Supreme Court clarifies JCT termination rules: Providence v Hexagon

Termination mechanisms based on a two‑notice procedure are common across commercial contracts. Typically, an innocent party may serve an initial notice (the 1st Notice) requiring a breach to be remedied. If the breach is not cured within a specified period, the innocent party may then issue a second notice (the 2nd Notice) bringing the contract to an end.

Clause 8.9 sets out the circumstances in which a contractor may terminate for employer default:

• 8.9.1 – 1st Notice for employer default:
  The contractor may issue a 1st Notice for listed defaults, including non‑payment.
• 8.9.2 – 1st Notice following suspension:
  A 1st Notice may also be issued where the works have been suspended for a specified period for reasons not caused by the contractor.
• 8.9.3 – 2nd Notice to terminate:
  If the issue identified in the 1st Notice continues for the stated period (usually 14 days), the contractor may terminate by serving a 2nd Notice. Under the unamended JCT, this must be served within 21 days after the 14‑day remedy period expires.
• 8.9.4 – Repeated default:
  Where an employer repeats a default that has already been the subject of a 1st Notice, the contractor may dispense with the 1st Notice and issue a terminating 2nd Notice within a “reasonable time”.

The proper interpretation of clause 8.9.4 was central to the dispute in Providence Building Services Ltd v Hexagon Housing Association Ltd [2026] UKSC.

The dispute

Hexagon failed to make an interim payment by its final date for payment. Providence responded by serving a 1st Notice under clause 8.9.3. One day before Providence could have issued the 2nd Notice to terminate, Hexagon cured the default by making payment.

Shortly afterwards, Hexagon again failed to make payment on time. This time, Providence issued a single terminating notice relying on clause 8.9.4, arguing that the employer had “repeated” the earlier non‑payment and that a fresh 1st Notice was unnecessary.

Hexagon disputed the termination, arguing that because the earlier default had been remedied within the clause 8.9.3 window, Providence had not acquired the right to terminate and could not rely on clause 8.9.4.

Supreme Court’s decision

The Supreme Court found in favour of the employer, overturning the Court of Appeal’s earlier decision. Clause 8.9.3 is a “gateway” to clause 8.9.4.

The court held that a contractor can only rely on clause 8.9.4 if the right to terminate under clause 8.9.3 had already arisen. In this case, Hexagon’s late payment—made just within the remedy period—prevented the right to terminate from coming into existence.

As a result:

• The original 1st Notice was exhausted once the default was remedied.
• It could not be relied upon to support a later termination under clause 8.9.4.
• Providence should have served a new 1st Notice when the second non‑payment occurred and waited for the contractual remedy period to expire.

Even though the second non‑payment was the same type of default, it did not revive rights that had been extinguished when the employer remedied the first breach in time. 

Why clause 8.9.4 exists

Much of the argument in the case concerned the purpose of clause 8.9.4. The court clarified that the provision is designed for a narrower situation:

• where the employer has not remedied the default identified in the 1st Notice,
• but the contractor has, for its own reasons (for example ongoing negotiations),
  not served the 2nd Notice within the 21‑day period allowed by clause 8.9.3.

In such circumstances, if the employer repeats the same default, clause 8.9.4 prevents the employer gaining a second opportunity to remedy the breach.

However, where the initial default has been remedied in time, the “gateway” to clause 8.9.4 never opens.

Practical consequences

For contractors

The decision means that where an employer remedies a late payment within the clause 8.9.3 period, the contractor must restart the two‑notice process for each subsequent late payment.

This may have commercial consequences:

• The employer can—intentionally or otherwise—stretch payment cycles without risking immediate termination.
• Adjudication offers little practical remedy during this period because the employer can still cure the default within the notice window.
• Cashflow‑sensitive contractors may feel locked into a contract where delayed payments fall short of what was agreed or required.

For employers

The judgment avoids a scenario in which two late payments, perhaps caused by administrative error, could result in termination—a risk described by Lord Burrows as “a sledgehammer to crack a nut”.

Employers are therefore protected from disproportionately severe consequences for isolated or remedied breaches.

Can parties agree something different?

Yes. The judgment turns on the standard JCT wording, but parties remain free to amend clause 8.9 where commercial considerations require a different balance.

Potential amendments include:

• Extending or deleting the 21‑day limit for serving the 2nd Notice under clause 8.9.3.
• Allowing termination for repeated defaults regardless of whether the earlier breach was remedied within the notice period.
• Setting shorter cure periods for particular defaults, especially non‑payment.

In sectors where cashflow is critical, giving contractors stronger protection against repeated late payment may be both commercially justified and mutually beneficial.

Conclusion

The Supreme Court’s decision restores the orthodox understanding of clause 8.9: the two‑stage process must be followed each time a default is remedied within the notice period. Clause 8.9.4 provides a useful shortcut only in limited circumstances where the right to terminate has already arisen but has not been exercised in time.

Parties should consider whether the standard JCT wording reflects their commercial risk profile—particularly in relation to payment obligations and cashflow—and amend it where necessary.