The Supreme Court reverses hair-trigger termination for late payment: Providence v Hexagon

In its first decision of the year, the Supreme Court provided welcome clarity as to the extent of the Contractor’s termination rights under a JCT form of contract.  

Providence Building Services Limited v Hexagon Housing Association Limited [2026] UKSC 1 concerns the construction of termination provisions in the JCT Design and Build Contract 2016 Edition.  The Supreme Court found that the Contractor is not able to terminate under clause 8.9.4 where an Employer default is repeated unless the right to terminate had previously accrued under clause 8.9.3.

Significance of the decision

As the JCT 2016 provisions in question are unchanged in the latest JCT 2024 suite, the decision is one of ongoing relevance for interpretation of this widely-used standard form contract.  

Disputes over termination are often high-stakes in their consequences, and binary in outcome – either a party validly exercised its right to terminate, or it did not and instead repudiated the contract.  This means it is vital to have clarity about how the courts will apply common termination provisions.  Prior to the Supreme Court’s recent judgment, the industry was contending with a 2024 Court of Appeal decision that, whilst unanimous, was doubted for its apparently draconian implications.  In allowing the appeal against that decision (also unanimously), the Supreme Court has finally laid the issue to rest.

The Court of Appeal decision indicated that the Contractor could terminate where the Employer repeated a default about which it had been notified by the Contractor in the past, whether or not that default had previously persisted long enough to give rise to a right to terminate.  This had the effect that just two marginally late payments by the Employer, even if quickly corrected, could give rise to a right to terminate.  The Supreme Court instead found that the first notified default must have not been remedied in time such that a right to terminate had accrued but was not exercised by the Contractor.  This provides some reassurance to an Employer under the JCT Design and Build Contract that minor administrative errors that are swiftly put right will not leave it open to the risk of termination for default.

From the perspective of a Contractor facing payments that are repeatedly late but not sufficiently late to permit termination, the outcome of the case may be frustrating, although other less drastic tools and remedies remain available to exert pressure on the Employer to pay on time.

The issue and the contract

The case concerned whether the Contractor could terminate its employment under clause 8.9.4 of the contract where a notice of specified default had previously been given under clause 8.9.3 but a right to terminate under that clause had never accrued.  To summarise the relevant provisions:

• Clause 8.9.1 provides that the Contractor may give notice if there is a specified default by the Employer.  A failure to pay an amount due by the final date for payment constitutes a specified default.
• Under clause 8.9.3, if the Employer continues a specified default for a specified period (here, 28 days) after receipt of such a notice, the Contractor may then give notice to terminate.
• Under clause 8.9.4, if the Contractor for any reason does not give notice to terminate under clause 8.9.3 but the specified default is repeated, then the Contractor may give notice to terminate.

In this particular contract, the time periods in clause 8.9 were amended from those in the standard form, but this does not affect the point of interpretation in question.  

Case background

The Contractor (Providence) was employed by a housing association (Hexagon) to design and build several apartment blocks in Purley, London.  

In December 2022 Hexagon failed to pay to Providence an amount due by its final date for payment.  Providence gave notice of this specified default under clause 8.9.1 on 16 December 2022.

On 29 December 2022 Hexagon paid the outstanding amount due in full.  The specified default did not continue for 28 days from receipt of the notice, so Providence did not accrue a right to terminate under clause 8.9.3.

In April 2023 Hexagon again failed to pay an amount due by its final date for payment.  Providence immediately issued a notice of termination under clause 8.9.4 on the basis that this amounted to a repeat of a specified default, i.e. a failure to pay an amount due by its final date for payment.

Whilst the parties agreed that Hexagon’s failure to make payment on time was a repeat of a specified default, Hexagon disputed that Providence’s notice of termination was lawful and asserted that Providence had repudiated the contract.  This was on the basis that, before Providence could terminate for repetition of a notified specified default, it must have previously accrued a right to terminate under clause 8.9.3 (or it must now wait 28 days for such a right to accrue in respect of the repeated default).  Conversely, Providence contended that clause 8.9.4 did not require this and it could terminate immediately upon repetition of the notified default.

Appeal history

Hexagon was largely successful in adjudication on this dispute.  Providence then issued court proceedings as to the correct interpretation of the clauses in question.

The High Court found for Hexagon, reasoning that the natural and ordinary meaning of clause 8.9.4 in context was that it required that a clause 8.9.3 notice could have been given but the Contractor decided not to do so.  The judge did not accept Providence’s submissions that this interpretation would produce a harsh and uncommercial outcome for the Contractor, or that the provision should be read such that the Contractor’s termination rights were symmetrical with the equivalent rights of the Employer.

On appeal, the Court of Appeal then found in favour of Providence.  The court placed emphasis on the phrase “for any reason” in clause 8.9.4, which it considered must include the Contractor not giving notice for the reason that there was no accrued right to do so.  It compared this to the equivalent Employer’s termination right, which expressly permitted termination even where the default had previously been cured before the right accrued, and concluded that the wording of clause 8.9.4 could not be construed as narrower.  The court also gave some weight to the argument that other remedies available to the Contractor did not provide a satisfactory solution to the cashflow difficulties created by late payment.

Supreme Court’s findings

The Supreme Court’s recent judgment allowed Hexagon’s appeal against the Court of Appeal decision.  It found that, considering the objective natural meaning of the provision, clause 8.9.4 was “parasitic on clause 8.9.3 rather than being independent of it”.  The key factor here was the opening words of clause 8.9.4.  If clause 8.9.4 intended that the Contractor could terminate upon repetition of the default, regardless of the history, then the provision would not need to refer back to clause 8.9.3 at all – i.e. the provision could simply state “If the Contractor repeats a specified default…”, rather than “If the Contractor for any reason does not give the further notice referred to in clause 8.9.3…”.

Further, the Supreme Court considered that this reading of the clause results in a “rational and less extreme outcome”.  It was a more rational outcome that only where the original breach was particularly serious (i.e. it was not remedied within the cure period) would an immediate right of termination arise if the breach was repeated.  An extreme outcome might otherwise hypothetically arise where the Contractor could terminate because the Employer was one day late in making payment on two occasions, neither of which in isolation would entitle the Contractor to terminate.  The court suggested this “might be thought to provide a sledgehammer to crack a nut”.

Regarding the comparison of clause 8.9.4 with equivalent Employer’s termination rights, the Supreme Court pointed out that there was no reason to expect symmetry between those rights given the different contractual obligations on the parties.  It concluded that different wording had deliberately been used in the two relevant clauses to produce a different effect.

Finally, the court considered the question of whether the Contractor had other adequate remedies for late payment that might impact its cashflow “unhelpful”, and not a matter that should be allowed to distort interpretation of the Contractor’s termination rights.  To the extent this caused difficulties for the Contractor, the court suggested that this was something for the JCT to consider in a future version of its standard forms.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at January 2026. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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