When is a repudiatory breach not a repudiatory breach?

The remedy available when a party commits a repudiatory breach may depend on how the contract treats the breach.

A repudiatory breach is one that is so fundamental that it goes to the heart of the contract, rendering it incapable of performance.

In Kulkarni v Gwent Holdings Limited [2025] EWCA Civ 1206, a shareholders’ agreement provided that a deemed transfer notice would be served if the counterparty to the agreement committed a breach that was not capable of remedy within 10 business days. Crucially, the agreement failed to distinguish between a breach that might give rise to a claim in damages, and one that was repudiatory in nature and might give rise to rescission of the agreement under common law.

The defendants breached the agreement in several ways: firstly, they allotted two tranches of shares to themselves when they should have been offered to the claimant first; secondly, they attempted to terminate the agreement. The claimant argued that the mandatory transfer provision in the agreement had been triggered and that he was entitled to the defendants’ shares.

The defendants admitted that the breaches were material, persistent and repudiatory in nature. However, they also argued that the breaches were capable of remedy: the allotment of shares could be reversed and the notice terminating the agreement could be withdrawn. Where the breach could be remedied, it followed that the claimant could not rely on the mandatory transfer procedure in the agreement.

The court held (both at first instance and on appeal) that where the termination provisions of a contract made no distinction between a repudiatory breach and other breaches, the court should take a practical rather than technical approach. It should examine the outcomes of the breach and whether there was an easy and obvious route to a remedy.

The case serves as a salutary reminder to those drafting contracts and shareholders’ agreements to carefully define what breaches are repudiatory in nature, and whether they entitle the innocent party to rescind the contract as a contractual remedy, rather than relying on their rights at common law.

As ever, clarity and precision are essential when drafting such provisions.