Minor defaults, major consequences? Supreme Court says no in JCT termination case

• 16 January 2026
• News

On 15 January, the Supreme Court handed down its decision in Providence Building Services Limited v Hexagon Housing Association Limited (UKSC/2024/0130). The case turned on an important technical point in the JCT Design and Build Contract (2016 edition): does a contractor need to have gained the right to terminate under clause 8.9.3 before it can rely on clause 8.9.4 to bring the contract to an end?

The Supreme Court unanimously held that yes, it does. In other words, a contractor cannot use clause 8.9.4 unless an earlier “specified default” continued without being put right within the time period specified in clause 8.9.3.

Why this matters

The judgment is significant because:

• It clarifies how the termination clauses in the standard form JCT contracts operate in both the 2016 and the updated 2024 editions, which are widely used.
• It gives wider guidance on how contractual termination rights should be read and applied, particularly in the context of standard form contracts — useful for anyone involved in negotiating, drafting, or interpreting contracts.

The relevant clause

The relevant parts of clause 8.9 in the contract provided as follows (the parties’ bespoke amendments are shown underlined):

The facts

Providence Building Service Limited (“Providence”) had been appointed by Hexagon Housing Association Limited (“Hexagon”) as the building contractor under a JCT Design and Build 2016 contract. Although the parties had made some bespoke amendments, none of those changes affected how the termination clauses were interpreted in this case.

During the works, the following series of events unfolded, which ultimately led the parties to the Supreme Court:

• On 25 November 2022, the employer’s agent issued Payment Notice 27 for £260,000 which was to be paid on or before 15 December 2022;
• On 16 December 2022, as payment had not been made, Providence issued a notice of specified default under clause 8.9.1;
• On 29 December 2022, payment was made in full, albeit 14 days late;
• On 28 April 2023, the employer’s agent issued Payment Notice 32 for £360,000 which was to be paid on or before 17 May 2023;
• On 18 May 2023, as payment had not been made, Providence issued a notice of termination pursuant to clause 8.4.3;
• On 23 May 2023, Hexagon made payment, contesting the validity of the termination.

Hexagon’s arguments

Hexagon’s position was that a contractor cannot jump straight to issuing a termination notice under clause 8.9.4 simply because the employer has repeated the same type of default (in this case, late payment). Instead, Hexagon argued that the contractor must first have acquired the right to terminate under clause 8.9.3, and that right only arises if the specified default has continued unremedied for the full 28‑day period.

Applied to the facts here, Hexagon said that Providence could not rely on the late May payment as grounds to terminate immediately under clause 8.9.4. Although the May default was a repeat of late payment, like the earlier December default for which a specified default notice had been served, the December payment was made within the 28‑day cure period. Because that earlier default was remedied in time, Providence never obtained a clause 8.9.3 right to terminate. Without that accrued right, said Hexagon, Providence could not terminate under clause 8.9.4.

In Hexagon’s view, Providence should have waited 28 days from the date the May payment became overdue before taking any termination step. Only if the May default had then still not been remedied could Providence have validly terminated. The outcome would have been entirely different if the December payment had not been made within 28 days — in that scenario, on Hexagon’s case, Providence’s right to terminate under clause 8.9.3 would have accrued, enabling immediate termination under clause 8.9.4 when the May payment was also paid late.

Providence’s arguments

In contrast, Providence argued that where the employer repeats the same type of default — and a specified default notice has already been served for that earlier breach — the contractor does not need to have first gained the right to terminate under clause 8.9.3 before it can terminate under clause 8.9.4. On that interpretation, the contractor can move straight to clause 8.9.4 if the same default happens again.

Providence argued that this meant it was entitled to terminate in May. The May late payment was a repeat of the earlier late payment in December, for which Providence had already served a specified default notice. Because of that earlier notice, Providence said it did not need to wait a further 28 days to see whether Hexagon would fix the May default. It could terminate immediately once the May payment fell due and was not paid — which is exactly what it did, serving its termination notice under clause 8.9.4 the day after payment should have been received.

Whereas the High Court decided the argument in favour of Hexagon, the Court of Appeal disagreed, overturning the decision of the High Court in favour of Providence and prompting Hexagon’s appeal to the Supreme Court.

Supreme Court’s decision

Noting the public importance of the matter given the prevalence of JCT forms, the Supreme Court overturned the decision of the Court of Appeal.

The Supreme Court stated that the modern approach in English law to contractual interpretation is to ascertain the meaning of the words used by applying an objective and contextual approach.

As the contract in question was a standard form widely used across the construction industry, the Supreme Court held that the relevant background included not only the text of the 2016 JCT Design and Build Contract but also earlier case law, and established industry practice, on similar clauses in previous editions. As Lord Burrows explained, when parties choose a widely used standard form, they generally expect it to operate consistently for all who use it.

The Supreme Court was of the view that clause 8.9.4 was “parasitic” on clause 8.9.3 because the opening words of clause 8.9.4 (“If the Contractor for any reason does not give the further notice referred to in clause 8.9.3…”)refer back to 8.9.3. If it were intended to operate independently, there would be no need to refer back to clause 8.9.3.

Against that background, Hexagon’s argument aligned most naturally with both the wording and the commercial context of the contract: the contractor should only be able to terminate for a repeated specified default if the employer failed to cure the earlier default within the cure period. That interpretation, the Supreme Court said, produced a more rational and less extreme outcome than the approach argued by Providence.

By way of illustration, Lord Burrows offered an example: suppose an employer makes two late payments, each only one day late. Under Providence’s interpretation, the contractor could nevertheless terminate the entire contract. The Supreme Court considered that disproportionate, “a sledgehammer to crack a nut”.

The Supreme Court also criticised the Court of Appeal’s attempt to create symmetry between the employer’s termination provisions in clause 8.4 and the contractor’s termination provisions in clause 8.9. The Supreme Court said that was misguided as the two sets of provisions are drafted differently, govern different rights and obligations, and are not required to mirror each other.

A sensible outcome

The Supreme Court’s decision looks to be a victory for rationality and common sense, albeit, from some viewpoints, a slight divergence from giving the words of the contract primary importance. Employers, in particular, will be reassured as the decision confirms that the repetition of short‑lived breaches, such as slightly delayed payment, will not, by themselves, give contractors an immediate right to terminate the contract.