Clarifying the contractor’s right to terminate
A recent Supreme Court decision has clarified the scope of a contractor’s right to terminate contracts; whilst providing breathing room for employers, the decision means contractors could face an inability to terminate contracts where repeated breaches occur, but are rectified within 28 days.
Providence Building Services Ltd v. Hexagon Housing Association Ltd
On 15 January 2026, the Supreme Court overturned a Court of Appeal decision that termination under a Joint Contracts Tribunal (JCT) contract was possible, even where the original breach had been remedied, returning clarity to the interpretation of termination under a JCT contract for repeated breaches.
The right to terminate for repeated breaches of contract
Clause 8.9 of the JCT Design and Build Contract 2016 outlines how a contractor can terminate a contract for employer defaults, including for non-payment. This involves issuing a Default Notice, allowing 28 days for the default to be remedied, then issuing a further notice to terminate if the breach is not remedied. Clause 8.9.4 goes on to allow termination for repeated breaches.
The Supreme Court reinstated the early Technology and Construction Court (TCC) ruling that the right to terminate for a repeated breach depends on the contractor having the right to issue a further notice (i.e. if the breach exceeded 28 days). If the original breach (the subject of the Default Notice) was remedied, this right never arose. Regarding the Court of Appeal ruling, Lord Reed said that allowing a contractor to terminate because it received two separate late payments, which were each overdue by a day only, would be like using ‘a sledgehammer to crack a nut’.
This approach is much more commercially minded, avoiding the ‘two strikes and you are out’ scenario where a breach could enable the contractor to terminate even where the employer had, ultimately, cured the breach.
What does the JCT Design and Build contract mean for employers and contractors?
This means that employers no longer need to rush to amend standard JCT contracts in order to avoid the risk of termination which the Court of Appeal ruling had allowed.
It is likely that there will need to be a thorough review when the next edition of the JCT contract is produced – and both employers and contractors should familiarise themselves with what may be crucial changes.
Employers can breathe a bit easier about being penalised where they have remedied a breach for late payment. However, for contractors, it is important to be aware that this ruling could essentially allow employers to continue to pay late on a consistent basis, so long as they remedy a breach within the 28 days allowed by the Default Notice. If an employer pays late again, an earlier default cannot be relied upon unless it previously matured into a termination right. This therefore limits a contractor’s ability to rely further on clause 8.9.4.
What action can contractors and employers take to remain compliant?
Contractors should be mindful of the need to amend their JCT contracts to ensure they still have the termination rights they may need to rely on in such scenarios as persistent late payment.
As is always the case, employers should continue to ensure they are aware of the JCT contract payment mechanisms and have in place an organised and diligent payment system – regardless of the Supreme Court reducing this termination risk.
For all parties, this should be seen as a commercially beneficial decision, allowing clearer understanding and application of termination mechanisms under the JCT contract.
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Please be advised that this is an update which we think may be of general interest to our wider client base. The insights are not intended to be exhaustive or targeted at specific sectors as such, and whilst we naturally take every care in putting our articles together, they should not be considered a substitute for obtaining proper legal advice on key issues which your business may face.