CA-2024-002472 - [2025] EWCA Civ 1407

Mr Riley submitted that URE should be deemed to have made an election to affirm the contract by reason of its conduct in continuing performance after knowing of the amalgamation. He submitted that this was not a mere lapse of time, but represented positive conduct by URE, which continued to supply electricity, invoiced the merged entity NHG, pressed for access for the fitting of AMR meters, and continued to negotiate for the long-term contract which would have been pointless if it was not prepared to deal with the amalgamated entity.

I would accept that this represents positive conduct which goes beyond the mere lapse of time and I agree with the judge, despite Mr Sims’ submissions in support of the Respondent’s Notice, 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.

Mr Riley relied on the statement by Lord Goff in The Kanchenjunga at 398 col 1 that if a party does not make its election, ‘the time may come when the law takes the decision out of his hands, either by holding him to have elected not to exercise the right which has become available to him, or sometimes by holding him to have elected to exercise it’. But this was said in a context where the electing party did have knowledge, not only of the facts, but also of its right to elect. It does not provide any support for the existence of a separate doctrine of election, or a principle of deemed election, whereby an election is deemed to be made as a result of the lapse of time regardless of knowledge. This is clear from the way in which Lord Justice Rix put the matter in the passage from his judgment in the Kosmar Villa Holidays case which I have quoted at para 97 above (emphasis added):

‘74. … However, there will be some circumstances where, even in the absence of an actual election, the party with the choice created by relevant knowledge, actual or obviously available, will be regarded as having exercised it after a reasonable time has passed. …’

Thus a party will not be deemed to have made an election to affirm the contract unless it has the relevant knowledge (which includes ‘blind-eye’ knowledge). I would therefore reject ground 2.

It is therefore unnecessary to consider whether, if there would otherwise have been such a deemed election, clause 13.1 would have operated to preclude such a conclusion. That clause provides, in short, that delay or omission in exercising any right will not be construed as a waiver of that right. I would have held however, that if URE had had the relevant knowledge, its positive conduct in continuing to perform as summarised above would have meant that this was not a case of mere delay or omission, and that clause 13.1 would not have prevented a waiver by election from having occurred.

It is similarly unnecessary to consider at any length the other point raised by the Respondent’s Notice, which is whether the opening words of clause 10.2 (‘The Supplier may terminate this contract at any time …’) had the effect of excluding the doctrine of waiver. Mr Sims focused here on the words ‘at any time’. On the view which I take, the point does not arise unless URE had the relevant knowledge for a waiver by election and, if it had such knowledge, its conduct would have amounted to an election to affirm. That being so, the words ‘at any time’ could not have preserved a right to terminate after the election to affirm had been made.