Repeated non-payment under JCT D&B: only defaults notified earlier but uncured allow contractors to terminate

Providence Building Services Ltd v Hexagon Housing Association Ltd [2026] UKSC 1 concerns the interpretation and interaction of clauses providing for termination by the contractor for employer default under the JCT Design and Build Contract 2016. The case applies to parties using this form and its previous editions (and associated subcontracts) which adopt the same wording, offers important guidance on interpreting construction standard forms, and assists when construing similarly worded termination clauses in all English-law governed commercial contracts.

Facts and background

In 2019, Hexagon engaged Providence as contractor under a lightly amended JCT Design and Build Contract 2016.

Hexagon failed to pay an interim payment by 15 December 2022, the final date for payment. Consequently, Providence on 16 December 2022 issued a specified default notice for Hexagon's failure to pay, as Providence was entitled to do under clause 8.9.1. Hexagon paid the interim sum in full on 29 December 2022, within 28 days of the specified default notice. Under clause 8.9.3, Providence would have had the right to give a further notice terminating the contract had Hexagon's non-payment continued for 28 days from receipt of the specified default notice.

Five payment cycles later, Hexagon again failed to pay an interim payment by its final date for payment, 17 May 2023. Providence considered this to be a repeat of December's default and so the next day issued a notice terminating the contract, arguing it was entitled to do so under clause 8.9.4.1 which 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 a specified default…then, upon or within 28 days after such repetition, the Contractor may…terminate the Contractor's employment under this Contract."

Hexagon paid the sum in full on 23 May 2023 and the following day disputed the termination notice, arguing that Providence was entitled to terminate under clause 8.9.4 only if the December specified default notice gave rise to a right to terminate. As Hexagon had paid the original sum within 28 days of receiving the December specified default notice, Hexagon alleged that Providence's termination notice was invalid and amounted to a repudiatory breach, which Hexagon accepted.

At first instance, the English Technology and Construction Court held that Providence could not terminate the contract. Clause 8.9.4's conditional opening words indicated that the contractor's right to serve the further notice to terminate must have accrued, and that the contractor must have chosen not to serve this further notice to be entitled to terminate under clause 8.9.4 upon the employer repeating a specified default. The right to serve the further notice to terminate had not accrued in December 2022 as Hexagon had cured the default on time.

The Court of Appeal unanimously overturned the TCC's decision. The Court held that Providence was entitled to terminate under clause 8.9.4, even if the termination right under clause 8.9.3 had not accrued. The Court emphasised that the words "for any reason" in clause 8.9.4 were sufficiently broad to cover any situation in which the contractor had not given the further notice referred to in clause 8.9.3, regardless of whether the right to serve such notice had arisen.

The Supreme Court decision

The Supreme Court unanimously allowed Hexagon's appeal, preferring the employer's objective and contextual interpretation.

Clause 8.9.4's opening words made clause 8.9.4 parasitic on clause 8.9.3. It therefore rejected Providence's argument that a repeated specified default, notwithstanding the timely cure of the first specified default, was sufficient to trigger the clause 8.9.4 termination right and held that Providence was not entitled to terminate under clause 8.9.4 unless the clause 8.9.3 termination right had previously accrued. Here, the repeated default of non-payment had been cured within the 28-day time limit in clause 8.9.3.

The Supreme Court reaffirmed the long line of cases establishing the objective and contextual approach to contract interpretation, focusing on the meaning that the actual words used in the contract would convey to a reasonable person with all relevant background knowledge at the time of contracting. Interpreting standard forms involves examining the objective intentions of the contracting parties in the relevant context, which includes an alignment with the objective intentions and expectations of those in the industry who drafted and use the form, which in this case is that an uncured non-payment is required before terminating under clause 8.9.4.

However, the courts' general position is not to trawl through how the clauses in earlier editions of the standard form were interpreted in previous cases and by users (although such background is admissible).

Whilst each side had rational arguments supporting their interpretation, Hexagon's was less extreme: the contractor's right to terminate immediately for repeated defaults was restricted to situations where the earlier breach had not been cured within 28 days. This approach ensured that such termination was available only in cases of serious breach rather than for minor or promptly remedied late payments.

There was also no reason for the employer's and contractor's termination rights to be symmetrical, especially given the differences in the wording and context of the relevant clauses. Interpretation of termination provisions should not be influenced by the fact that late payments lead to cashflow difficulties for contractors.

Key industry lessons

The Supreme Court's decision clarifies that a contractor can terminate under clause 8.9.4 only if the employer's earlier specified default was not cured within the period in clause 8.9.3, thus leading to the accrual of the clause 8.9.3 termination right. Where this or similar wording appears in a termination clause, a party facing a late payment from a counterparty which earlier remedied a late payment within the contractually stipulated time cannot terminate simply because the counterparty is again late in making payment.

The right to terminate for repeated non-payment and other defaults specified in the standard form is therefore limited and must be exercised with extreme care, having sought legal advice and working through the contractual machinery precisely (as is true when terminating for whatever reason, contractually or at common law).

Although this dispute has been resolved largely in the way the industry would have expected, rendering unnecessary any amendments to the standard form which the Court of Appeal's decision may have required, the case is one of the courts' regular reminders to attend to contractual payment regimes: by paying their supply chains on time, employers avoid expensive satellite litigation such as this and reduce termination risk; by keeping clear records when payments are missed, tracking cure periods, and being aware of other remedies for non-payment, such as suspension, contractors increase their chances of redress in the event of non-payment.

Important for disputes more broadly, the case accords significant weight to the intention of standard form drafters and those in the industry who use them when assessing the parties' objective intentions to ascertain the meaning of a standard form's words. When interpreting standard forms (but not bespoke contracts), the background in the minds of the contracting parties is likely to be judged to be consistent with the generally known objective intentions of the industry in its drafting and use of the form.

Authored by Steph Leung and Mark Crossley.