About this case:

• Citation:
  [2025] EWCA Civ 1407
• Judgment:
  External link
• Court:
  England and Wales Court of Appeal
• Judge:
  Males LJ

URE Energy Ltd raised an action against Notting Hill Genesis, a charity incorporated as a community benefit society, seeking a termination payment under an energy supply contract on the basis of two breaches of contract. An issue arose at trial as to whether URE had lost the right to terminate as a result of waiver by election, which the High Court ruled it had not. NHG thereafter appealed.

The appeal was heard by Lord Justice Males, Lord Justice Zacaroli, and Lord Justice Miles. Jamie Riley KC & Chinmayi Sharma appeared for the appellant and Hugh Sims KC, James Wibberley & Zachariah Pullar appeared for the respondent.

Skim-read the contract

The claimant, URE, was a start-up company purchased by a Mr Gary Ensor with the aim of supplying electricity to the Genesis Housing Association, the defendant’s predecessor. Mr Ensor’s proposal involved the installation of LEDs across Genesis’ entire estate and the construction of a solar farm to generate electricity, at a substantial cost to be recovered over a period of 25 years. Following a tender process, URE’s bid was successful, but the parties were not yet in a position to conclude a 25-year contract as URE still needed funding for the construction of the solar farm.

As a result, on 1 October 2017 the parties agreed to a four-year “placeholder” agreement intended to be superseded by the longer-term contract, drafted by solicitors based on a precedent. Under clause 10.2, URE was able to terminate the contract under nine separate grounds, including the passing by Genesis of a resolution for its amalgamation. Such a resolution was passed on 1 February 2018 for the merger of Genesis with another housing association, creating the defendant and appellant NHG.

On 29 October 2018, NHG gave written notice that it no longer intended to proceed with the long-term contract with URE, which would be fatal to URE’s business. In a letter dated 7 November 2018, URE terminated its relationship with NHG on the basis of the amalgamation, to which it had not previously objected. The High Court judge ruled that Mr Ensor had “skim-read” the contract and did not know he had the right to terminate based on the amalgamation, assuming that the provision related solely to amalgamation as a result of insolvency. NHG’s defence of waiver by election therefore failed.

Senior counsel for the appellant submitted that URE should have been taken to know of its right of termination and the judge was wrong to find otherwise. It was a basic principle of contract law that a part could not contend it did not know or understand the terms to which it had agreed. The respondent relied on the case of Peyman v Lanjani (1985) as authority for the proposition that an affirmation would only have effect if the rescinding party knew of its right to rescind, which could not be distinguished in respect of contractual termination rights.

Principle of fairness

In a decision with which the other judges agreed, Males LJ said of the appellant’s criticisms of Peyman: “It seems to me that the decision in Peyman v Lanjani is not  unprincipled. 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. Rather, the problem is that this principle comes into conflict with other legal principles. In particular it conflicts with the principle ‘that in the field of commerce the existence and exercise of legal rights should depend on objective manifestations of intent and not on a party’s private understanding’.”

He continued: “Contrary to Mr Riley’s submission, no such rule can be derived from the well-known case of L’Estrange v Graucob. That case decided that Miss L’Estrange was bound by an exclusion clause in a contract which she had signed regardless of whether she had read it or knew its contents. Whether she knew about the clause or had read the contract was ‘wholly immaterial’. In the present case there is no doubt that the parties are bound by the terms of their contract. The issue is whether URE elected to affirm the contract when it had a contractual right to terminate it. L’Estrange v Graucob has nothing to do with that issue.”

Considering whether the knowledge was obviously available to Mr Ensor, Males LJ said: “On the judge’s findings, Mr Ensor had no reason to investigate whether the amalgamation of Notting Hill and Genesis gave URE any right to terminate the contract until the parties’ relationship deteriorated in October and early November 2018. At the time when the amalgamation occurred, Mr Ensor did not in fact know that it gave URE any right to terminate and, as he was quite content to deal with the amalgamated entity, would have had no reason to scrutinise the contract or ask for legal advice about it to find out whether URE had any such right.”

He concluded: “I would accept that [the continued supply of electricity] represents positive conduct which goes beyond the mere lapse of time and I agree with the judge that URE’s conduct following the amalgamation would have been sufficiently clear and unequivocal, on an objective basis, to demonstrate that URE intended to affirm the contract. But it remains the case that there can be no waiver by election without the relevant knowledge which, on the authority of Peyman v Lanjani, includes knowledge of the right to elect.”

NHG’s appeal was accordingly dismissed.