Your counterparty breaches the contract but you carry on performing, unaware that you have the right to terminate the contract. Months later, when the relationship sours, your lawyers spot the clause. Have you lost your termination right?
Or suppose you receive a termination notice and accept it, thinking that suits your commercial interests, only to realise later that you have inadvertently given up a valuable claim for misrepresentation.
Two recent decisions explore these scenarios: URE Energy Limited v Notting Hill Genesis [2025] EWCA Civ 1407 and Actinon PTE Ltd v Char Biocarbon Inc [2026] EWHC 94 (Comm). Both concern waiver by election, but from opposite directions: URE Energy asks what knowledge is needed before a party can be held to have affirmed, whereas Actinon looks at what conduct will amount to an election.
Waiver by election arises when a party, knowing it has a choice between two mutually exclusive options, acts in a way consistent only with one of them. Once that choice is communicated in clear and unequivocal terms, it is final.
A common example is a repudiatory breach of contract: if the innocent party chooses to affirm the contract rather than terminate it, the right to terminate is lost.
In URE Energy, the Court of Appeal reaffirmed the rule in Peyman v Lanjani [1985] Ch 457: a party will not be held to have elected to affirm a contract unless it knew both the relevant facts and that it had the right to elect. Males LJ acknowledged the "powerful criticisms" of Peyman v Lanjani, both academic and judicial, but the decision has stood for 40 years and the Court of Appeal remains bound by it.
URE Energy had a four-year electricity supply contract with Genesis Housing Association. The contract gave URE a right to terminate if Genesis amalgamated with another entity without URE's prior approval.
In April 2018, Genesis merged with Notting Hill Housing Trust. URE knew about the merger and its director viewed it positively because of the larger customer base it might provide. URE carried on supplying electricity, sending invoices and negotiating a possible long-term deal.
In October 2018, after the relationship between the parties had broken down, URE (without legal advice) had attempted to terminate the contract on the basis of NHG’s alleged failure to provide access for smart meter installation, claiming this was a material breach. It was only in November 2018 that URE's solicitors identified the amalgamation clause for the first time. After receiving legal advice, URE revoked its existing termination notice and served a fresh one, this time relying on the amalgamation.
NHG argued that by performing the contract for over seven months after the amalgamation, URE had waived its right to terminate.
The trial judge made the factual finding that URE’s director did not know URE had a termination right until advised by solicitors in November 2018. The director believed the relevant clause dealt only with insolvency. That finding could not be challenged on appeal.
NHG advanced four main arguments before the Court of Appeal. All four failed.
URE was therefore entitled to its termination payment. Males LJ accepted that the result was "counter-intuitive, and indeed unmeritorious" and that the amalgamation had plainly been "seized on" once things went wrong commercially. But Peyman v Lanjani has stood for 40 years. Any change would need to come from the Supreme Court.
Actinon raises a related question: what happens when a party makes a clear choice but without appreciating that it will cut off other rights?
Actinon, an engineering company, licensed pyrolysis technology to CHAR Biocarbon. The licence required CHAR to pay minimum royalties on a set schedule. CHAR fell behind on payments from early 2022. In June 2023, Actinon served a notice of default, demanding payment of over $3 million and giving CHAR 30 days to pay, failing which the agreement would terminate.
CHAR's solicitors, DLA Piper, responded with a letter that proved decisive. It accepted Actinon's termination "with immediate effect from 1 July 2023", disputed the amount owed, acknowledged that CHAR owed at least $635,810 on its own calculations and included a general reservation of rights. Privileged material disclosed in the proceedings showed that DLA Piper had advised CHAR that accepting termination "potentially puts us in a slightly better position" because it would end the agreement immediately rather than a 36-month notice period.
It was only later, in its Defence and Counterclaim, that CHAR alleged for the first time that it had been induced to enter the licence by misrepresentations about the technology's hydrogen output and sought rescission.
Paul Mitchell KC, sitting as a Deputy High Court Judge, granted Actinon summary judgment on the $635,810 that CHAR had admitted owing.
By accepting Actinon's termination, CHAR had made a choice between two inconsistent positions: either the licence was valid and terminable for breach, or it was voidable for misrepresentation and could be rescinded. CHAR could not have it both ways. As the judge put it: "one cannot accept that a contract has been terminated and seek thereby to alter the balance of rights between the parties, without a logically prior and inevitable acceptance that the contract was in force immediately before it was terminated".
The Court also held that CHAR's general reservation of rights could not undo the acceptance. A catch-all reservation does not make an irrevocable election equivocal.
Both judgments draw a careful line between election and estoppel.
Election requires knowledge and an unequivocal choice. Once made, it is final and does not depend on reliance by the other party. Estoppel, by contrast, arises where a party makes an unequivocal representation by words or conduct on which the other party relies to its detriment. Knowledge of the right is not required for an estoppel to arise.
In URE Energy, the Court of Appeal noted that continued performance without knowledge of the right to terminate might still give rise to an estoppel, but NHG's estoppel defence failed on the facts because there was no detrimental reliance. In Actinon, the estoppel argument also failed as Actinon's CEO had not read DLA Piper’s letter as containing any promise by CHAR not to rely on a right to rescind and there was no evidence of reliance.
Know your contract before a dispute arises: Rights buried in detailed contract provisions can be missed, even by sophisticated parties. Identify key provisions, including termination triggers such as mergers, changes of control and insolvency events, early on and review them when circumstances change.
Build clear time limits into termination provisions: If you want a right to terminate to be lost unless exercised promptly, say so in the contract. The Court of Appeal observed in URE Energy that it may be possible to construe a right as having to be exercised within a reasonable time, so that if not exercised the right lapses. However, in URE Energy, no such argument was advanced. Express time limits and "deemed approval" mechanisms can avoid the problem.
Think before you accept (or reject) a termination notice: Actinon highlights that accepting a counterparty's termination for tactical reasons (here, to secure an earlier end date) can have significant consequences. If you have, or think you may have, a right to rescind, or other claims that depend on the contract being voidable, accepting termination may cut them off.
A general reservation of rights may not save you: Where an election has been clearly communicated, a boilerplate general reservation cannot undo it.
Manage estoppel risk: Even if you lacked knowledge and so could not have elected to affirm a contract, you may still be prevented from terminating if the other party relies on your conduct to its detriment. Manage communications carefully, use specific reservations of rights where appropriate and be very careful of conduct that could signal that you are treating the contract as continuing. In URE Energy, NHG's estoppel defence failed only because it could not prove detrimental reliance. A different set of facts could have gone the other way.
Route notices and key documents to the right people: When you receive a notice of merger, amalgamation or similar event, make sure it reaches the appropriate people within the business and external advisers promptly. The risk is not only that a right may be lost through election but also that continued performance may give rise to an estoppel if there is detrimental reliance.
Terminating a contract and applying the legal principles that govern election and affirmation in a real-world scenario remains a complex exercise requiring careful thought. As these cases demonstrate, decisions taken in the heat of a dispute can have lasting and sometimes irreversible consequences. Parties should seek legal advice as soon as a potential issue arises and before any steps are taken that cannot be undone.
