Commercial Contracts Update: Key Cases for 2026

Getting a commercial contract's clauses right on paper is only half the job - the other half is knowing how the courts are actually interpreting and enforcing those clauses this year. A run of Court of Appeal and Supreme Court decisions through late 2025 has reshaped the practical answers on conditions precedent, onerous terms, penalty clauses, waiver and termination. This update covers what's changed; for the drafting fundamentals themselves, see our Commercial Contract Drafting guide.

Conditions precedent: the end of "deemed fulfilment"

The most significant development is the Supreme Court's decision in King Crude Carriers v Ridgebury November, handed down on 20 November 2025. The Court unanimously rejected the long-standing "deemed fulfilment" principle - the idea that if one party's breach prevents a condition precedent to payment from being satisfied, the condition is treated as automatically fulfilled and the other party can claim the full debt.

The Court held there is no such principle under English law. Where a party's breach prevents a condition precedent being met, the innocent party's remedy is a damages claim, not a debt claim for the full contract price - and damages may be far less valuable if market conditions have moved in the breaching party's favour since the contract was made. The practical takeaway for drafting: parties who want certainty that they can recover the full contract sum when the other side's breach blocks a condition precedent now need to say so expressly in the contract. Relying on the old judicial principle to fill the gap is no longer a safe assumption.

Onerous and unusual terms still need clear notice

In MS Amlin Marine v King Trader [2025] EWCA Civ 1387, the Court of Appeal confirmed that unusual or particularly onerous clauses require fair and reasonable notice to be brought to the other party's attention before they'll be treated as binding - but it also confirmed the threshold for what counts as "unusual" is a high one between sophisticated commercial parties negotiating at arm's length. This is a useful reminder rather than a dramatic shift: standard boilerplate between commercial counterparties is unlikely to be caught, but a genuinely unusual limitation or exclusion buried in incorporated terms is still a live risk worth flagging during due diligence and contract review.

Penalty clauses: a high bar, not an impossible one

Houssein v London Credit [2025] tested a 4% monthly default interest rate against the penalty doctrine, and the rate survived scrutiny because the lender could point to legitimate business interests that justified a rate well above the ordinary commercial rate. This lines up with the post-Cavendish v Makdessi approach: a clause won't automatically fail as a penalty just because it looks punitive on its face, provided the party relying on it can show the figure protects a genuine, legitimate commercial interest rather than simply deterring breach. For drafting, this means the commercial rationale behind a default rate or liquidated damages figure is worth documenting at the negotiation stage - it's exactly the evidence a court will look for if the clause is later challenged.

Waiver of termination rights requires actual knowledge

URE Energy v Notting Hill Genesis [2025] EWCA Civ 1407 confirmed that a party doesn't waive its right to terminate simply by continuing to perform the contract after a breach - waiver requires that the party actually knew it held the termination right and unequivocally elected not to exercise it. Continuing to accept performance or make payments while a breach is being investigated is not, by itself, enough to lose the right to terminate later. This is a genuinely helpful clarification for anyone managing an ongoing commercial relationship through a live breach issue, where pausing all performance the moment a problem surfaces isn't always commercially realistic.

Loss-of-bargain damages on cancellation

Orion Shipping and Trading v Great Asia Maritime [2025] EWCA Civ 1210 confirmed that a buyer can recover loss-of-bargain damages on a contractual cancellation where the contract's express terms permit it - even without a repudiatory breach in the traditional sense. The case is a reminder that express contractual cancellation rights can carry real financial consequences beyond simply unwinding the deal, and those consequences should be modelled and negotiated deliberately rather than assumed to be minimal.

FAQ

Does the King Crude Carriers decision affect existing contracts, or only new ones?
It's a statement of what English law has always required (there was never a "deemed fulfilment" principle to rely on) rather than a change that applies only prospectively - so it affects how existing contracts without express protective drafting will be interpreted if a dispute arises, not just contracts signed after November 2025.

Do I need to rewrite standard boilerplate clauses after MS Amlin Marine?
Not necessarily. The case confirms existing principles rather than lowering the bar for what counts as an unusual term between commercial parties. It's worth revisiting genuinely unusual limitation, exclusion or indemnity provisions specifically, rather than treating it as a reason to overhaul standard terms generally.

Does continuing to invoice or accept payment during a dispute risk waiving termination rights?
Following URE Energy v Notting Hill Genesis, not automatically - waiver requires actual knowledge of the right and an unequivocal election not to use it. It's still good practice to reserve rights expressly in correspondence while a breach is under investigation, rather than relying on this case as a substitute for doing so.

What makes a default interest rate or liquidated damages clause more likely to survive a penalty challenge?
Evidence that the figure was set to protect a legitimate commercial interest - rather than purely to deter breach - strengthens a clause's chances, as Houssein v London Credit illustrates. Documenting that rationale when the clause is negotiated is more useful than trying to reconstruct it after a dispute has started.

Commercial contract law doesn't stand still, and a clause that was safe to rely on a year ago can look different after a run of cases like this one. Learnsignal's Legal CPD training keeps commercial and in-house lawyers current on developments like these alongside the practical drafting skills covered elsewhere in this series, including our Civil Procedure and Dispute Resolution update for the litigation side of the same relationships.