Election Requires Knowledge Even for Express Contractual Rights; No Deemed Knowledge of Contract Terms; “Remaining Value” Means Turnover — URE Energy Ltd v Notting Hill Genesis [2025] EWCA Civ 1407

Introduction

This Court of Appeal decision tackles a seemingly simple but consequential question in the law of waiver by election: when a party has a right to terminate that is expressly conferred by contract, can that party be said to have elected to affirm the contract by continued performance if it did not know it had that right? In short, does the principle in Peyman v Lanjani — that election requires knowledge not only of the facts but of the existence of the right — apply even where the right is an express contractual right?

Males LJ (with whom Zacaroli and Miles LJJ agreed) answers “yes.” The court confirms that (i) knowledge of the right to elect is required for an election to affirm, even where the right is set out in black and white in the contract; (ii) there is no rule that parties are “deemed” to know their contract terms for the purpose of waiver by election; and (iii) the phrase “remaining value of this Contract to the Supplier” in a termination-payment clause refers to future income (turnover), not profit. Although the outcome may feel counter-intuitive on the facts (URE seized on an amalgamation months later as a lifeline after negotiations for a long-term deal failed), the court held it was bound by longstanding authority.

Parties: The claimant/respondent was URE Energy Ltd (a start-up supplier of electricity); the defendant/appellant was Notting Hill Genesis (NHG), the post-merger entity succeeding Genesis Housing Association. The dispute arose out of a four-year electricity supply agreement and the supplier’s contractual right to terminate upon the customer’s amalgamation unless pre-approved.

Summary of the Judgment

• Issue 1: Whether election to affirm a contract requires knowledge of the right to terminate when that right is contained in an express contract term. Held: Yes. Peyman v Lanjani applies. There is no special rule that parties are deemed to know the terms of their contracts for the purpose of election (paras 88–96). L’Estrange v Graucob does not assist on election (para 90).
• Issue 2: Whether URE’s continued performance after the amalgamation amounted to a deemed election by lapse of time. Held: No. Deemed election after lapse of time still depends on the electing party having the requisite knowledge (para 104). Here, URE (through Mr Ensor) did not learn of the right until 5 November 2018 (paras 41–42). Without knowledge, there can be no election.
• Issue 3: How to calculate the termination payment under clause 10.5 (“50% of the remaining value of this Contract to the Supplier”). Held: “Remaining value” means anticipated future income (turnover) for the remaining term in respect of the premises terminated, not projected profit (paras 108–111). The clause is a pragmatic, swift measure focused on per-premises revenue, avoiding complex margin accounting within a 10-day payment deadline.
• New point on appeal: The court permitted NHG to argue (for the first time on appeal) the “deemed knowledge” point as a pure question of law causing no prejudice that costs cannot cure (paras 51–58), but rejected it on the merits.
• Outcome: Appeal dismissed; URE’s termination was valid; termination payment of £3,946,861.56 affirmed (paras 112–114).

Case Background

The parties entered a four-year electricity supply contract (from 1 October 2017) as a placeholder while negotiating a rare 25-year arrangement involving AMR smart metering and a solar farm. The contract (drafted by URE’s solicitors) included supplier termination rights. Clause 10.2(d) allowed URE to terminate if the customer passed a resolution for “winding up,” which expressly included “amalgamation, reconstruction, reorganisation, administration, dissolution, liquidation, merger or consolidation,” save for a solvent amalgamation “approved in advance by the Supplier.”

Genesis (the customer) amalgamated with Notting Hill Housing Trust on 3 April 2018 to form NHG. URE received advance notice but did not object; indeed, Mr Ensor thought a larger customer base was positive. Relations soured in autumn 2018 due to disputes over access for AMR rollout and a reversion to payment in arrears. When NHG pulled the plug on the 25-year deal, URE sought to terminate the four-year contract, ultimately relying (through solicitors) on clause 10.2(d) on 7 November 2018. URE claimed a termination payment under clause 10.5.

At summary judgment, Moulder J held there was no real prospect that NHG could show URE gave advance consent to the amalgamation, and no evidence supported an estoppel by reliance. At trial, Dias J found no waiver by election because URE did not know of its clause 10.2(d) right until 5 November 2018 (when advised by its solicitors); she awarded the clause 10.5 payment. NHG appealed on election and quantum.

Detailed Analysis

Precedents and Authorities Considered

• Peyman v Lanjani [1985] Ch 457: Court of Appeal held that for election to affirm, a party must know not only the facts but also that it has the right to rescind/terminate. The present court treats Peyman as a binding statement of general principle (paras 62–75), not confined to non-contractual rights.
• The Kanchenjunga [1990] 1 Lloyd’s Rep 391 (HL): Lord Goff’s classic exposition distinguishing election (choice between inconsistent rights; final; does not depend on reliance) from equitable estoppel (representation; reliance; potentially suspensory). The court uses these foundations (paras 59–61) but notes that Kanchenjunga left Peyman’s correctness open (para 81).
• Kosmar Villa Holidays v Trustees of Syndicate 1243 [2008] EWCA Civ 147: Rix LJ’s remarks on knowledge “actual or obviously available” are read as addressing blind-eye knowledge, not diluting the requirement of knowledge of the right (paras 97–99).
• Moore Large & Co v Hermes Credit & Guarantee [2003] EWHC 26 (Comm): Presumption that a party with legal advice knew its rights; rebuttable by waiver of privilege (paras 41, 85).
• Involnert Management Inc v Aprilgrange Ltd [2015] EWHC 2225 (Comm): Leggatt J critiqued Peyman as hard to justify but accepted it as established law, noting the mitigating presumption and the practical difficulties it creates for proof (paras 78, 85).
• Delta Petroleum (Caribbean) v BVI Electricity Corp [2020] UKPC 23: Lord Leggatt summarised election doctrine; the present court observes that this summary does not mention knowledge of the right but does not undermine Peyman (para 79–81).
• L’Estrange v F Graucob [1934] 2 KB 394: Binding effect of signed terms; distinguished because being bound by terms is different from knowing you have a right for the purpose of election (para 90).
• The Laconia [1977] AC 850: Reasonable-time constructions to avoid lingering rights; acknowledged as a different “mitigation” route but inapplicable here (para 82).
• Prudential Assurance v HMRC [2016] EWCA Civ 376; Singh v Dass [2019] EWCA Civ 360; Notting Hill Finance v Sheikh [2019] EWCA Civ 1337: Criteria for allowing new points on appeal; applied to permit NHG’s new legal argument (paras 53–58).
• Coastal Estates Pty Ltd v Melevende [1965] VR 433 and Sargent v ASL Developments (1974) 131 CLR 634: Australian cases exploring (and in Sargent partially endorsing) “deemed knowledge” for express contractual rights; the Court of Appeal declines to follow that approach (paras 68–69, 91–93).
• MUR Shipping v RTI [2024] UKSC 18 and The Golden Victory [2007] UKHL 12: General emphasis on commercial certainty; relied on by NHG, but not decisive against the binding effect of Peyman (paras 48, 80–81).

Legal Reasoning

1) Can a party be “deemed” to know its express contractual rights for election?

• The court permits NHG to run the new “deemed knowledge” point on appeal (pure law, no further evidence needed, no irremediable prejudice), but rejects it (paras 51–58).
• Holding: No rule of law deems a contracting party to know its express contractual rights for the purpose of waiver by election (para 95). Whether the party knew of the right is a question of fact. L’Estrange is not analogous; it speaks to being bound by the contract, not to knowledge for election (para 90).
• Peyman applies across the board: the court declines to carve out a “contract-term” exception (paras 88–90). It recognises the competing value of commercial certainty but considers itself bound to apply Peyman’s fairness-centric knowledge requirement unless and until the Supreme Court changes the law (paras 80–81).

2) What constitutes the requisite knowledge?

• Knowledge means awareness that you have a legal right to choose between inconsistent courses (para 96). It can include “blind-eye” knowledge (deliberately shutting eyes to the obvious), but here the trial judge found no such deliberate avoidance (paras 41–42, 98–99). Mr Ensor did not appreciate the solvent amalgamation limb within clause 10.2(d) until advised on 5 November 2018; until then, he assumed the sub-clause dealt with insolvency scenarios (para 41).
• A factual presumption exists that a party with lawyers knows its rights (Moore Large), but it is rebuttable and was rebutted by URE’s waiver of privilege and the evidence (paras 41, 85–86).

3) Is continued performance a deemed election after lapse of time?

• The court confirms that even a “deemed” election (where time is said to take the decision out of the party’s hands) still requires that the party had the relevant knowledge (actual or blind-eye) during the period said to give rise to the deemed election (paras 101–104).
• On these facts, although URE’s conduct would objectively have amounted to affirmation had it known of the right (continued supply, invoicing NHG, pursuing AMR rollout, negotiating a long-term contract), it did not have the requisite knowledge; therefore no election (paras 43, 101–104).
• Clause 13.1 (“no delay or omission … shall be construed as a waiver”) does not assist if there had been a knowledgeable, positive election by conduct; however, without knowledge, the clause is not engaged (paras 105–106).

4) Why does estoppel not save NHG?

• Equitable estoppel is available where the other party reasonably relies to its detriment on an unequivocal representation by words or conduct that the right will not be enforced. But Moulder J found no detrimental reliance at the summary judgment stage, and there was no appeal against that conclusion; estoppel was out of the case at trial (paras 37–38, 87).
• The court reinforces the sequential analysis: consider election first (requires knowledge of the right), then consider whether estoppel fills any gap through detrimental reliance (paras 59–61, 66–71, 72–75, 87).

5) Interpreting the termination payment: income or profit?

• Clause 10.5 provides for “50 percent of the remaining value of this Contract to the Supplier in respect of the relevant Supply Premises (as determined by the Supplier acting reasonably) … within 10 days of the termination date” (para 107).
• Context and structure point to turnover, not profit: (i) the right can be exercised per premises; per-premises future income is straightforward to project, whereas costs are often global, uneven over time, or front-loaded; (ii) a 10-day timeline is consistent with a simple, pragmatic arithmetic (paras 110–111); (iii) the clause functions as a negotiated, certain and prompt compensation mechanism, not a granular damages inquiry (para 111).
• Held: “Remaining value” means anticipated future income (turnover) in respect of the terminated premises; the supplier’s calculation must be reasonable, but there is no requirement to net off future costs (paras 110–111).

Impact and Practical Consequences

A. Substantive law: reaffirmation and clarification

• Binding affirmation requires knowledge of the right to elect even for express contractual rights. No deemed knowledge rule applies. This cements Peyman’s reach and rebuffs an Australian-style carve-out for contractually conferred rights.
• Deemed election by lapse of time presupposes knowledge. Parties cannot transmute mere time plus performance into an election where the “elector” was unaware of the right.
• The court acknowledges strong criticism of Peyman (fairness vs commercial certainty), but treats it as settled law unless the Supreme Court revisits it. Expect continued reliance on the presumption of knowledge in legally advised contexts and on the estoppel safety valve for reliance-and-detriment situations.

B. Litigation strategy

• Election defense now turns centrally on proving knowledge of the right — not just the facts. If the counterparty had legal advisers, push the Moore Large presumption; be ready to force a difficult choice: either they waive privilege to rebut the presumption (with the risks that entails) or the presumption stands.
• Do not neglect estoppel. If you want to shut down “ambush termination,” prove concrete detrimental reliance following the counterparty’s continuing performance (investment decisions, foregone alternatives, operational arrangements) — otherwise, election may fail and estoppel may be unavailable, as here.
• Raise all legal arguments early. Although the court allowed NHG’s new legal point on appeal, it emphasised the discretion and the usual cautions (Prudential; Singh v Dass). Late pivots are risky.

C. Contract drafting and deal practice

• Manage knowledge risk:
  • Express time limits: make termination rights exercisable within a fixed period after the triggering event (or after notice of the event), failing which the right lapses. This converts uncertainty about “election” into a contractual sunset.
  • Deeming provisions: stipulate that continued performance beyond a defined period after the event constitutes affirmation, irrespective of actual knowledge. Consider whether this sits comfortably with Peyman; as a matter of contract, parties can define conditions for availability of a right and how it is lost. Draft with care and reasonableness in mind (and consider UCTA where applicable).
  • Representations and acknowledgments: on contract signature or on notified events (e.g., proposed amalgamation), require written acknowledgment of whether any consent or approval is needed and, if so, that it is given or refused by a deadline.
• Restructuring notifications:
  • Where a counterparty notifies a merger or reorganisation, seek explicit written confirmation that any approval requirement is satisfied. If you are the notifying party, secure a contemporaneous “approval” or waiver to neutralise any later reliance on termination events.
  • Consider making approval a condition precedent with a deemed refusal unless affirmative consent is provided by a date certain.
• Termination-payment drafting:
  • Say what you mean. If you intend a revenue-based sum, use “gross charges” or “future Charges” language and a clear calculation schedule. If you intend to compensate lost margin, say “net margin” and specify cost treatment and audit rights.
  • Per-premises mechanics: if partial termination is possible, ensure the formula works per site and avoids global cost allocation disputes.
  • Payment timing: a short payment deadline, as here (10 days), fits a simple revenue model; if profit is intended, build in time and process for data exchange and calculation.
• “No waiver” clauses (like clause 13.1): Useful, but not a panacea. They do not override a clear, knowledgeable election by conduct. Consider pairing with specific deeming provisions and tight notice requirements.

D. Sector-specific implications

• Utilities and long-tail supply contracts: These often include change-of-control or amalgamation termination rights. This decision heightens the importance of active consent management around reorganisations and of explicit time-limits or deeming provisions to avoid “latent” rights lying dormant until commercial leverage shifts.
• M&A execution risk: Buyers inheriting long-term supply contracts should obtain counterparties’ written approvals where the contract calls for it, even if those rights seemed moribund at the time. Reliance on a supplier’s silence plus continued trading will not necessarily extinguish a termination right absent demonstrable detrimental reliance.

Complex Concepts Simplified

• Waiver by election: When a party faces mutually exclusive choices (e.g., terminate or affirm), its words or conduct can “elect” one course. Once chosen with the requisite knowledge, the choice is final and irrevocable.
• Knowledge requirement: For election to affirm, the party must know both the facts and that it has the legal right to choose. Ignorance of the right (unless it is “blind-eye” ignorance) prevents an election from arising (Peyman v Lanjani).
• Blind-eye knowledge: Deliberately shutting one’s eyes to an obvious right (or failing to make inquiries where suspicions demand it) may be treated as knowledge.
• Equitable estoppel: Separate from election. If a party’s conduct is an unequivocal representation that it will not enforce its rights, and the other party relies detrimentally, the first may be estopped from later enforcing those rights. Estoppel does not require the representor to have known its rights.
• Deemed election by lapse of time: The law may treat a party as having elected after a reasonable period — but only if it had the knowledge needed to make the choice during that period.
• Termination payment (liquidated sum vs damages): A contractual sum payable on termination (whether or not for breach) can be a pricing mechanism rather than damages. Here the clause fixed 50% of remaining “value” and was construed to mean future income, enabling swift reconciliation without profit analysis.
• Solvent amalgamation approval: A contractual condition making termination rights contingent on pre-approval of restructurings. Absence of requested approval may trigger a termination right even where the supplier otherwise has no objection.

Conclusion

URE Energy v Notting Hill Genesis is a strong reaffirmation of Peyman v Lanjani: a party cannot be held to have elected to affirm a contract unless it knows of the right to elect — even where that right is stated expressly in the contract. The Court of Appeal rejected an Australian-style “deemed knowledge” rule and distinguished L’Estrange v Graucob, underscoring that being bound by a contract is not the same as knowing of a right for election purposes. Deemed election by lapse of time still depends on knowledge; the fallback of estoppel remains available where reliance and detriment can be proved.

On the commercial side, the court’s construction of the termination-payment clause as a turnover-based mechanism is noteworthy: the phrase “remaining value … to the Supplier” in a per-premises, short-deadline payment clause indicates a simple revenue measure, not an exercise in profit accounting. Parties who want a margin-based result must draft for it explicitly.

The decision places a premium on careful drafting (time-bound rights, explicit deeming provisions, clear termination-payment formulae) and on proactive consent and reliance management around corporate reorganisations. While Males LJ recognised the result may feel unmeritorious on the facts, the court viewed itself as bound by principle and precedent. Unless and until the Supreme Court revisits Peyman, knowledge of the right remains the keystone for election to affirm — express term or not.