The Supreme Court Confirms Limits On Termination For Repeated Defaults Under JCT: Providence v Hexagon

The Supreme Court has handed down its judgment in Providence Building Services Limited v Hexagon Housing Association Limited [2026] UKSC 1, unanimously confirming that a contractor cannot terminate its employment under clause 8.9.4 of the JCT Design and Build Contract 2016 for a repeated default (such as late payment) where the right to give a termination notice for the original default had not previously accrued under clause 8.9.3. For commentary on the Court of Appeal's decision, see our previous blog.

What are the key implications of the decision for the industry?

The judgment provides much needed guidance on the Contractor's right to terminate for repeated specified defaults under clause 8.9.4 of the JCT Design and Build Contract 2016 (and other JCT forms which contain these provisions). Certainty around termination provisions is key to both parties' interests to avoid arguments that the contract has been repudiated by the party purporting to terminate.

The Court of Appeal's earlier decision had meant that employers were at risk of being tripped up where more than one administrative payment error was made during the period of the contract – in larger/longer schemes this could cover very many payment cycles. The earlier decision meant that even where the employer had corrected a late payment within the time allowed by the contract, if the employer made another late payment, that would automatically entitle the contractor to terminate its employment (provided it had served a notice of specified default in relation to the first payment). Many had found the Court of Appeal's decision surprising.

The Supreme Court's judgment allows employers operating under standard form JCT contracts to proceed with certainty that late payments which are swiftly corrected will not automatically give rise to a right for the contractor to terminate its engagement under the contract. One practical outcome is that clause 8.9 in the JCT contract will no longer need to be amended by employers to address the effect of the Court of Appeal's decision.

Contractors still have several other options available to them under the Housing Grants, Construction and Regeneration Act 1996 where payments are late.

The Supreme Court also provided valuable guidance on the nuanced interpretation of industry-wide standard form contracts, which will be particularly welcome to industries such as construction which frequently use standard forms.

The journey to the Supreme Court

Hexagon Housing Association Limited (Hexagon) engaged Providence Building Services Limited (Providence) under an amended form of the JCT Design and Build Contract 2016. Failure by Hexagon to make payment by the relevant deadline entitled Providence to give notice of a specified default under clause 8.9.1 of the contract.

Under clause 8.9.3 of the contract, if the specified default was not remedied within 28 days of receipt of the notice, Providence could terminate the contract by further notice to Hexagon. Clause 8.9.4 provided for termination in the case of repeated specified default "if the Contractor for any reason does not give the further notice referred to in clause 8.9.3".

In December 2022, Hexagon was late making an interim payment, prompting Providence to issue a notice of specified default under clause 8.9.1. Hexagon made the payment within 28 days of receipt of the notice. As such, Providence's right to serve a further notice to terminate its employment under clause 8.9.3 did not arise in respect of this specified default.

Hexagon missed a further payment in May 2023. Providence served a notice under clause 8.9.4 purporting to terminate the contract on the basis that Hexagon had repeated a specified default.

Hexagon disputed the ability of Providence to terminate for a repeated specified default on the basis that the entitlement to termination would only arise if a right to terminate under clause 8.9.3 had been accrued but not been exercised by the Contractor.

Although the High Court decided in Hexagon's favour, the Court of Appeal took the converse approach. The Court of Appeal determined that clause 8.9.4 allows the Contractor to terminate if a specified default is repeated even where no right had accrued to give a termination notice under clause 8.9.3.

The Supreme Court's key findings

(a) Correct interpretation of clause 8.9.4

In the Supreme Court's view, the natural meaning of the disputed clause was that the Contractor must have had an accrued right to terminate under clause 8.9.3 before clause 8.9.4 applies. The opening words of clause 8.9.4 refer to clause 8.9.3: "If the Contractor for any reason does not give the further notice referred to in clause 8.9.3...", and the Court held that clause 8.9.4 cannot therefore operate independently of clause 8.9.3.

The Supreme Court also considered the practical consequences of the alternative interpretation to be extreme. On the Court of Appeal's view, a Contractor could theoretically terminate the contract simply because two payments were each made one day late – an outcome the Supreme Court described as using "a sledgehammer to crack a nut".

(b) Asymmetry of termination rights

Both parties have termination rights under the JCT contract. Clause 8.4.3 entitles the Employer to terminate for a repeated specified default if the Employer does not give the notice of termination specified in clause 8.4.2. Clause 8.4.3 expressly identifies that such notice of termination may not have been given due to the end of the specified default.

The Supreme Court disagreed with the Court of Appeal's attempt to seek interpretive symmetry between the Employer's and Contractor's respective termination rights. The Supreme Court held that the material difference in contractual obligations between Employer and Contractor provides no reason for symmetrical termination rights. It also noted that clauses 8.4 and 8.9 are drafted on inherently asymmetrical terms with different cure periods, types of specified default and different language, as clause 8.4.3 expressly contemplates the ending of a specified default. This divergence was treated as deliberate, confirming that an accrued right to terminate is required before clause 8.9.4 can be invoked.

This is of importance to both contractors and employers, reinforcing that their respective rights must be interpreted according to the natural meaning of the drafting and that the Court will resist attempted interpretive symmetry between parties with fundamentally different contractual obligations.

(c) Interpretation of industry-wide standard form contracts

Another key takeaway is the Supreme Court's guidance on the interpretation of industry-wide standard form contracts. The Court acknowledged that the established approach to contract interpretation applies, but also highlighted certain nuances specific to the interpretation of standard forms such as the JCT. In particular:

• Historical judicial treatment and practice in relation to clauses in an earlier version of a standard form may be included as admissible background context. However, the "archaeology of the forms" should generally be discouraged, as it is akin to referring to previous drafts of a contract which is not a proper aid to construction.
• Where parties choose to use an industry-wide standard form, it can generally be taken that their objective intentions in the relevant context are that their respective rights and obligations should be consistent with those of other parties using the same form, and should reflect the objective intentions of those who were concerned with the drawing up of that standard form agreement.

This guidance will be especially valuable for those operating in industries such as construction, where the frequent use of standard forms demands clear principles of interpretation.

(d) Commercial considerations cannot override clear drafting

Finally, the Supreme Court cautioned against allowing broader commercial considerations, specifically the Contractor's potential cash-flow difficulties arising from late payment, to distort the interpretation of the disputed clause. The judgment makes clear that any mitigations in favour of the Contractor are to be achieved through contractual drafting and not by departing from the natural meaning of the clause.