What happens when a party to a contract breaches its obligations? Is that the end of the road for the agreement?

A fundamental breach of contract, one that strikes at the very heart of the deal, usually gives the other party the option to terminate the agreement. This is known as a repudiatory breach, meaning the breach is so serious it could justify ending the contract. However, the innocent party also has the choice to affirm the contract, essentially forgiving the breach and continuing business as usual.

Some contracts, however, include terms that allow certain breaches to be remedied, often within a specific timeframe.

In the recent Court of Appeal decision of Kulkarni v Gwent Holdings Ltd, the court confirmed that that even a significant breach might still be capable of remedy, depending on the contract’s wording and the circumstances.

In this blog, we (Melissa Worth and Johanna Smallman) explore the case’s background, the court’s reasoning, and what it means for your contracts moving forward.

Background: A Shareholder Dispute Escalates

The case, Kulkarni v Gwent Holdings Ltd, centred on a dispute between two shareholders bound by a shareholders' agreement (SHA). This agreement included a critical clause: if one shareholder committed a "material or persistent breach" of the agreement, they would be required to transfer their shares. The clause also stated that if the breach was "capable of remedy," the breaching party had ten business days to fix it after being notified.

One shareholder, Gwent, committed several significant breaches, including improperly allotting shares to itself that were meant for the other shareholder, Kulkarni, and attempting to terminate the SHA altogether. Gwent even admitted that its actions were both material and repudiatory breaches.

Kulkarni argued that a repudiatory breach, by its very nature, is so severe it can never be remedied. He claimed that once such a breach occurs, the innocent party has an immediate right to act, and the option to "remedy" the breach is off the table. This argument was based on the common law principle that a repudiatory breach allows the innocent party to either terminate the contract or affirm it.

Common law is essentially where judges make decisions based on past cases, and those decisions help shape future rulings. Instead of relying only on written laws, it’s built on tradition and precedent - kind of like legal case history guiding the present.

Decision: Practicality Over Technicality

The Court of Appeal disagreed with Kulkarni’s interpretation. The judges emphasised a key distinction: the common law rights arising from a repudiatory breach (such as the right to terminate) are separate from what the contract itself says about remedying a breach.

In this case, the SHA’s wording allowed for breaches to be remedied. The court noted that if the parties had intended for any repudiatory breach to be automatically irremediable, they should have explicitly stated so in the contract. Since the SHA referred to breaches being "capable of remedy" without distinguishing between types, the court interpreted this phrase in a practical sense.

The court used a practical test for remediability: can the breach be fixed in a way that restores the contractual relationship? In this case, the breaches were deemed fixable: Gwent could reverse the improper share allotment and formally accept that its attempt to terminate the agreement was invalid. These actions would effectively remedy the breaches.

Implications for Your Business

This case illustrates the importance of precise contract wording. When disputes arise, you can’t rely solely on general legal principles and what is of key importance is the terms of the contract that you agreed to. Here are some practical takeaways:

1. Review Your Breach Clauses Carefully
   Examine the breach and termination clauses in your key contracts, especially shareholder agreements, partnership agreements, and major client or supplier contracts. Do they define what makes a breach "capable of remedy"? If your contract is silent, a court may adopt a practical test that might not align with your expectations. If you want certain severe actions to trigger immediate termination without an opportunity for remedy, your contract must explicitly state this.

2. Don’t Assume a Breach is Irremediable
   If a partner, supplier, or other party commits what seems to be a major breach, pause before taking drastic action. Even if the breach is repudiatory, your contract might require you to provide notice and an opportunity to fix the issue. Acting too quickly and terminating the contract without following the agreed procedure could ironically put you in breach of the contract. Always follow the process set out in your agreement.

3. Be Clear and Specific in New Contracts
   When drafting new agreements, be precise. Consider defining what constitutes an "irremediable" breach. For example, you might list specific actions, such as fraud, illegal activity, or a breach of confidentiality, that automatically trigger termination rights without a cure period. Leaving terms like "capable of remedy" undefined opens the door to interpretation and potential disputes.

4. Focus on Practical Solutions
   The court’s decision confirms that judges will take a practical approach when interpreting contract clauses. This means that when disagreements arise, the focus should be on whether the issue can be resolved through a workable solution, rather than rushing straight to court. Litigation is costly and should generally be a last resort. While it’s important to protect your legal rights, finding a practical remedy can often preserve valuable business relationships and avoid the expense, stress, and uncertainty of a court judgment.

Conclusion

This case reinforces a fundamental business lesson: clarity in your legal agreements is your best defence. By ensuring your contracts are clear, specific, and aligned with your intentions, you can better navigate disputes and maintain control over your business relationships.

Legal disclaimer

The matters contained within this article are intended to be for general information purposes only. This blog does not constitute legal advice, nor is it a complete or authoritative statement of the law in England and Wales and should not be treated as such.

Whilst every effort is made to ensure that the information is correct, no warranty, either express or implied, is given as to its’ accuracy, and no liability is accepted for any errors or omissions.

Before acting on any of the information contained herein, expert advice should always be sought.

© Melissa Worth, October 2025