On 15 January 2026, the Supreme Court handed down a significant judgment on termination for late payment under the JCT Design and Build Contract. In Providence Building Services Limited v Hexagon Housing Association Limited [2026] UKSC 1, the Court confirmed that a contractor cannot terminate immediately for repeated late payment where an earlier instance of non-payment was remedied within the contractual cure period.
The decision brings welcome clarity to an issue that had created uncertainty following the Court of Appeal’s judgment in 2024, particularly given that the relevant wording remains unchanged in the JCT 2024 edition.
In February 2019, Providence Building Services Limited (the Contractor) and Hexagon Housing Association Limited (the Employer) entered into a JCT Design and Build 2016 (as amended between the parties) (the Contract) for the construction of a number of buildings in London.
On 25 November 2022, the employer‘s agent issued a payment notice to the Employer and the Employer subsequently failed to pay the Contractor by the final date for payment. The following day, the Contractor served notice of a specified default on the Employer for non-payment under clause 8.9.1 of the Contract. Pursuant to the amendments made to the Contract, the Employer then had 28 days to pay the Contractor before the Contractor could consider termination. The Employer did pay Contractor within 28 days, so the Contractor never had the right to serve notice to terminate.
Then in April 2023, the Employer once again failed to pay a sum of monies pursuant to a payment notice by the final date for payment.
The Contractor issued a notice of termination under clause 8.9.4 of the Contract, stating that this failure to pay was a repetition of the specified default that had occurred in November.
The Employer disagreed and referred the dispute to an Adjudicator that found largely in its favour.
The Contractor escalated the dispute to the High Court, seeking clarification on the correct interpretation of clauses 8.9.3 and 8.9.4.
The High Court found in favour of Employer, but this was then escalated to the Court of Appeal who found in favour of the Contractor.
The case revolves around how clause 8.9 actually works. Clause 8.9 sets up a two-stage mechanism by which late payment allows the contractor to serve a notice of default. If that default continues for the number of days specified in clause 8.9.3, the contractor acquires a right to terminate. Only once this right is acquired does the contract allow termination for a “repetition” of the same default under clause 8.9.4.
The case was once again escalated and so we find ourselves here, having received judgment from the Supreme Court on whether a contractor can terminate its employment under clause 8.9.4 of the JCT Design and Build 2016 in a case where a right to give the further notice referred to in clause 8.9.3 has never accrued.
The Supreme Court has ruled that no, a contractor cannot terminate its employment in a case where a right to give the further notice has never accrued.
The Supreme Court’s decision can be broken down into the following reasonings:
The Supreme Court placed emphasis on the objective and contextual interpretation of clause 8.9.4 being ‘a natural one’ – essentially that the wording should be taken at face-value. Clause 8.9.4 specifically refers to clause 8.9.3 in a way that the Supreme Court considered ‘parasitic’, meaning that the right to terminate for a repeated specified default hinges on the accrual of a right to terminate under clause 8.9.3, rather than standing independently. This means that non-payment would have needed to be uncured in order for a right to terminate to arise.
Clause 8.4 is the mirror image of clause 8.9 as it addresses the employer’s right to terminate, and was heavily relied on by the Court of Appeal in its judgment. The Court of Appeal considered that as the structure and wording of the clauses were similar, the clauses should be interpreted symmetrically.
The Supreme Court considered this reliance ‘misplaced’ as there was no reason why the rights to terminate should be symmetrical given that the contractual obligations for the parties are so different; and that the wording of clauses 8.4.3 and 8.9.4 had specifically been chosen by the drafter of the JCT to be different in order to require that there does not need to be a previously accrued right for the employer to terminate under clause 8.4.3, but would be required for the contractor to terminate under 8.9. If the drafter had not intended for this interpretation, then the wording would have been identical in both clauses.
The Supreme Court also appeared to consider in the alternative the commercial impact if contractors were allowed to terminate without the right of termination under 8.9.3 accruing. The court stated that such allowance might be a ‘sledgehammer to crack a nut’ as even two payments late by one day each would cause the right to terminate to accrue, despite payment subsequently being made within the contractual time period for rectification. The Supreme Court considered such termination ‘an extreme outcome’ and that the natural meaning of the wording of clauses 8.9.3 and 8.9.4 instead gave rise to a rational consequence of termination only where the earlier breach, for which a specified notice of default was given, went uncured for longer than the contractual period stated in clause 8.9.3.
For employers, developers and funders, the decision restores a measure of stability. For a period of time under the Court of Appeal ruling, clause 8.9.3 and 8.9.4 could have been interpreted to allow for termination of contracts in instances as trivial as two payments late by one day each, which could be a bureaucratic and financial nightmare. The interpretation by the Supreme Court means that curing a late payment within the contractual grace period does ‘wipe the slate clean’. A contractor cannot bank the original default and deploy it later when relations deteriorate.
For contractors, the judgment is a reminder that termination is intended to be a response to serious, uncured payment failure. As stated in the original High Court judgment, the JCT still gives contractors a ‘battery of weapons’ to protect its cashflow, including interest, suspension and adjudication. Termination is a draconic measure not to be used lightly.
For solicitors and adjudicators, there is a warning about standard forms and interpretation. The Supreme Court was careful to say that courts should not bend JCT wording to address perceived industry unfairness. If the sector wants a tougher late-payment termination regime, that is a matter for the JCT drafting committee, not judicial interpretation. It may also suggest that careful thought should go into schedules of amendments as to whether clause 8.9.3 and 8.9.4, which are historically only lightly amended, should be amended to allow for more rapid termination if the employer is a known serial non-payer. The result is that the risk landscape has shifted back towards where many thought it sat before last year’s Court of Appeal ruling. Repeated late payment is still serious but not fatal, unless there are repeated, uncured breaches.
If you need further guidance, our specialist team of construction solicitors are ready to assist.
Disclaimer
The content of this article is provided for general information only. It does not constitute legal or other professional advice. The information given in this article is correct at the date of publication.
A Mackman Group collaboration - market research by Mackman Research | website design by Mackman
