In construction contracts, many people assume that well-crafted termination clauses will fully protect them from commercial risk. A UK Supreme Court decision, in January 2026, concerning late payment under the Joint Contracts Tribunal Design and Build (JCT D&B) contract is a reminder of a harder truth: risk doesn’t disappear; it simply shifts.
The case in brief
The contract between Hexagon Housing Association Ltd and Providence Building Services Limited was under a JCT D&B 2016 form, for a housing development in Purley, South London.
Three sub-clauses of the JCT form provide a mechanism for the contractor to terminate for late or non-payment. Clause 8.9.1 requires the contractor to give a "specified default notice" if payment is not made by the final date for payment. Clause 8.9.3 entitles the contractor to terminate its employment under the contract if the employer fails to pay within the requisite period of that notice. Finally, clause 8.9.4 gave the contractor the right to terminate immediately if the employer repeated a specified default.
Hexagon (the employer) made two late payments. The first was paid 14 days late, but within the 28 day “cure period” after the contractor issued a notice of default. When a second payment was late, Providence, the contractor, sought to terminate immediately, arguing that this was a “repeated specified default” under clause 8.9.4. Their argument was that they were entitled to do so on the basis that it was the second payment that was late, and that it had already served a specified default notice in response to the first late payment. The Court of Appeal agreed with Providence. The Supreme Court did not.
The Supreme Court held unanimously that clause 8.9.4 doesn’t create an independent termination right. It has to be read in line with clause 8.9.3. In simple terms, the contractor can only rely on repetition if it first had an accrued right to terminate because the employer failed to cure the earlier default within the notice period.
As the first late payment was “cured” within the contractual period of 28 days, no right of termination crystallised. That meant clause 8.9.4 couldn’t be triggered.
The wording in JCT 2024 is materially the same as the 2016 version considered in the Providence -v- Hexagon case, as well as in the Scottish SBCC forms, so the Supreme Court decision gives helpful legal clarity. Commercially, it tells us something equally important.
The illusion of protection
We are often asked by contractors whether repeated late payment creates any leverage for them. The ultimate threat of termination arguably serves as a behavioural control: pay on time or face project disruption. That view was reinforced by the decision of the Court of Appeal in the Providence case. The decision of the Supreme Court shifted that.
So long as late payment is cured within the contractual notice period, employers can be confident that the risk of termination flows away, even if late payment happens again. The obligation to pay on time remains, but the termination risk doesn’t automatically follow repeated delays.
It would be wrong to conclude that contractors are left without any protection. Under both statute and the JCT/Scottish Building Contract Committee (SBCC) forms, contractors retain the right to suspend performance for non-payment following proper notice. That said, the right to suspend operates entirely differently – it is a pressure mechanism, not an exit mechanism.
Cash flow risk
Construction is uniquely sensitive to the timing of cash flow. With tight margins and heavy supply chain reliance, payment delays ripple quickly.
The Supreme Court’s decision makes it clear that termination can’t be used as a shortcut enforcement mechanism. That means contractors must still absorb the strain of repeated late payment, even where employers take things to the wire (and so long as they ultimately pay within the “cure” period).
And so, the legal risk for employers reduces as the financial timing risk for contractors increases.
Leverage risk
The Supreme Court’s reasoning reinforces that termination is a nuclear remedy, to be construed strictly. The court won’t distort clauses to protect contractors from cash flow pressure. Using the threat of termination as leverage is not to be done lightly, and the consequences for wrongful termination are significant.
Behavioural risk
If late payment can be cured within the default/cure period without exposure to termination, will it mean employers feel less pressure to prioritise punctual payment? That could result in an erosion of trust, creating tension in the supply chain.
While a cumulative termination trigger for repeated late payment might not be available to contractors, the tools remaining in their tool kit, which employers need to be aware of, include the right to suspend works after notice; the right to claim interest on late payment and the rights to extensions of time and loss and expense flowing from any period of suspension.
What this could mean in future
For contractors:
If termination isn’t a viable deterrent for repeated late payment, protection could be front loaded at the time of negotiation of amendments to the standard JCT forms:
- Shorter (than 21 days as provided for in SBCC forms) cure periods
- Security mechanisms for payment (e.g. project bank accounts, parent company guarantees or advance payment bonds)
- Stronger interim suspension rights (e.g. amendment to allow suspension where there is a pattern of late payment, regardless of cure within notice period; or allowing for partial suspension of some activities)
As well as best practice including the operation of robust notice management systems and real time cashflow forecasting.
For employers:
Repeated late payment, even if cured, can damage market reputation, increase pricing in future tenders, reduce confidence in delivery, and pose a greater risk of disputes.
Summing up
The Supreme Court hasn’t altered the commercial reality of late payment in construction. The judgement makes visible what was always true – cure period transfers timing risk; strict interpretation transfers enforcement risk; and reliance on termination transfers liquidity risk back to the party arguably least able to absorb it.
If you would like to discuss how this decision affects your projects or explore practical amendments to strengthen payment protections on upcoming contracts, please get in touch with any member of the Construction team. We are helping clients across the sector review their JCT/SBCC positions and adapt their commercial strategies in light of the Supreme Court’s decision.
