Supreme Court considers approach to interpretation of industry-wide standard form contracts

The Supreme Court has held that a contractor cannot terminate its employment under clause 8.9.4 of the JCT Design and Build Contract 2016 for a repeated default (such as late payment) where the right to give a termination notice for the original default had not previously accrued under clause 8.9.3: Providence Building Services Limited v Hexagon Housing Association Limited [2026] UKSC 1.

The court overturned the Court of Appeal's decision, which had meant that employers were at risk of termination where more than one administrative payment error was made during the period of the contract. In particular, under the earlier decision, even if the employer had corrected a late payment within the time allowed by the contract, a further late payment would automatically entitle the contractor to terminate its employment (provided it had served a notice of specified default in relation to the first payment). 

As well as the specific implications for those in the construction industry, the decision is of interest more generally for the Supreme Court's guidance on the interpretation of industry-wide standard form contracts which have been negotiated by representatives of contracting parties in a particular trade or industry. In particular, while the usual approach to contract interpretation applies:

• Historical judicial treatment and practice in relation to clauses in an earlier version of a standard form may be included as admissible background context, for example if it is clear that the standard form has been amended so as to depart from a court decision. However, the "archaeology of the forms" should generally be discouraged, as it is akin to referring to previous drafts of a contract, which is not a proper aid to construction. 
• Where parties choose to use an industry-wide standard form, it can generally be taken that their objective intentions in the relevant context are that their respective rights and obligations should be consistent with those of other parties using the same form, and should reflect the objective intentions of those who were concerned with the drawing up of that standard form agreement.

For more information see this post on our HSF Kramer Construction Notes blog.