Legal Developments in Construction Law: January 2026
1. Knowledge requirements for waiver by election in contractual termination rights
The Court of Appeal recently considered the principle of waiver by election, specifically whether a party’s conduct following a contractual termination event can amount to an election to affirm the contract, and the extent to which knowledge of that right is required.
The dispute related to a four year electricity supply contract (the “Contract”) between URE Energy Limited (“URE”) for the supply of electricity to Genesis Housing Association (“Genesis”).
The Contract included a clause permitting URE to terminate in certain events, including Genesis’ amalgamation, unless the amalgamation was approved in advance. Following Genesis’ merger with another entity to form Notting Hill Genesis (“NHG”), URE continued to perform the Contract for several months, only later seeking to terminate and claim a substantial termination payment.
At first instance, the High Court found that URE had not lost its right to terminate by election, as it was unaware of the contractual termination right arising from the amalgamation until shortly before giving notice to terminate. NHG appealed, contending that URE should be deemed to know its contractual rights and that continued performance amounted to an election to affirm.
The Court of Appeal reviewed the doctrine of waiver by election, drawing on established authorities including The Kanchenjunga [1990] 1 Lloyd’s Rep 391 and Peyman v Lanjani [1985] Ch 457 requiring that a waiver by election between alternative inconsistent rights requires actual knowledge not only of facts giving rise to those rights but also knowledge of the rights themselves. The Court rejected the argument that a party is deemed, as a matter of law, to know all express contractual rights for the purpose of waiver by election. The decision in Peyman v Lanjani was held to be of general application, requiring actual knowledge of the right to elect, regardless of whether the right arises under an express contractual term or the general law.
The Court found that URE’s principal (Mr. Ensor) was aware of the amalgamation to form NHG but did not appreciate that it triggered a right to terminate under the Contract until later advised by his solicitors. The Court found that absent such knowledge URE’s continued performance did not amount to an election to affirm the Contract. URE validly terminated the Contract upon acquiring the relevant knowledge.
The Court further held that positive conduct following the amalgamation to form NHG, such as continued supply, invoicing, and negotiations, would have amounted to a waiver had URE known of its rights, but in the absence of such knowledge, no election occurred. The argument that a lapse of time or obviously available means of knowledge could substitute for actual knowledge was rejected.
This judgment provides important clarification on the interplay between waiver by election, knowledge requirements, and contractual termination rights. The decision highlights the need for parties to be aware of their contractual entitlements, and impose in contract drafting any required mitigations, e.g., time limits for election, and the consequences of their conduct following events giving rise to termination rights.
This case will serve as a reminder to contracting parties to check whether any new rights might arise on a later amalgamation or other restructuring of that counterparty. As this case also illustrates, parties cannot rely upon their counterparties to advise when it merges with another business and parties therefore should proactively identify any new rights and remain vigilant in being able to exercise those rights (where that may be in its interest) as and when they arise.
URE Energy Ltd v Notting Hill Genesis [2025] EWCA Civ 1407 (10 November 2025)
2. Condition precedent is not deemed fulfilled by a party’s own breach
The Supreme Court recently ruled definitively on whether the principle established by the House of Lords in Mackay v Dick (1881) 6 App Cas 251, namely that of “deemed fulfillment” or “deemed wavier” (the “Mackay Principle”) was applicable in English Law. The Mackay Principle suggests that where a party to a contract wrongfully prevents the fulfillment of a condition precedent to their debt obligation that precedent would be deemed fulfilled.
The current case dealt with the sale of vessels from Ridgebury November LLC and others (together the “Sellers”) to King Crude Carriers SA and others (together the “Buyers”) under separate but near identical memoranda of understanding (“MoU”). The MoUs each held that the respective Buyers would lodge a 10% deposit after signature of the MoU and the opening of the relevant bank account. The accounts were never opened as the Buyers did not provide requisite information and the deposits were never made. Contractually if the deposits were not made the Sellers could each cancel their contract and claim the deposit as a debt.
The applicability of Mackay v Dick under English law was considered at all stages up to the Supreme Court who ruled unanimously that the Mackay Principle was not applicable in English law overruling the Court of Appeal’s position.
The Supreme Court reached its position rejecting the Mackay Principle for several reasons including:
- Existing English law authorities on the applicability of Mackay v Dick were inconsistent.
- In order to avoid the Mackay Principle fundamentally undermining the current law of contracts for sale of goods, property and the accrual of debts wide ranging uncertain exceptions would be needed which would not form robust principles of law.
- English law of contract proceeds on the terms of the contract, both express and implied, and their interpretation which promotes certainty rather than the “fictional fulfillment of a condition precedent.”
- The rejection of the Mackay Principle did not lead to an injustice. As there was an adequate remedy to the Sellers in damages it was unnecessary to establish the debt claim.
The Supreme Court separately considered the issues of whether contractual interpretation and possible implied terms would have the same effect as the Mackay Principle but in this instance found that the express pre-conditions meant the debt never arose. The implied terms proposed by the Sellers would have the effect of essentially re-writing the contract.
The effect of this decision settles the applicability of Mackay v Dick and the Mackay Principle in English law in the negative. Practically, contracting parties are still able to clarify in drafting any deemed fulfillment or deemed waiver of conditions precedent to reflect its commercial agreement, a point the parties in the current case were reminded of by the Supreme Court. However, in the absence of such positive steps, parties cannot rely on the Mackay Principle to rescue rights which have been lost through non-compliance with condition precedent requirements.
King Crude Carriers SA & Ors v Ridgebury November LLC & Ors (Rev1) [2025]
UKSC 39 (12 November 2025)
3. Summary judgement enforcement of an adjudicator’s decision, the Construction Act residential occupier exception and what constitutes a valid pay less notice
The case of RBH Building Contractors Ltd v James & Anor [2025] EWHC 2005 (TCC) sought summary judgment enforcement of an adjudicator’s decision. The Court examined both the Housing Grants, Construction and Regeneration Act 1996 (“Act”) residential occupier exception under section 106 and what constituted a valid pay less notice under section 111 of the Act.
Mr. & Mrs. James (the “James’”) purchased a property in Devon in order to build a large luxury house and engaged RBH Building Contractors Limited (“RBH”) to provide project advisory services. No written contract was executed for RBH’s services, and the contract was agreed orally. Relationships between the parties soured and RBH ceased work in April 2024 and in November 2024 submitted a payment application for £663,016. The James’ responded by letter on 27 November 2024 outlining that it considered nothing was payable. RBH commenced a smash and grab adjudication for the unpaid amounts and the adjudicator found in their favour. RBH then sought an application for summary judgement to enforce the adjudicator’s decision.
The James' claimed as a defence that the adjudicator did not have jurisdiction since they were residential occupiers for the purpose of s106 of the Act and so the statutory adjudication scheme did not apply.
The Court considered the test for giving summary judgement in CPR Part 24.3, namely that the party (in this case the James') has no real chance of succeeding on the defence. The exception in section 106 of the Act means it does not apply to a construction contract relating to a dwelling one of the parties occupies or intends to occupy. The Court found that in assessing an intention to occupy a commonsense approach must be taken and it should consider what the employer’s intention was at the time the contract was entered into. Applying that test the Court held, despite evidence that although following contract execution the James' may have intended to rent the property for periods, what mattered was their intention at the formation of the contract. As there was some initial evidence suggesting that the James' did intend to occupy the property from the outset, they did have a realistic chance of success on defence and the summary judgement enforcement was dismissed.
Separately the Court considered a Part 8 application as to whether the letter of the 27 November constituted a valid Pay Less notice contrary to the adjudicator’s finding. The Court held the letter did address the required criteria for such notices under section 111(4) of the Act and that a reasonable objective reader would have understand from the letter what was considered payable and the basis on which it was calculated.
This case highlights the importance of the limited exceptions to the Act and that if the parties want certainty as to dispute mechanisms, they should ensure a written contract outlining the agreed dispute procedures is executed. It also underlines the importance of ensuring that any document purporting to be a pay less notice must clearly reflect the requirements of s.111 of the Act to be valid.
RBH Building Contractors Ltd v James & Anor [2025] EWHC 2005 (TCC)
(10 June 2025)
4. Government releases third Grenfell Inquiry Phase 2 recommendations progress report
On 17 December 2025 the Government released its third quarterly report updating progress against the Grenfell Tower Inquiry’s Phase 2 recommendations Grenfell Tower Inquiry Government Progress Report - GOV.UK (“Report”).
In addition to the Report, on the same day the Government released a number of other related documents addressing specific Inquiry recommendations including:
- A consultation on the establishment of a single construction regulator to cover the whole of the construction sector, including in respect of the regulations of buildings, construction products and building professions, digitizing delivery of regulatory services and information and protection of residents. The consultation will close on 20 March 2026 and the Government intends to publish its response to the consultants in the summer of 2026 Single construction regulator prospectus - GOV.UK
- The outcome of the Government’s review of the definition of higher risk buildings, finding that the current definition appropriately reflects current evidence in respect of fire safety risk. The Government is not proposing a change in the definition but will conduct an ongoing review Review of the definition of higher-risk buildings - GOV.UK
- An update from the Fire Engineers Advisory Panel (“Panel”) established in April 2025 outlining its Authoritative Statement on the knowledge and skills to be expected of a competent fire engineer with a view to regulation of the profession. The Panel also conducted a wider review of the fire engineering profession Fire Engineers Advisory Panel: Authoritative Statement - GOV.UK. The Government also released a “next steps” document outlining the next steps it proposed in the reform of the fire engineering profession Next steps on fire engineering profession reform - GOV.UK
5. BSR to become independent on 27 January 2026
The Government have issued the draft regulations to transfer the Building Safety Regulator (“BSR”) from the Health and Safety Executive (“HSE”) and for it to become a separate entity which will assume all the statutory responsibilities currently held by the HSE under the Building Safety Act 2022. This transfer will take effect on 27 January 2026. Although the transferred BSR will be a standalone entity it is sponsored by, and will retain ultimate accountability to, the Ministry for Housing, Communities and Local Government.
The transfer will allow the BSR to enter contracts and employ staff and be legally responsible in its own name. In the long term it is hoped this transfer will strengthen accountability and eventually establish a single construction regulator.
6. HSE launches a consultation on amending the Control of Asbestos Regulations 2012
On 10 November 2025 the HSE launched a consultation on both regulatory changes (to the Control of Asbestos Regulations 2012 (SI 2012/632) (“CAR 2012”)) and non-regulatory changes via guidance in respect of asbestos management to provide further protection to workers and building users. The consultation will close on 9 January 2026.
The consultation proposals aim to enhance protection in areas where asbestos remains a significant health risk with three key proposals:
- To amend the CAR 2012 and associated guidance to ensure the independence and impartiality of roles in the four-stage clearance process to minimise the risk of exposure from asbestos to workers and building users after the removal of asbestos.
- To drive up the standard of asbestos surveys by improving guidance and using other interventions to ensure dutyholders understand the critical role of an asbestos survey in managing asbestos risk and are equipped to commission a quality survey from a competent asbestos surveyor or organization.
- To improve guidance and use other interventions to clarify the type of work that constitutes work with asbestos known as notifiable non-licensed work (NNLW).
The consultation is particularly relevant to dutyholders, asbestos analysts, asbestos removal contractors, asbestos surveyors, and associated professions including construction and facilities management.
7. Consultation on changes to the Construction Industry Scheme (CIS)
On 6 January 2026 the Government launched a consultation on proposed amendments to the CIS regulations to simplify their administration. The changes will (i) exempt payments made to local authorities or public bodies from the scope of the CIS and (ii) will require contractors to file a nil return when they have not paid any subcontractors in a month, unless they have previously advised HMRC they are not making any such payments. The consultation remains open until 3 February 2025.
Construction Industry Scheme proposed simplification and administrative
amendments - GOV.UK
8. The Construction Products (Amendment) Regulations 2025 come into force
The Construction Products (Amendment) Regulations 2025 (“Regulations”) come into force in the United Kingdom on 8 January 2026.
One of the main changes under the Regulations is to allow for the continued recognition of European Union’s certified CE markings alongside UKCA markings on products in the UK construction market. This change will reflect the EU’s new Construction Products Regulations which also come into force in January 2025. The alignment of these regulations will remove the need for duplicate certifications meaning either CE or UKCA marked products can be placed on the UK market without additional testing. This change should improve supply for construction materials, allow for cost savings through increased competition and reduced delays in construction projects due to supply chain delays.
The Construction Products (Amendment) Regulations 2025
9. FIDIC launches new practice notice of dispute board decisions
The International Federation of Consulting Engineers (“FIDIC”) at its London Contract Users’ conference on 3 December 2025 launched a new practice note providing best practice guidance to adjudicators in carrying out their functions under FIDIC contracts and to produce logical and reasoned decisions.
The note sets out standards of good practice expected of dispute board members and details best practice tasks and techniques for producing dispute board decisions aligned with the requirements of FIDIC’s DAAB Procedural Rules. The guidance note covers techniques for managing the referral process, review of referrals, establishing timetables, response reviews, jurisdictional challenges, managing additional exchanges, assessment of evidence, hearings, deliberation among dispute board members, structuring decision documents, compliance with FIDIC contract provisions and formalities, and post-decision considerations. While written primarily for dispute adjudication and avoidance boards, the general principles may apply to all types of dispute board decisions under other FIDIC forms and the document is expected to be widely used across the international construction industry.
Practice Note III Dispute Board Decisions: Preparation and Composition byFIDIC - Issuu
