In the world of construction and commercial litigation, certainty is the most valuable currency. For years, practitioners operating under JCT and SBCC contracts operated on the “orthodox” understanding of termination rights: a contractor could only terminate for a repeated default if the initial default had been serious enough to trigger a right to terminate in the first place.

However, a surprising Court of Appeal decision recently threw this into disarray, suggesting that even a minor, quickly remedied breach could set the stage for a later termination.

Now, in the landmark judgment of Providence Building Services Limited v Hexagon Housing Association Limited [2026] UKSC 1, the Supreme Court has officially restored the status quo.

The Core Dispute: A “Deceptively Narrow” Question

The case centered on a fundamental question of contractual interpretation: Can a contractor terminate for a repeated default under clause 8.9.4 if the original default was remedied within the 28-day cure period?

Under the JCT Design and Build Contract 2016, the termination process follows a specific stepped structure:

• Step 1 (Clause 8.9.1): The Contractor gives a notice of specified default (e.g., a late payment).
• Step 2 (Clause 8.9.3): If that default continues for 28 days, the Contractor gains a right to terminate.
• Step 3 (Clause 8.9.4): If the Contractor does not exercise that right, but the Employer later repeats the default, the Contractor can then terminate.

In this case, the Employer (Hexagon) paid the first late invoice within the 28-day window. When a second late payment occurred months later, the Contractor (Providence) tried to terminate. They argued that the right to terminate for a “repeat” existed regardless of whether the first default ever reached the Step 2 threshold.

Why the Supreme Court Stepped In

The Supreme Court unanimously overturned the Court of Appeal, providing three key reasons why the “orthodox” view must prevail:

1. The “Parasitic” Nature of Clause 8.9.4 The Court held that the right to terminate for a repeat default is “parasitic” on the right to terminate for the initial default. If the right to terminate under clause 8.9.3 never actually accrued (because the breach was cured), then the “repeat” clause cannot be triggered. To hold otherwise would render the specific drafting of the contract “inept.”
2. Avoiding “The Sledgehammer” The Court was wary of the “extreme outcomes” of the alternative interpretation. Under the Court of Appeal’s logic, two trivial breaches—even those delayed by only a single day—could justify ending a multi-million-pound contract. The Supreme Court aptly described this as using “a sledgehammer to crack a nut.”
3. Commercial Reality vs. Judicial Re-writing While acknowledging the importance of contractor cash flow, the Court was clear: it is not the role of the judiciary to re-write standard form contracts to be “fairer.” If the balance of power in JCT contracts needs shifting, that is a task for the drafting committee, not the courts.

What This Means for the Industry

This ruling is a victory for commercial stability. It prevents “hair-trigger” terminations and ensures that the drastic step of ending a contract is reserved for serious, persistent failures.

• For Employers: There is a renewed “safety net” if a single payment is missed and quickly rectified.
• For Contractors: It is a reminder that the procedural steps of the JCT must be strictly adhered to. Termination remains a high-risk strategy; getting it wrong can lead to a claim for repudiatory breach.

Conclusion

Termination is often the most high-stakes moment in a construction project. This judgment provides much-needed clarity, but the “stepped” nature of JCT notices remains a minefield for the unwary.

For further information about this Supreme Court Judgement, or advice regarding similar construction disputes, contact Phil Morrison, Head of Construction at Tyr.