A new Supreme Court ruling has clarified when contractors can terminate for repeated late payment under standard JCT contracts, tightening the rules around how repeated payment defaults should be handled.
The dispute revolved around clauses 8.9.3 and 8.9.4, which set out when a contractor may terminate a contract for late payment by an employer.
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Providence Building Services had sought to terminate its contract after the employer failed to make two interim payments on time.
The contractor served a specified default notice after the first late payment in December 2022, which was later cured within 28 days, meaning it did not accrue a right under clause 8.9.3 to serve a termination notice.
It then attempted to terminate after a second missed payment in May 2023 by relying on clause 8.9.4, which allows termination for a repetition of a specified default.
The Supreme Court held that a contractor cannot validly terminate under clause 8.9.4 unless it previously had an accrued right to terminate under clause 8.9.3. As such, the first default must have led to an existing right to give a further termination notice.
As the December late payment was cured within 28 days and never gave rise to an accrued termination right, the contractor’s termination in May was judged to be invalid.
Lord Burrows, giving the judgment on behalf of a unanimous court, emphasised that the question focused on the “natural and ordinary meaning” of clauses 8.9.3 and 8.9.4 in the context of the contract as a whole, and on established principles of contractual interpretation.
Why this matters for construction professionals
The ruling clarifies how termination mechanisms in the standard JCT Design and Build form operate, particularly on repeated breaches such as late payment.
Contractors cannot rely on clause 8.9.4 in isolation – they must first have had an accrued right to terminate under clause 8.9.3 before a repetition of default provides a valid termination ground.
Construction professionals and contract administrators are advised to review termination provisions carefully when assessing rights and risks around repeated breaches, especially under JCT standard forms that retain this wording.
‘Common sense’ judgment
In 2023, Hexagon’s interpretation of the clauses was successful at adjudication and then before a judge at the Technology and Construction Court. Providence successfully appealed to the Court of Appeal in 2024, and Hexagon appealed to the Supreme Court – receiving permission to appeal in 2024 and, subsequently, the matter was heard in 2025.
Mark London, head of the construction, engineering and procurement team at Devonshires – who successfully represented Hexagon – welcomed the Supreme Court clarification regarding the clause.
“Having been somewhat surprised by the decision of the Court of Appeal, I am now delighted that the Supreme Court have clarified the correct way to interpret the clause in question,” London said. “In doing so, it has brought certainty back to an industry where the use of the JCT standard form is common.
“While the judgment is important to the construction industry given the prevalence with which the JCT forms are used, this judgment will impact a significant number of parties and projects across the country.
“In an industry where ‘cash is king’, and project costs creep ever upward, the reversal of the Court of Appeal’s decision has clarified a powerful protection for employers.”
Commenting on the judgment, Tim Healey, partner at Herbert Smith Freehills Kramer, added that employers in the construction industry will welcome the Supreme Court’s decision.
“The Supreme Court also delivered a clear message that negotiated contractual asymmetry will be upheld and the courts will not seek to harmonise differing rights of termination (which should be a welcome clarification to both employers and contractors).
“The industry as a whole will welcome a heavy dose of common sense, given termination of the contract is a drastic remedy which carries significant consequences.”
