The UK Supreme Court has ruled a contractor cannot terminate a project because a client made two late payments.
Providence Building Services and Hexagon Housing Association have been involved in a long-running dispute concerning a £7.2m project in South London. The work, which was carried out between 2019 and 2022, delivered six blocks of social housing in Purely.
To give context into the dispute, in November 2022 Hexagon missed a payment worth £264,000. Providence issued a formal default notice, but the company made the payment within 28 days.
In April 2023, Hexagon made the same mistake. The company missed a payment of £355,000 and Providence issued a payment notice requiring the money by 17th May 2023. Following this, Providence terminated the contract on 18th May.
However, Hexagon subsequently paid on 23rd May, a move that prompted legal action.
The Court of Appeal previously sided with Providence, ruling that the contractor was right to terminate the contract after Hexagon missed a scheduled payment for the second time, despite having paid within 28 days of the first default notice.
Although, in a ruling on Thursday 15th January 2026, the Supreme Court overturned that decision and sided with Hexagon.
The President of the Supreme Court, Lord Robert Reed, explained clause 8.9.4 of the JCT (Joint Contracts Tribunal) Design and Build Contract (2016) requires a contractor to accrue the right to terminate a contract, rather than exercising it immediately.
Lord Reed said if a contractor could terminate a contract after just two late payments, the clause would be like using ‘a sledgehammer to crack a nut’. He continued: ‘It would be less extreme if a second day entitles the contractor to terminate the contract only where the first late payment has been delayed beyond the specified 28 days and has therefore been particularly serious.’
Mark London, senior partner at Devonshires, representing Hexagon, said the previous Court of Appeal judgement had introduced ‘a significant risk to employers everywhere who, in the event of a specified default, will face the proverbial Sword of Damocles for the remainder of the contract.’
He described the previous judgement as creating a ‘two strikes and you’re out’ regime and welcomed the Supreme Court’s decision, saying it ‘has brought certainty back to an industry where the use of the JCT standard form is common.’
Image: Tingey Injury Law Firm/UnSplash
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