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Termination – A timely reminder
In August 2024 we reported on the Court of Appeal case, Providence Building Services Limited v Hexagon Housing Association Limited [2024] EWCA Civ 962. A copy of the article can be found here: Court of Appeal decides on JCT DB 2016 termination provisions.
This case is a timely reminder of the importance of termination and notice requirements.
In this blog, we provide a brief recap on how Employers can terminate under JCT and NEC4 contracts.
TERMINATING A JCT BUILDING CONTRACT
Under the 2016 and 2024 editions of the SBC and D&B, the Employer may terminate for:
Contactor default (i.e. unreasonably suspending works, failing to proceed regularly and diligently, not complying with a notice/instruction to remove works, subcontracting or assigning without consent or not complying with CDM and in the 2024 contract forms failing to comply with the dutyholder requirements introduced by the Building Safety Act 2022)
Contractor insolvency (noting that the definition of insolvency in the 2024 forms now includes two new insolvency tests)
Contactor corruption (i.e. if an offence is committed under the Bribery Act 2010, or if an officer of a local authority accepted a fee or reward)
Under the Public Contracts Regulations 2015 (i.e. exclusion ground(s) and where the substantial modification ground applies under the regulations)
Employers should remember that termination by the Employer for a Contractor default requires two notices to be given. The first notice specifies the defaults. If the specified defaults continue for 14 days from receipt of the first notice, then within 21 days from the expiry of the 14-day period, a second notice can be served which terminates the contract.
TERMINATING AN NEC4 ENGINEERING AND CONSTRUCTION CONTRACT
Under NEC4 ECC, consider at the outset the termination table in clause 90.2. This provides further details on the reasons for termination and the applicable procedure to follow.
The reasons for terminating an NEC4 ECC include:
Breach of contract (with the Contractor typically allowed four weeks to remedy a breach).
Operation of law, meaning that the contract may no longer be performed lawfully, as intended.
An instruction to stop work.
Matters beyond the parties' control.
If the parties have selected Option X11 (Termination by the Client) in the Contract Data, then the contract will also allow for termination at the Client's convenience i.e. "for a reason not set out in the Termination Table" (clause X11.2, NEC4 ECC).
Clause 90.1 requires the party terminating to notify the other party and the project manager. It is the project manager who then issues a termination certificate.
Proceed with caution
Content: ensure that any termination notice(s) contain the required information.
Sending a notice: make sure the notice(s) are sent in accordance with the requisite notice provisions and make a note of when it is deemed to be received.
Timings: check when you need to send your termination notice(s). If the notice(s) are not served in time, the termination will not be effective.
Harnaek Rahania, Junior Associate, Sharpe Pritchard
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