The Supreme Court overturns decision on contractor's entitlement to terminate for repeated late payments

Providence Building Services Ltd v Hexagon Housing Association Ltd [2026] UKSC 1

The Supreme Court has just handed down judgment in a case that it had to decide because it was a matter of general public interest (to those of us dealing with construction matters, anyway). It relates to contractual interpretation of a clause in the long-standing and widely respected and used standard form contract: Joint Contracts Tribunal 2016 Design & Build Form; moreover, it remains important and relevant since the new edition of the JCT D&B contract published in 2024 includes the same wording of the relevant clause as the 2016 version.

The actual clause in question (clause 8.9) relates to termination of the contract by the contractor. Clause 8.9.1 provides that if an interim payment was not made in the time prescribed by the contract, the contractor could give notice of a 'specified default'. If that specified default was not remedied within 14 days of the notice then under clause 8.9.3 the contractor could terminate the contract.

Clause 8.9.4 deals with what is to happen if a specified default is repeated. It says:

".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 ....

... then, upon or within a reasonable time after such repetition, the Contractor may by notice to the Employer terminate the Contractor's employment under this Contract."

The decision the court had to come to in respect of these terms therefore affects termination rights under clause 8.9 and impacts project risk, payment strategies, and dispute outcomes under both JCT 2016 and 2024.

Background

The facts of this case were that:

The employer (using a slightly amended form of the standard form contract) had failed to pay a sum by the due date so the contractor duly issued a notice of specified default, citing the failure to pay a sum due.
Nearly two weeks later, the employer paid the application sum in full. The specified default did not therefore continue for the requisite period which would have allowed the contractor to terminate the contract for the employer's continuing the default.
Four months later (and following four satisfactory payment application rounds) the employer again failed to pay a sum due in time. The contractor therefore served a termination notice under clause 8.9.4, referring back to the previous notice of default.
Five days later the employer paid the sum due under the application in full and then disputed the lawfulness of the contractor's termination notice, asserting that the contractor had repudiated the contract.
A week later the employer wrote to the contractor purportedly accepting the contractor's repudiation and terminating the contract.

The battle lines were therefore drawn on either side of a dispute that could be distilled into the discrete question which was ultimately considered by the Supreme Court:

"Can the contractor terminate its employment under clause 8.9.4 of the JCT 2016 Design and Build Form, in a case where a right to give the further notice referred to in clause 8.9.3 has never previously accrued?"

The litigation

The pendulum swung in each party's favour as the question proceeded through the various levels of tribunal: adjudication, High Court, Court of Appeal, and Supreme Court. Seeking to derive what is the natural meaning of the clause in question in order that an industry-wide contract can be interpreted consistently, the Supreme Court has settled on the view that it is only if the employer has failed to cure a specified default that the contractor can terminate immediately for a further late payment (having not terminated on the basis of the first notified default in the words of the contract: "for any reason"). If the employer cures the specified default within the requisite period then the contractor's right to serve a further notice based on it expires.

The court considered the different wording in the clauses relating to termination by the employer and termination by the contractor, but decided that the asymmetrical position was consequential to the differing contractual obligations of the parties. The difference did not justify doing violence to the natural meaning of the words to combat contractor's cash-flow problems.

The judgment concluded that if and so far as the contractor does, or does not, have other satisfactory methods of combating cash-flow problems caused by late payment, that is a matter for the JCT to consider "in the light of this judgment" in a future draft of the standard form contract. Meanwhile, even if an employer is routinely late in payment of application sums under the relevant contracts, if the sums are paid before the expiry of the specified default period the contractor cannot terminate the contract under clause 8.9.

Lessons learnt

For contractors:

You cannot rely on an earlier default if it was cured within the notice period.
Each late payment is treated discretely unless the employer allows the "specified default" to run its course.
You may need to adapt cashflow protection strategies (e.g., stricter payment monitoring, prompt issuance of notices, contractual amendments on new projects).

For employers:

Paying within the cure period protects you from termination rights.
However, repeated late payment still carries commercial risks (performance issues, disputes, suspension rights under the Construction Act, reputational issues).