JCT DB 2016 Clause 8.9.4: “Repeat Default” Termination Requires a Previously Accrued Clause 8.9.3 Right

1. Introduction

Providence Building Services Limited v Hexagon Housing Association Limited [2026] UKSC 1 is a United Kingdom Supreme Court decision on the interpretation of a widely-used termination mechanism in the JCT Design and Build Contract (2016 edition) (and materially identical wording in the 2024 edition). The dispute arose from the Employer’s repeated late payments and the Contractor’s attempt to terminate immediately for a later late payment by characterising it as a “repetition” of an earlier “specified default”.

The parties were:

• Providence Building Services Limited (the “Contractor”, Respondent in the Supreme Court)
• Hexagon Housing Association Limited (the “Employer”, Appellant in the Supreme Court)

The central issue was agreed and narrow, but of broad industry importance because it determines when a contractor can invoke the “repeat default” termination route under clause 8.9.4:

“Can the contractor terminate its employment under clause 8.9.4 of the JCT 2016 Design and Build Form, in a case where a right to give the further notice referred to in clause 8.9.3 has never previously accrued?”

2. Summary of the Judgment

The Supreme Court (Lord Burrows giving the judgment, with whom Lord Reed, Lord Briggs, Lord Stephens and Lord Richards agreed) allowed the Employer’s appeal.

It held that clause 8.9.4 is “parasitic” on clause 8.9.3: the contractor may only terminate under clause 8.9.4 for repetition of a specified default if the contractor previously had an accrued right to terminate under clause 8.9.3 (i.e., the earlier specified default or specified suspension event continued beyond the cure period).

On the facts, the Contractor’s December notice under clause 8.9.1 was followed by the Employer curing the late payment within the 28-day period; therefore, no clause 8.9.3 termination right ever accrued and the Contractor could not use clause 8.9.4 to terminate immediately upon a later late payment in May.

3. Analysis

3.1 Precedents Cited

A. Interpretation is a question of law

The Court reaffirmed that interpretation is a legal question, citing Pioneer Shipping Ltd v BTP Tioxide Ltd, The Nema [1982] AC 724. This anchors the Supreme Court’s role in definitively resolving clause meaning—particularly significant for a standard form used across an industry.

B. The “whole contract” principle

The Court emphasised the orthodox requirement to construe clauses in their contractual setting, citing:

• Chamber Colliery Co Ltd v Twyerould [1915] 1 Ch 265n
• Charter Reinsurance Co Ltd v Fagan [1997] AC 313
• Beaufort Developments (NI) Ltd v Gilbert-Ash (NI) Ltd [1999] 1 AC 266 (notably “in the context of JCT contracts”)

These authorities supported the Court’s insistence that clause 8.9.4 cannot be read as a free-standing repetition trigger; its opening words and relationship with clause 8.9.3 are part of the meaning.

C. Modern contextual approach and limits of “commercial common sense”

The Supreme Court located its approach within the modern line of authority:

• Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896: objective meaning to a reasonable person with relevant background; business common sense can assist; subjective intention and previous negotiations are excluded.
• Arnold v Britton [2015] UKSC 36; [2015] AC 1619: the words used are of primary importance and courts must not “rewrite” a bad bargain by overusing commercial common sense.
• Wood v Capita Insurance Services Ltd [2017] UKSC 24; [2017] AC 1173: interpretation as an “iterative process”, checking competing readings against the contract and their consequences.

These cases underpinned the Supreme Court’s choice to prioritise the linguistic and structural role of clause 8.9.4’s opening words, and to treat “commercial common sense” as confirmatory at most, not as a lever to transform clause design.

D. Standard forms, industry context, and background material

The judgment draws a careful line between permissible and impermissible contextual materials for standard forms.

• A Schroeder Music Publishing Co Ltd v Macaulay (formerly Instone) [1974] 1 WLR 1308: Lord Diplock’s distinction between “take it or leave it” forms and industry-negotiated standard forms. The JCT form is treated as an industry-wide standard form negotiated by representatives on both sides, reducing concerns about inequality of bargaining power and supporting consistent interpretation.
• Beaufort Developments (NI) Ltd v Gilbert-Ash (NI) Ltd [1999] 1 AC 266: admissibility/utility of earlier judicial authority and practice to understand the evolution of standard wording.
• Orion Shipping and Trading LLC v Great Asia Maritime Ltd [2025] EWCA Civ 1210: cited as further support for focusing on background generally known within the relevant market/industry.
• Polestar Maritime Ltd v YHM Shipping Co Ltd, The Rewa [2012] EWCA Civ 153; [2012] 2 All ER (Comm) and Seadrill Management Services Ltd v OAO Gazprom [2010] EWCA Civ 691; [2011] 1 All ER (Comm) 1077: “archaeology of the forms” is generally discouraged unless the reason for amendments is confidently identifiable. The Supreme Court invoked these to resist overreliance on comparing different JCT editions where the rationale for drafting changes is not evidenced.
• Tesco Stores Ltd v Union of Shop, Distributive and Allied Workers [2024] UKSC 28; [2025] ICR 107: used by analogy to show how objectively shared intentions of those responsible for collectively negotiated text may be relevant when interpreting incorporated provisions, without abandoning objective interpretation.

The Court accepted the admissibility of the JCT’s guidance as background (“Design and Build Contract Guide 2016”), but ultimately found it did not assist on the disputed point.

E. Earlier JCT cases considered but treated as unhelpful on the present wording

The Court noted the Court of Appeal’s discussion that the Contractor’s interpretation had been correct on the 1998 JCT wording and that this was considered in Ferrara Quay Ltd v Carillion Construction Ltd [2009] BLR 367 and Reinwood Ltd v L Brown & Sons Ltd [2007] BLR 10. However, the Supreme Court did not treat this “archaeology” as determinative for the current 2016 clause structure and wording, especially given the general caution expressed in Seadrill Management Services Ltd v OAO Gazprom.

3.2 Legal Reasoning

A. The decisive textual point: clause 8.9.4’s opening words create a “gateway”

The Supreme Court’s core holding turns on the opening words of clause 8.9.4:

“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 Court reasoned that these words are structurally meaningful: they point back to clause 8.9.3 and presuppose the existence of a “further notice” that the Contractor could have given. That further notice is the termination notice available only if a specified default or specified suspension event has continued beyond the stated period (here amended to 28 days).

On this reading, clause 8.9.4 is not an alternative termination route triggered merely by repetition. It is a follow-on mechanism for the case where the contractor could have terminated under clause 8.9.3 (because the earlier breach persisted long enough), but “for any reason” did not do so, and later faces repetition.

B. Avoiding superfluity and obscurity

The Court found the Contractor’s construction made the opening words of clause 8.9.4 effectively redundant (or, at best, unclear). If repetition alone sufficed, clause 8.9.4 could have begun simply with “If the Employer repeats a specified default…”. The Court treated the existing wording as deliberate and therefore interpretively significant.

C. Commercial consequences as a sense-check, not a rewriting tool

The Court accepted that both constructions could be presented as rational, but considered the Contractor’s construction produced a more extreme result: even two minor late payments (e.g., one day late each time) could entitle immediate termination on the second default (assuming a specified default notice had been served on the first).

The Contractor argued clause 8.2.1 (termination not “unreasonably or vexatiously”) would police abuse. The Court rejected that as “scant comfort” because it would burden the Employer with difficult, uncertain litigation about reasonableness/vexation after the termination notice.

D. Rejecting forced symmetry with clause 8.4

The Court of Appeal’s key move was to read clause 8.9 by analogy with clause 8.4 (Employer termination for contractor default), placing strong weight on structural similarity and arguing the conditional phrases should “carry the same meaning”.

The Supreme Court rejected that for three reasons:

1. No requirement of symmetry: employer and contractor obligations differ, and JCT may rationally allocate termination powers differently.
2. The contract was already asymmetrical (as amended): different cure periods (28 days vs 14 days) and different specified defaults (notably clause 7.1 treated differently).
3. Different drafting choices matter: clause 8.4.3 expressly includes “whether as a result of the ending of any specified default or otherwise”, while clause 8.9.4 does not. The Court treated that difference as deliberate clarification: clause 8.4.3 clearly covers cases where no accrued termination right arose because the default ended within time, whereas clause 8.9.4’s wording supports the opposite inference.

E. Standard forms and objective intention

The Employer suggested interpretation should pursue the intention of the standard form’s drafter rather than parties’ objective intention. The Court declined that as an overstatement. The correct approach remains objective interpretation; however, when parties adopt an industry standard form, the relevant context typically includes the shared market understanding and the aim of consistent interpretation across users of the form.

3.3 Impact

A. Practical effect on JCT DB 2016/2024 termination strategy (late payment)

The ruling substantially narrows “repeat default” termination by contractors under clause 8.9.4:

• If the Employer cures a specified default (e.g., late payment) within the clause 8.9.3 cure period (here 28 days), no clause 8.9.3 right accrues.
• Without that previously accrued right, the Contractor cannot use clause 8.9.4 to terminate immediately upon a later repetition.
• The Contractor must instead restart the clause 8.9 process: serve a specified default notice and wait for the cure period to expire before terminating under clause 8.9.3 (subject to “not unreasonably or vexatiously”).

B. Increased significance of the cure period

The cure period becomes a decisive threshold. Only if an earlier specified default persisted beyond the cure period—making it “particularly serious” in the Court’s framing—does clause 8.9.4 become available for immediate termination on repetition.

C. Drafting and negotiation implications

Parties who want “two strikes and out” termination for late payment will need bespoke amendments. This decision signals that, absent clear wording, courts will not stretch clause 8.9.4 to create an immediate termination right for repeated minor payment delays.

D. Dispute risk and the role of clause 8.2.1

The Court’s skepticism about relying on “unreasonably or vexatiously” as a safeguard suggests fewer cases should turn on that uncertain standard, and more on whether the contractual “gateway” to termination was properly opened. This may improve predictability but reduces the contractor’s leverage against repeated short delays.

4. Complex Concepts Simplified

• Contractual interpretation (objective): the court asks what the words would mean to a reasonable person with the relevant background, not what either party later says they intended.
• Specified default notice (clause 8.9.1): a formal warning identifying the employer’s default (e.g., failure to pay by the final date).
• Accrued right to terminate (clause 8.9.3): the right arises only if the specified default continues for the stated period after receipt of the notice (here 28 days). If the employer cures within that window, the right never arises.
• “Parasitic” clause: a clause that depends on another clause being capable of operation first. Here, clause 8.9.4 depends on clause 8.9.3 having been available at an earlier stage.
• “Repeat default” termination (clause 8.9.4): not a free-standing right upon any repetition; it is only engaged if the contractor previously could have terminated under clause 8.9.3 but did not.
• “Unreasonably or vexatiously”: a constraint on serving termination notices. The Court viewed it as an uncertain, dispute-prone control mechanism and not a reliable substitute for clear termination thresholds.
• “Archaeology of the forms”: using earlier editions/drafting history of standard forms as interpretive aids. Courts usually discourage it unless the reason for changes is clearly established and likely known in the industry.

5. Conclusion

[2026] UKSC 1 establishes that, under the JCT Design and Build Contract (2016) clause 8.9, clause 8.9.4 cannot be used to terminate for a repeated specified default unless a clause 8.9.3 termination right previously accrued. The Supreme Court reached that result by prioritising the text and structure of clause 8.9.4, rejecting an assumed symmetry with clause 8.4, and treating commercial common sense as a check rather than a basis to re-engineer the clause.

The decision will influence termination practice across the construction industry by making the clause 8.9.3 cure period the critical gateway to the more draconian “repeat default” termination right, thereby favouring contractual stability over immediate termination for repeated but promptly cured late payments.