Termination of JCT building contracts: Supreme Court reverses Court of Appeal

It is an all too common question from contractors and sub-contractors as to whether they can terminate contracts due to non-payment of sums due.

The answer is not straightforward and usually all depends on what the terms of contract provide for.

The Supreme Court has now decided an appeal in the case of Providence Building Services Limited v Hexagon Housing Association Limited [2026] UKSC 1 concerning the termination provisions in the JCT Design and Build 2016 Edition. In its judgement, the Supreme Court unanimously allowed the employer’s appeal, finding that the contractor was not entitled to terminate the contract.

The issue being considered was whether a contractor was entitled to terminate its employment under clause 8.9.4 in a situation where there had been a repetition of a non-payment specified default, but where the earlier specified default had been remedied by the employer within the period allowed under the contract.

This meant that the contractor never had the right to give the termination notice provided for under clause 8.9.3.

Clause 8.9.3 stated:

“If a specified default… 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.”

Clause 8.9.4 provided:

“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)… the employer repeats the specified default… 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.”

The decision turned, essentially, on the application of the introductory words of clause 8.9.4 in the context of the other provisions:

“If the contractor for any reason does not give the further notice referred to in Clause 8.9.3…”

Background

The case concerned late payments under a JCT Design & Build 2016 contract between Hexagon Developments and Providence Construction. When Hexagon missed a payment, Providence issued a notice of specified default. Hexagon remedied the breach within the 28‑day contractual window, preventing any right to terminate from arising. When a later payment was again late, Providence sought immediate termination based on a repeated default.

The contractual issue

The key issue was whether a contractor may terminate under clause 8.9.4 without a prior right to terminate under clause 8.9.3. The High Court said yes, the Court of Appeal disagreed, and the Supreme Court has now restored the High Court’s interpretation.

Supreme Court’s findings

The Supreme Court decided that clause 8.9.3 is the “gateway” to clause 8.9.4. A contractor may only terminate for a repeated specified default if the earlier default persisted for 28 days and generated a termination right, even if that right was not exercised.

Impact on employers and contractors

The consequence for contractors is that employers may make repeated late payments without triggering termination, provided each breach is remedied within 28 days. Contractors now face a narrower termination route, but retain other remedies such as statutory interest and default notices.

The judgment resets the balance of risk under JCT contracts, limiting the scope of termination for repeated employer default.

For advice for employers, contractors and sub-contractors regarding the right to terminate, contact any member of the HCR Construction Team.