Repudiatory breach tends to be mentioned when a project relationship is close to breaking down. In simple terms, it is a breach so serious that it goes to the heart of the contract and deprives the innocent party of substantially the whole benefit of the bargain.
In construction, it is rarely a single issue. A routine disagreement about valuation, defects, or even missed payments will not usually be enough. The courts look for conduct that, viewed objectively, shows that a party no longer intends to perform the contract as agreed, or has made performance materially different from what was promised.
Common examples in practice include persistent non payment combined with clear indications that payment will not be made at all, a refusal to follow the agreed payment or certification mechanism, wrongful denial of access to site, abandonment of the works, or other conduct that makes performance of the contract effectively impossible.
The threshold is high in construction contracts because the most common breaches are designed to be capable of remedy. Delay, defective work, and under certification are often addressed through extensions of time, damages, and dispute resolution mechanisms such as adjudication. Those built in remedies are one reason why many serious problems still fall short of repudiation.
A breach is more likely to be repudiatory where one or more of the following can be shown.
- First, performance has been rendered fundamentally different, for example where a party abandons the works, refuses to proceed, or prevents completion entirely.
- Second, the innocent party is deprived of substantially the whole benefit, for example where conduct makes completion impossible or demonstrates an inability or unwillingness to complete at all.
- Third, future performance is no longer credible, where the overall picture points to a loss of capacity, competence, or commitment such that the contract can no longer realistically be performed.
The occurrence of a repudiatory breach does not automatically bring the contract to an end. The innocent party has a choice. It can affirm the contract and insist on performance, or it can accept the repudiation and treat the contract as terminated.
It is important to remember that this is not a label to use lightly. Whether a repudiatory breach has occurred is highly fact dependent and will turn on the circumstances of the particular case and the contract in question. Alleging repudiation, or treating the contract as at an end, without a proper basis can backfire and expose you to a claim for wrongful termination. It is therefore important to take advice before asserting repudiatory breach or seeking to accept it.
For more information on termination, please see our longer article on termination of construction contracts, including practical guidance and common pitfalls highlighted by Providence v Hexagon.
