Termination clauses and the express right to terminate in certain events – knowledge versus understanding

URE Energy Limited v Notting Hill Genesis [2025] EWCA Civ 1407

The question

Is a party with an express contractual right to terminate the contract in response to certain trigger events, who continues to perform for a period of months after such an event has occurred, entitled to say that its conduct does not amount to an election to affirm the contract because it did not "know" that the contract entitled it to terminate?

The key takeaway

Even if a party is aware of facts that trigger a contractual termination right, unless a party is aware of the existence of the right to terminate itself, it cannot affirm the contract by its conduct and may therefore still terminate the agreement if it becomes aware of the right to terminate at a later date (unless estopped from doing so).

The background

URE Energy Limited (URE), a start‑up electricity supplier acquired by Mr Ensor, entered into a four‑year placeholder electricity supply contract with Genesis Housing Association Limited (Genesis) on 1 October 2017. URE and Genesis agreed that URE would supply electricity across Genesis’s estate for four years while the parties negotiated a longer‑term deal.

The four-year contract was detailed, both parties had specialist assistance during the negotiations, and it was drafted by a solicitor. It included clause 10.2(d): entitling URE (the supplier) to terminate the contract in certain events, including the passing of a resolution by Genesis for its amalgamation:

‘10.2 The Supplier may terminate this Contract at any time for all or any Supply Premises if: … (d) the Customer passes a resolution for its winding up which shall include amalgamation, reconstruction, reorganisation, administration, dissolution, liquidation, merger or consolidation (other than a solvent amalgamation, reorganisation, merger or consolidation approved in advance by the Supplier) or a petition is presented for, or a court of competent jurisdiction makes an order for, its winding up for dissolution, or an administration order is made in relation to it or a receiver is appointed over, or an encumbrance takes possession of or sells, one or more of its assets or the Customer makes an arrangement or composition with its creditors generally or ceases to carry on business; …’

The contract also contained the following term:

‘13.1 No delay or omission by either party in exercising any right, power or remedy under this Contract shall be construed as a waiver of such right, power or remedy and any single or partial exercise shall not prevent any other or further exercise of the same or the exercise of any other right, power or remedy.’

Clause 10.5 entitled URE to a termination payment equal to 50% of the remaining value of the contract in the event of a termination pursuant to clause 10.2.

In February 2018, Genesis passed a resolution to amalgamate with Notting Hill Housing Trust, creating Notting Hill Genesis (NHG). Genesis/NHG notified URE of the proposed amalgamation but did not seek its formal advance approval, and URE, through Mr Ensor, raised no objection and continued to supply power, invoice NHG and press ahead with meter roll out and the long‑term contract discussions.

By October 2018, the relationship had deteriorated and NHG gave written notice that it would not proceed with the long‑term contract. Mr Ensor sought advice from his solicitors. In November 2018 Mr Ensor was legally advised that URE could have a right to terminate the short-term contract without notice on the basis that NHG had not sought URE’s approval for the amalgamation. This was the first time Mr Ensor had become aware that URE might have such a right. The contract was terminated. URE ceased to operate and brought a claim for the termination payment under clause 10.5 on the basis that it was entitled to terminate the contract as a result of the amalgamation.

At first instance, the court considered whether URE had waived by "election" its right under clause 10.2(d)

to terminate by continuing under the contract. Election arises when a party has a choice between two alternative courses of action (typically, whether to terminate a contract or continue performance) and, with knowledge of the facts giving rise to that choice, acts in a way which is only consistent with having made a choice between them. As part of its consideration, the court examined whether Mr Ensor of URE was aware of its right to terminate (and, if so, when) and the impact of URE's receipt of legal advice from its solicitors.

The court found in favour of URE; the company had not elected to affirm the contract, as it had no knowledge of the right to terminate the contract until it received legal advice on termination in November 2018. Prior to that it only knew of "the facts giving rise to the right to terminate" – the amalgamation.

The decision

On appeal, the decision of the High Court was upheld. On the unchallenged finding of fact that Mr Ensor did not understand that clause 10.2(d) gave URE a right to terminate, until several months after the amalgamation event, the court found that no election to affirm could have occurred, despite URE’s post‑amalgamation conduct. To make an election, the party concerned must be aware both of the facts giving rise to terminate and of the right itself (knowledge would include "blind eye" knowledge).

The judge rejected NHG’s core submission that, where the right to terminate arises from an express contractual term, a commercial party has deemed knowledge of that term. Although it will be presumed that a party who has legal advice is aware of its rights, this presumption is rebuttable. A deemed knowledge rule would be at odds with this rebuttable presumption.

The court declined to carve out a special category for express termination clauses or to invent a deemed‑knowledge rule, stressing that to do so would, in substance, undermine the well established knowledge requirement of waiver by election and be unrealistic in the context of long and complex commercial contracts.

The court acknowledged that the knowledge requirement for waiver by election is difficult to reconcile with objective principles and the principle that ignorance of the law is no excuse but noted that any perceived unfairness could be mitigated in other ways. For example, courts will apply a “healthy scepticism” to self‑serving claims of ignorance and estoppel arguments can be utilised where there is detrimental reliance by the other party. In this case, however, the High Court had found no detrimental reliance by NHG.

Why is this important?

The case challenges the assumption that if a party appears to affirm the contract, by delaying in exercising its rights or by reason of its conduct in continuing to perform after a triggering event such as an amalgamation, the right to terminate is lost. A termination right will not be treated as waived by election unless the contracting party actually knows that the right exists and that it has a choice between terminating and affirming the contract.

Any practical tips?

Most commercial contracts contain detailed bespoke or standard termination provisions. These should be reviewed at the outset and, in terms of the right to terminate, monitored throughout the term of the contract for potentially triggering events (such as here, the amalgamation). Within a large business, ensure there is a joined-up approach to dealing with termination to avoid a situation where the actions of one part of the business end up affirming the contract while another part, with the requisite knowledge, seeks to terminate.

Consider, within the termination clause, specifying a clear time limit within which any termination right must be exercised, to prevent parties from seeking to rely on that right long after the triggering event has occurred.

When negotiating complex, lengthy contracts keep in mind that your counterparty may not have "knowledge" of all of the key provisions and that waiver is an option.