In August 2024, we reported on Providence Building Services Limited v Hexagon Housing Association, a very important decision of the English Court of Appeal (ECA). It dealt with the proper interpretation of the termination provisions in the Joint Contracts Tribunal (JCT)/Scottish Building Contract Committee (SBCC) 2016 standard form building contracts. These provisions allow a contractor, in certain defined circumstances, to terminate its own employment under the contracts, principally Clauses 8.9.1, 8.9.3 and 8.9.4.
That decision was handed down after JCT published its updated and revised 2024 contract forms, where the relevant termination provisions remain essentially unchanged.
Decision of the ECA appealed
The issue considered by the ECA was whether a contractor was entitled to terminate its employment under Clause 8.9.4 in a situation where there had been a repetition of a specified default (in this case, non-timeous payment), but the earlier specified default had been remedied by the employer within the period allowed by the contract. This meant that the contractor had never had the right to give the termination notice provided for under Clause 8.9.3.
It should be noted that the parties agreed certain bespoke amendments to the timescales set out in the relevant clauses of the standard form (shown in square brackets below), but they do not affect the arguments.
Clause 8.9.3 stated:
"If a specified default... continues for [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 [28] day period, by a further notice to the employer terminate the contractor’s employment under this contract."
Clause 8.9.4 went on to provide:
"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)... the employer repeats the specified default... then, upon or within [28] days after such repetition, the contractor may by notice to the employer terminate the contractor’s employment under this contract."
The decision turned, essentially, on the correct interpretation and importance of the introductory words of Clause 8.9.4 in the context of the other provisions:
"If the contractor for any reason does not give the further notice referred to in Clause 8.9.3..."
The ECA held that, on a proper construction of the relevant contract provisions, there was nothing in the words used which meant that the right to give the termination notice under Clause 8.9.3 had to have arisen at some point in the past, (but for some reason the contractor decided not to give it) before the contractor could terminate its employment under Clause 8.9.4. The ECA upheld Providence’s argument that the wording meant the right to terminate upon repetition of a specified default, extended to when the further termination notice referred to in Clause 8.9.3 had not been given because no right to give it had ever arisen.
The ECA also appeared to stress that Clauses 8.9 and 8.4 (which dealt with termination by the employer) should be read so that there was symmetry in the termination provisions.
That was a controversial decision, as we indicated in our last update on the case. Hexagon was subsequently given permission to appeal to the UK Supreme Court (UKSC). The appeal was heard in November 2025, and the UKSC issued its judgment on 15 January 2026.
Decision of the UKSC
In what is undoubtedly a landmark judgment for the UK construction industry, the UKSC has ruled that the ECA was wrong to interpret Clause 8.9.4, as it did in the context of the termination provisions considered as a whole.
The UKSC agreed with Hexagon that, upon a proper interpretation of the words, the right to terminate under Clause 8.9.4 could only be triggered where a right to give a termination notice had previously arisen under Clause 8.9.3 but had not been given. The UKSC considered that if the contractor’s argument was correct, the introductory words to Clause 8.9.4 would essentially be superfluous or, if not superfluous, they were not just redundant (as contended by the contractor) but also "inept" to achieve the interpretation argued for by the contractor.
The UKSC considered that the interpretation argued by Hexagon reflected "an objective natural meaning" of the words used, which produced a "rational and less extreme outcome". As many had pointed out, the contractor’s interpretation meant that if the employer made two late payments, each just one day late, the contractor would be entitled to serve a termination notice, provided a specified default notice had been given in respect of the first late payment. That might be what the UKSC described as "a sledgehammer to crack a nut".
The UKSC rejected the contractor’s submission that, in such circumstances, the employer could rely on Clause 8.2.1, which provides that any termination notice should not be given unreasonably or vexatiously. The UKSC considered that this would "give scant comfort to the employer, who would have to embark upon the tricky and nebulous task of showing that the notice was given unreasonably or vexatiously".
The UKSC also rejected the ECA’s apparent suggestion that the relevant words should be interpreted to provide "symmetry" between the provisions which allowed termination by the employer and those that allowed termination by the contractor. The UKSC stressed that there was no reason, in principle, why they should have such symmetry. Indeed, a proper examination of Clause 8.4 and Clause 8.9 showed that the provisions were quite different. The parties had agreed asymmetrical termination provisions.
Comment
At the time of our update on the ECA decision, we indicated that, given the structure and content of the termination provisions considered as a whole, many in the construction sector would question the decision of the ECA. We said they would have thought, with some justification, that Clause 8.9.4 was only triggered if the contractor’s right to give a notice of termination had previously accrued under Clause 8.9.3 but had not been exercised. We said it remained to be seen whether the UKSC or JCT itself would, in due course, have the last word on the issue raised by the case. It seems the UKSC has now had the last word, unless JCT/SBCC change the wording of their standard forms.
While JCT/SBCC remained characteristically tight-lipped about the matter and did not formally intervene in the case when given the opportunity by the UKSC, probably due to cost and other reasons, the concerns many had about the ECA decision have proved well founded.
Termination of a building contract by one party in the case of default by the other is often referred to as the "nuclear option", given the very significant effects of a termination, including delay to a project, significant additional cost and, importantly under JCT/SBCC provisions, the ability of the contractor to make a claim if the termination of its own employment is well founded under the contract. Further, termination provisions have to be drafted carefully so that it is not easy for a party to use them as an inappropriate "escape mechanism", for example where a contractor might seek to use them to exit an unprofitable contract due to under-tendering or subsequent under-performance. Many considered that the wording of the JCT/SBCC termination provisions had thus evolved over many years to try to strike a difficult balance on termination rights, including affording opportunities to remedy defaults that sometimes might be inadvertent.
Against that background, many will consider that the judgment of the UKSC reflects what parties to JCT/SBCC contracts (and their advisers) generally considered the position to be before the ECA decision. Accordingly, the judgment of the UKSC overturning the ECA is likely to be widely welcomed, particularly by employers.
Some, however, in light of the particular factual background to this case (non-timeous payment by the employer), may regard it as a setback in the ongoing fight to ensure timeous payment, notwithstanding the availability of other remedies open to the contractor in such circumstances, such as suspension of the works, claiming interest and adjudication.
It is important to recognise, however, that the factual position in the case regarding non-timeous payment by the employer is, arguably, unusual, and the termination provisions in the JCT/SBCC standard forms cover defaults beyond those relating to non-timeous payment.
The UKSC stated that "if* there is a problem for contractors, which could justifiably be ameliorated by a differently worded termination clause, that is a matter for the JCT to consider in light of this judgment."
If the parties wish the contractor to have the ability to terminate in the circumstances argued by Providence, that could be achieved by changing the wording of the standard forms. However, that is likely to be opposed by employers, including employer interests within JCT/SBCC, when they consider the UKSC decision and whether there should be any changes to the wording of the standard forms in light of the case. Any such changes could give rise to more disputes about what the changes mean.
Finally, it is important to realise that while this case deals with JCT/SBCC main contract terms, the same provisions are essentially "stepped down" into the JCT/SBCC sub-contracts to reflect the wording of the relevant main contracts. So, the reasoning of the ECA would have applied not only to employer/main contractor relationships but also to main contractor/sub-contractor relationships under the relevant JCT/SBCC contract forms. Accordingly, the decision of the UKSC will now apply to relationships along the whole length of the supply chain in the JCT/SBCC family of contracts.
*Emphasis has been added by the author and does not appear in the original quotation.
