Why accepting termination for breach can lose you the right to rescind a contract for misrepresentation

Actinon PTE Ltd v Char Biocarbon Inc [2026] EWHC 94 (Comm)

The question

Can accepting termination of a contract amount to affirmation, even where the party did not fully appreciate the consequences at the time?

The key takeaway

A party's right to rescind (e.g. on the basis of a misrepresentation) may be lost if they accept termination of the contract thereby treating the contract as valid up to the date of termination. Such a position is at odds with the contract being voidable for misrepresentation and the remedy of rescission being available.

The background

Actinon PTE Ltd (Actinon) granted Char Biocarbon Inc (Char) an exclusive licence to exploit its clean‑energy technology (the Agreement). The Agreement required Char to make minimum royalty payments, at specified intervals. 

Char began failing to pay Actinon's invoices in full and on time, although it continued to make partial payments. Actinon served a formal demand for payment of the outstanding sums and notice that the Agreement would be terminated for breach pursuant to the Agreement if Char failed to make payment within 30 days (the Notice). Later in that month, in reply, Char's solicitors sent a letter to Actinon (the DLA Letter) accepting termination but disputing the amount owed. The DLA Letter contained a general reservation of Char's rights. Before communicating its acceptance of Actinon's termination notice, Char had received legal advice suggesting this was the preferred approach to avoid having to compensate Actinon for lost royalty payments in relation to a 36 month notice period. 

Actinon issued proceedings and later sought summary judgment on sums Char had previously acknowledged it owed to it. In response to the application and, in its defence and counterclaim, Char contended, for the first time, that it had been induced to enter into the Agreement by alleged misrepresentations made by Actinon in relation to the hydrogen output performance of the clean-energy technology. Char sought an order rescinding the Agreement for misrepresentation. These allegations had not appeared in any pre-action correspondence.

The decision

The key question for the court was whether Char had affirmed the Agreement by accepting Actinon's termination, i.e. it had acted in a way inconsistent with rescission by treating the Agreement as continuing or valid.

Whether Char knew when the DLA Letter was sent that it had a purported right to rescind the Agreement was irrelevant. Having received the Notice, the court considered that Char had made a clear choice between two "inconsistent courses of action" (accept the notice of termination/ do not accept the notice of termination) and it had made an unequivocal choice to accept that the Agreement was terminated. By accepting the termination for breach, Char was treating the Agreement as valid up to termination. The decision to terminate, once communicated, was final and irrevocable and the general reservation of rights had no impact on it.

The court also noted that it was a commercially rational decision for Char because accepting termination ended the Agreement promptly, whereas rejecting termination would have left Char exposed to a 36‑month notice period. 

As Char had no real prospect of obtaining an order at trial rescinding the Agreement, it had no real prospect of an order awarding damages in lieu of rescission.

Why is this important?

Rescission can be a valuable remedy – the effect of rescission is different from termination. A breach of contract has no effect on the existence and validity of the contract. It gives the innocent party the right to damages and, in certain cases, may entitle them to terminate the agreement, whereas rescission results in all obligations being extinguished (including secondary obligations to pay damages).

Where a legally advised party accepts contractual termination for breach, the court is likely to decide that this is treating the contract as affirmed, removing the party's ability to seek rescission of the agreement based on a claim of misrepresentation. 

Any practical tips?

Consider carefully both the reasons for and the consequences of accepting a termination notice, particularly where rescission might be an available remedy.

There are a number of grounds for rescinding a contract including duress, fiduciary misdealing, bribery and misrepresentation. If any of these arise during a dispute about performance of a contract, they should be raised promptly and considered when deciding how the contract should be brought to an end.

Summer 2026