Case Law Update: King Crude Carriers SA and others v Ridgebury November LLC and others (2025)

The Supreme Court decision confirms there is no principle of “deemed fulfilment” of conditions precedent in English Law, overturning the longstanding Court of Appeal decision in Mackay v Dick (1881).

Background

The appeal arose in relation to three identical sale contracts for the purchase of oil tankers in which King Crude Carriers SA (and others) (Buyers) were required to pay 10% deposits to Ridgebury November LLC (and others) (Sellers) into third-party escrow accounts and to provide all necessary ‘know your client’ documentation for this purpose.

The Sellers terminated the contracts on the grounds that the deposits had fallen due and that the Buyers, had not paid those deposits, having failed to provide the necessary KYC documentation, meaning that the accounts could not be opened and the deposits were never paid into them by the Buyers.

The Sellers commenced arbitration to claim the deposits as accrued debts. They relied on a doctrine known as Mackay v Dick principle whereby it is argued that if a condition in a contract gives rise to a debt due from a party that fulfils that condition, it should be deemed as fulfilled (or dispensed with or waived) where that party wrongfully prevents that condition from being satisfied. The Sellers therefore argued that the Buyers could not rely on their own breach of contract in preventing the opening of the deposit accounts, which was a condition precedent to the payment of the deposits. The Buyers’ position was that the Sellers’ only remedy was in damages and that they had suffered no loss because, the market price for each of the ships was higher at the date of termination than the purchase price under the contracts.

The arbitrators held that the Sellers were entitled to terminate the contracts and recover the amount of the deposits in debt, but the Buyers successfully appealed the awards in the Commercial Court. However, the Court of Appeal then reversed that decision in favour of the Sellers, reasoning that an obligor could not rely on the non-fulfilment of a condition precedent where it had itself caused such non-fulfilment. The Buyers subsequently appealed to the Supreme Court arguing that there is no Mackay v Dick principle in English Law, nor can contractual interpretation or an implied term assist the Sellers in their debt claim case.

The Supreme Court’s Decision

Concluding a flurry of decisions, the Supreme Court unanimously allowed the Buyers’ appeal, reinstating the Commercial Court’s decision. The Supreme Court held that, where a defendant's breach of contract prevents the fulfilment of a condition precedent to its debt obligation, that condition is not deemed to be waived or fulfilled so that the debt would be due. Sellers’ claims could only be for damages for breach of contract and not debt.

Some of the key reasons given by the Court for rejecting the Mackay v Dick principle were:

1. English authorities do not consistently support the principle and Lord Watson himself (in Mackay v Dick) did not rely on any English Law authorities in declaring the principle (which is drawn from civil law).
2. The principle would undermine the English Law on contracts (particularly in respect of the sale of goods) and create uncertainty.
3. Contract law is concerned with the terms of the contract (express and implied) and its proper interpretation. This provides greater certainty than a principle which relies on fictional fulfilment of a condition precedent.
4. No injustice results from rejecting the principle. Where a condition precedent has not been fulfilled because of the debtor’s breach of contract, the Supreme Court held that the breach can be remedied by a claim for damages.

As for the Sellers’ argument concerning the interpretation of the contracts, the Court found that the correct interpretation of the express preconditions in the contracts was that they did not need to be satisfied where the Buyers had defaulted - the interpretation proposed by the Sellers would effectively rewrite the contracts and contradict the express wording to pay the deposits into the escrow accounts. The Sellers’ argument regarding implied terms was also flawed and would render performance of the contracts impossible.

Key Takeaways

The judgment concludes that there is no English Law doctrine of “deemed fulfilment”.  If a condition precedent is not fulfilled due to a party’s own breach, the other party’s remedy is damages, unless the contract expressly states otherwise.

The decision serves as a reminder for commercial parties to consider the potential risks when negotiating conditions precedents and how non-compliance or fulfilment of those conditions will be treated.

In the first instance, the recourse for the innocent party may be to pursue damages for a breach of contract. If the intention is such that breach of contract should result in a condition precedent falling away or being otherwise deemed as waived, then express wording should be included within the contract to that effect.

For further information, please contact Kirsty Evans.