Supreme Court shuts down shortcut to termination in Providence v Hexagon 

Following our legal update from August 2024 (which is accessible here), the Supreme Court’s long-awaited ruling in Providence Building Services Ltd v Hexagon Housing Association Ltd [2026] UKSC 1 marks one of the most consequential interpretations of the JCT Design and Build Contract in recent years.  

At its core, the decision resolves industry-wide uncertainty surrounding whether repeated late payment automatically entitles a contractor to terminate, even where the earlier breach was swiftly remedied. The Supreme Court’s unanimous answer is that there is no automatic right to terminate in such circumstances.  

The judgment restores a structured, sequential approach to termination and reins in what it considered an “extreme outcome” that had briefly been permitted by the Court of Appeal. In practical terms, this brings clarity for employers worried about disproportionate termination risk, and for contractors who must now take a more measured, process-driven approach to non-payment disputes. It is a decision with immediate implications for live projects and will influence how parties administer payment cycles, manage cashflow pressures, and negotiate risk under both the 2016 and 2024 JCT suites, subject to any bespoke amendments. 

Providence was appointed to design and construct a residential scheme under a largely unamended design and build contract based on the JCT’s 2016 standard form. The standard termination machinery under clause 8.9 governed non-payment.   

Two late payments occurred: one in December 2022 and one in May 2023. In relation to the first, Providence served a notice of specified default.  Hexagon paid promptly within the amended 28-day period provided for it to ‘cure’ the specified default. In consequence, Providence never acquired the right to terminate its employment by the issuance of a “further notice” under clause 8.9.3.  

When a subsequent notified sum became overdue for payment by Hexagon in May 2023, Providence immediately purported to terminate under clause 8.9.4, asserting that the second default was a “repetition” within the meaning of the clause. Hexagon disputed the validity of that termination. Litigation followed through the TCC (which found in Hexagon’s favour), the Court of Appeal (which found in Providence’s favour) and ultimately the Supreme Court.  

The central question for the Supreme Court was straightforward: can a contractor terminate under clause 8.9.4 for a repeated late payment if it never acquired the right to terminate the first time around under clause 8.9.3? In other words, does clause 8.9.4 require a previously accrued right to terminate, or is any repetition of a notified default enough, regardless of whether or not the first breach was cured within the cure period? 

The Supreme Court unanimously held that a contractor cannot terminate in reliance on clause 8.9.4 unless it had first accrued a right to terminate under clause 8.9.3.  In other words, where an employer pays within the contractual ‘cure’ window referenced in a specified default notice, the contractor gains no termination right; and a subsequent late payment does not revive or create such a right. The earlier breach must have remained unremedied throughout the ‘cure’ period.  

Lord Reed emphasised that interpreting the clause to the contrary would lead to “an extreme outcome”: in that a contractor could terminate even where both defaults were trivial or promptly corrected—described memorably as using “a sledgehammer to crack a nut.”  The Supreme Court stressed that the JCT’s structure requires a stepped process: notice, cure period without cure, and only then termination—reflecting a rational commercial balance. 

The Birketts view 

Whilst this case offers several important takeaways for contracting parties, consultants and those advising on construction risk and liability, the Supreme Court’s decision will undoubtedly be pivotal in shaping the future of construction liability and building safety litigation. 

Although some may view the decision as employer‑friendly, the judgment offers clarity that will help parties manage late payment risk more predictably. 

• Given the strict sequencing under clause 8.9, contractors may wish to prepare a notice of specified default for non-payment so that one is ready for prompt issue when any payment deadline is missed. This would help to ensure the cure period starts as early as possible. 

• The Supreme Court noted that if the JCT wishes to recalibrate the balance struck by clause 8.9, it may choose to amend the wording in future editions. Until then, parties may consider bespoke amendments to provide for shorter cure periods, or may tailor alternative triggers for termination where rapid payment cycles or tight cashflow pressures are anticipated.  

• Adjudication remains the most powerful short‑term tool for recovering unpaid sums. Suspension rights can also be a strong commercial lever, provided the necessary warning notice is served. Termination still remains the “nuclear option”, and this case is a reminder that the courts will police it strictly. 

For employers, the decision brings relief: administrative payment errors that are corrected swiftly will not put projects at immediate risk of collapse. For contractors, it underlines the importance of robust contract administration and proactive management of payment disputes. 

The Supreme Court’s message is clear: termination under the JCT is a structured, two‑stage process, not one that can be short‑circuited by isolated or remedied late payments. The ruling provides greater certainty at a time when cashflow pressures continue to challenge the industry.