Supreme Court overturns contractor right to terminate under common JCT termination clause (Providence Building Services v Hexagon Housing Association)

In a win for Employer’s, the Supreme Court, in Providence Building Services Limited v Hexagon Housing Association Limited [2026] UKSC 1, ruled that a contractor (Providence) was not entitled to terminate the contract under clause 8.9 of the JCT Design and Build Contract 2016, despite the employer (Hexagon) making late payments on two separate occasions. The Court noted that the first late payment was rectified within the specified period for remedying defaults. As a result, the Court concluded that an accrued right to terminate under clause 8.9.3 is a necessary condition before clause 8.9.4 can be invoked.

In February 2019, Hexagon Housing Association Ltd (the Employer) and Providence Building Services Ltd (the Contractor) entered into a JCT DB 2016 contract with amendments.

“Termination by Contractor

Default by Employer

8.9 .1 If the Employer:

.1 does not pay by the final date for payment the amount due to the Contractor in accordance with clause 4.9 and/or any VAT properly chargeable on that amount; …

the Contractor may give to the Employer a notice specifying the default or defaults (a ‘specified’ default or defaults).

.2  If after the Date of Possession (or after any deferred Date of Possession pursuant to clause 2.4) but before practical completion of the Works the carrying out of the whole or substantially the whole of the uncompleted Works is suspended for a continuous period of 2 months by reason of any impediment, prevention or default, whether by act or omission, by the Employer or any Employer’s Person, then, unless it is caused by the negligence or default of the Contractor or any Contractor’s Person, the Contractor may give to the Employer a notice specifying the event or events (a ‘specified’ suspension event or events).

.3  If a specified default or a specified suspension event continues for 28 days from the receipt of notice under clause 8.9.1 or 8.9.2, the Contractor may on, or within 21 days from, the expiry of that 28 day period by a further notice to the Employer terminate the Contractor’s employment under this Contract.

.4  If the Contractor for any reason does not give the further notice referred to in clause 8.9.3, but (whether previously repeated or not):

.1 the Employer repeats a specified default; or

.2  a specified suspension event is repeated for any period, such that the regular progress of the Works is or is likely to be materially affected thereby,

then, upon or within 28 days after such repetition, the Contractor may by notice to the Employer terminate the Contractor’s employment under this Contract.”

Hexagon missed a payment in December 2022. Providence served a specified default notice whereby it would terminate the contract if Hexagon did not pay within 28 days. Hexagon paid late – but within the 28 days. Providence was therefore not entitled to terminate the contract under clause 8.9.3.

Hexagon failed to pay on time again in May 2023. Providence served a notice to terminate the contract under Clause 8.9.4, relying on the basis that Hexagon had repeated a specified default (i.e., it had repeated the specified default of the December 2022 late payment).

Providence argued that it was entitled under the contract to terminate if Hexagon paid late twice because the specified default had been repeated. Hexagon argued that the entitlement to termination for the second late payment was only triggered if the first payment had not ultimately been made within 28 days of its due date (which does not apply here because the first missed payment in December 2022 was made).

• The objective natural meanings of the words in 8.9.4 mean that Providence must have had an accrued right to terminate under clause 8.9.3 before clause 8.9.4 applies;
• It would lead to extreme outcomes if Providence was entitled to terminate for two small delays in payment, despite payments ultimately being made;
• Hexagon’s termination rights under the contract, which could be used to infer arguments in Providence’s favour, should not be relied upon to determine the Providence’s termination rights;
• Contract interpretation should not be seen through the lens of combatting Contractor cash-flow problems.

This judgment provides some comfort to Employers as it confirms that minor instances of repeated late payments, when swiftly corrected, will not automatically grant the contractor the right to terminate the contract. Contractors will need to demonstrate that a right to terminate for a prior specified default under clause 8.9.3 has fully accrued before they can terminate for repeated specified default under clause 8.9.4. In cases of repeated late payment, contractors will need to explore other available remedies instead of relying on termination.