn of the Channel Islands v Royal Hotel Ltd [1998] Lloyd’s Rep IR 151, 162-3). Again, Mr Ensor had no reason even to suspect he had any right to terminate in response to Genesis’ amalgamation until he took advice in November 2018.
The Peyman principle itself did not escape the Court’s critique: as Males LJ noted, it is a controversial principle which has received its share of judicial and academic criticism, to which his Lordship added his own observations at §80. However, as the Court also observed, it is a principle which has stood for 40 years, and during that period the Courts have identified various mitigations to what might otherwise be perceived to be harshness to a defendant; and the dust on this unique appeal having settled, is likely to continue undisturbed.
NHG raised two other unsuccessful grounds of appeal. The second contended URE should be deemed to have elected to affirm the Contract on account of its positive and unequivocal conduct of continuing to perform under it despite its ignorance of cl. 10.2(d); the Court rejected this in light of its disposal of ground 1. NHG’s third ground attacked the quantum of the URE’s termination payment under cl. 10.5; this raised a discrete issue of contractual interpretation, on which the Court upheld the Judge.
This appeal touches on fundamental questions in the law of contract, and the law of waiver (which is not limited to the law of contract): what does it mean to elect to waive a right? Does it make any difference if the putative waiver has expressly agreed to that right as a term of his contract? Ultimately, the decision turned on a relatively narrow issue of interpretation of the proper scope of the Peyman principle; but it might be thought to represent an affirmation of a fundamental private law principle: one cannot generally lose an express contractual right without the support of consideration. It is the presence of actual knowledge in a waiver scenario – the fact that the waiver knows there is a choice to be made, combined with his unequivocal conduct – that justifies the permanent loss of his right. Beyond this, there will be potential relief in equity, if detrimental reliance on an unequivocal representation can be proven. But otherwise the right given is to be respected. On the unusual facts of this case, the fact that the right to terminate was not identified for over 6 months did not result in the right being lost.
Hugh Sims KC, leading James Wibberley and Zachariah Pullar (instructed by Burges Salmon LLP), acted for the successful respondent.
Sign up
To be kept up-to-date with our latest news and future events, please complete the short form.
A member of the clerking team will help you resolve your request.
