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Providence v Hexagon: Supreme Court decision on repeated late payments and contractor termination rights

January 2026

Introduction:

In a recent landmark ruling, the Supreme Court has clarified the position on a Contractor’s right to terminate for late payments by the Employer. The case has placed a spotlight on the JCT standard form contract, which is widely used across the UK construction industry, and has significant consequences for all industry players.

Providence Building Services Limited (Respondent) v Hexagon Housing Association Limited (Appellant) [2026] UKSC 1 provides finality to a dispute regarding the JCT’s termination provisions that effectively alternated between protecting contractor cash-flow and upholding employer contractual certainty. The Supreme Court found in the Employer’s favour, disagreeing with the approach adopted by the Court of Appeal when interpreting the clause entitling the Contractor to terminate.

Background:

Our December 2024 article “Getting noticed: when can you give notice to terminate a “serial defaulter”?”, set out the factual background of the dispute, as well as the earlier High Court and Court of Appeal decisions. This article focuses on the Supreme Court’s decision following an appeal on a short but relevant contractual interpretation point.

By way of brief reminder:

• Providence (Contractor) was engaged by Hexagon (Employer) under an amended JCT Design and Build Contract 2016 edition.
• A dispute arose over late payment, in which Hexagon had twice failed to pay Providence on time for sums due under the contract. The first December 2022 payment was made 14 days late, and when the second May 2023 payment was not made on time, Providence served a termination notice under clause 8.9.4, citing both late payments/defaults as grounds for termination through repudiatory breach. Hexagon subsequently made payment in full and then disputed the lawfulness of the termination notice.
• Following adjudication, a High Court ruling and the decision of the Court of Appeal, Hexagon appealed to the Supreme Court in 2024.
• The appeal hearing focussed on the contractual interpretation of the relevant termination provisions (a question of law). The parties agreed that the issue to be decided was: “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?” [3]

Key contract terms considered:

Here are the relevant clauses (with the parties’ bespoke amendments shown for ease in strike-through and words in square brackets [5]):

“Termination by Contractor

Default by Employer

8.9.1 If the Employer:

.1 does not pay by the final date for payment the amount due to the Contractor in accordance with clause 4.9 and/or any VAT properly chargeable on that amount; or

.2 fails to comply with clause 7.1 [number not used]; or

.3 fails to comply with clause 3.16,

the Contractor may give to the Employer a notice specifying the default or defaults (a ‘specified’ default or defaults).

.2 If after the Date of Possession (or after any deferred Date of Possession pursuant to clause 2.4) but before practical completion of the Works the carrying out of the whole or substantially the whole of the uncompleted Works is suspended for a continuous period of the length stated in the Contract Particulars [2 months] by reason of any impediment, prevention or default, whether by act or omission, by the Employer or any Employer’s Person, then, unless it is caused by the negligence or default of the Contractor or any Contractor’s Person, the Contractor may give to the Employer a notice specifying the event or events (a ‘specified’ suspension event or events).

.3 If a specified default or a specified suspension event continues for 14 days [28 days] from the receipt of notice under clause 8.9.1 or 8.9.2, the Contractor may on, or within 21 days from, the expiry of that 14 day [28 day] period by a further notice to the Employer terminate the Contractor’s employment under this Contract.

.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 a specified suspension event is repeated for any period, such that the regular progress of the Works is or is likely to be materially affected thereby,

then, upon or within a reasonable time [28 days] after such repetition, the Contractor may by notice to the Employer terminate the Contractor’s employment under this Contract.”

The Supreme Court also considered the opposite situation of termination by the Employer for default by the Contractor in clause 8.4.

The parties’ main arguments:

Hexagon submitted that before a valid termination notice can be served for a repeat of a specified default under clause 8.9.4, the Contractor must previously have had an accrued right to serve a termination notice under clause 8.9.3.

Where an earlier specified default is cured, Hexagon argued that no termination notice can be immediately served where there has been a repetition of that specified default event; here the specified default was late payment but over different payment cycles.

Hexagon’s position was that Providence had no entitlement to terminate for the late May 2023 payment because, even though it was a repeat of a specified default (the late December 2022 payment), no right to terminate had previously accrued because the late December payment had been cured. It argued Providence should have waited 28 days to allow for the May payment to be made, before it could seek to terminate. However, the situation would have been different, and Providence could have terminated for the May late payment, had the December payment not been cured within the relevant timeframe (as a right to terminate would have previously accrued).

Providence argued where there is a repetition of a specified default, and an associated specified default notice has been served, then there is no requirement for the right to terminate to have previously accrued under clause 8.9.3. It argued its entitlement on the facts since there had been a further late payment by Hexagon in May in circumstances where there had been a late December payment for which a specified default notice was served. Accordingly, Providence argued it was entitled to terminate for the May late payment, as it did a day after the May payment should have been made to it, and was not required to wait 28 days for Hexagon to make the May payment first.

Decision:

On 15 January 2026, the Supreme Court delivered its judgment, in which Hexagon’s appeal was unanimously allowed, and Providence was found to have not been entitled to terminate the contract for the late receipt of payments. Clause 8.9.4 was viewed as appearing to be “parasitic” on clause 8.9.3, such that a termination right must first have been available to the Contractor following the first late payment (i.e. the right had accrued but not been exercised) before this sub-clause could then apply. The Supreme Court rejected a number of points made in the Court of Appeal’s decision.

Firstly, the Supreme Court remarked that the wording of “for any reason” in clause 8.9.4. was not so strong or wide as to undermine the fact that a party must have an accrued right to terminate under clause 8.9.3 before being able to rely on clause 8.9.4. This was not the case, as the initial default was paid within the 28-day period. Such a wide interpretation of clause 8.9.4. would mean termination was possible simply if the Employer fails to pay on time twice, thereby undermining clause 8.9.3. If this were intended, the clause would have begun with “if the Employer repeats a specified default” [32-33].

Secondly, the Supreme Court believed this would represent a disproportionate outcome if two payments, received a single day late each, could warrant termination. It deemed the position to be more balanced where one of these late payments was delayed beyond the specified period and so particularly serious.

Thirdly, the Supreme Court disagreed with the reliance on the scope of Employer’s termination rights in assessing the Contractor’s termination rights. It remarked that the Parties’ contractual obligations were markedly different throughout, so attempting to justify the need for symmetry in the operation of the termination rights was misplaced. Doing so also risked over-protection of Contractors from encountering cash-flow difficulties from late payments by distorting the interpretation of termination clauses [38].I se!

Commentary:

There are several wider implications for the construction industry flowing from the Supreme Court’s decision.

Negotiating and interpreting contractual provisions:

The Supreme Court acknowledged that it is important to examine the whole of the contract when considering a contractual interpretation point [4]. The primary focus was on the ordinary and natural meaning of the disputed clause, here the amended clause 8.9. However, it is important to ensure that all agreed contractual definitions, operative terms and contractual documents are carefully considered before entering into or using contracts. Whilst this was a legal question, it raised commercial, relationship, and cash-flow implications for the parties involved, coupled with a lengthy dispute process.

Any proposed amendments to standard forms of construction contract should be considered carefully as part of the negotiation process and to ensure that these are properly understood and work with the rest of the contract.

JCT Standard Form:

The Supreme Court provided a summary on the law on the modern approach to interpretating contracts, including industry-wide standard form contracts [21-32]. It acknowledged that in doing so, the admissible background context may include previous case law or clauses in an earlier version of the standard form. This is also important to note, especially since the JCT 2024 edition maintains the standard wording of the same relevant clauses here.

The Supreme Court recognised the JCT standard form contracts as industry-wide standard form contracts, subject to the extent of any bespoke amendments. It held that such contracts should be interpreted consistently across all users of that contract. This means, when considering the contractual interpretation of an industry-wide standard form contract, it can generally be taken that the contracting parties’ objective intentions, including around their respective rights and responsibilities, align with those of other users of the form and its authors.

Balancing party rights?

Reinforcing the point that symmetry of contractual position between parties is not required, the Supreme Court clarified that the Employer’s termination provision (clause 8.4), had a different meaning, allowing the Employer to terminate in the same circumstances without the right having accrued as required in clause 8.9.

It is recommended that any decision to use or amend a standard form of contract is carefully considered in light of this recent decision and the intended rights or obligations and risk allocation between the parties. The wording used to draft the termination clause, for example, will inform its meaning and future application (or interpretation in the event of a dispute).

Termination provisions:

Termination is typically used as a measure of last resort for various reasons. The disparity in termination rights of Employers and Contractors noted above, in addition to the Supreme Court’s ruling may increase the number of parties requesting amendments to the position on termination. This will be important for contractors to consider in line with other project, relationship, and contractual considerations, especially when dealing with an employer known for causing late payments and cash-flow issues.

The consequences for incorrect termination can also be significant and costly. Contractors who have already terminated using these provisions based on the findings in the earlier Court of Appeal decision, or a party drafting or considering termination notices served under these contractual provisions, may wish to review their position carefully in light of this decision.

 

Beale & Co has experience of advising clients on a range of construction contracts and at all stages of a project lifecycle or dispute. If you require assistance in contract drafting or negotiation, including concerning amendments to industry standard construction contracts, or if you require advice on a live contractual position or issue following this decision, please contact your Beale & Co contact or James Vernon using the contact details shown.

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