Get the timing right! Terminating a JCT contract

The recent High Court case of Andrew Bellis v Sky House Construction Ltd provided clarity on termination provisions in JCT contracts, and specifically when a termination notice can be issued, write Michael Comba and Beth Edwards.

Terminations always have tricky procedures, even if it is cut and dry that a contractor is in breach and a right to terminate has arisen. Issuing the notices at the right time is always a key part of this.

Background

Mr. Bellis had entered into a JCT Minor Works Contract (2016 Edition) with Sky House Construction Ltd to build a house extension. The contract contained the following process for termination:

• When a default occurs before practical completion, the employer may issue a default notice;
• If the default in question continues for seven days, the employer may issue a termination notice to the contractor. This can be issued on the expiry of the seven days, or within 10 days of this.

Clause 1.4 of the contract stated that “Where under this Contract an act is required to be done within a specified period of days after or from a specified date, the period shall begin immediately after that date.”

Mr Bellis had served an initial notice by hand on 1 September, which was followed by a termination notice on 8 September. Sky House commenced an adjudication for wrongful termination

The adjudicator found that Mr Bellis had issued the notice of termination too early (one day before he was entitled to do so), and in doing so had repudiated the contract. He was thereafter liable to pay over £30,000 to Sky House in damages.

Mr Bellis referred the issue to court, arguing that the adjudicator had erred in concluding that the contract had been terminated wrongfully.

Judgment

The court agreed with the adjudicator and accepted Sky House’s argument that the contract required seven “clear” days’ notice of a specified date, meaning the termination notice should only have been issued on 9 September. The use of clear days is a common approach to the calculation of time periods, for example it is used under the Civil Procedure Rules, and there is no suggestion in the JCT drafting that it should not be used here.

The court rejected Mr Bellis’ argument that the expiry of seven days was not a “specified date” referred to in clause 1.4, as it was not specifically referred to in the Contract Particulars. This interpretation would greatly reduce the effect and utility of clause 1.4, which could not have been what was intended in the drafting. Additionally, if Bellis’ interpretation had been correct, it could have led to a situation where Sky House had less than seven days to rectify the default; this is already a short period for defaults to be rectified and, from a practical perspective, should not be reduced even further.

Commentary

Applicable across the JCT suite, this case underlines the importance of complying with the JCT timelines.

A cautious approach is recommended for employers seeking to terminate and to double and triple check a right to terminate has procedurally arisen. That goes alongside any other procedural requirements, such as using the correct method and address of service.