King Crude: Supreme Court rejects “deemed fulfilment” and champions freedom of contract

The Supreme Court recently decided an important case going to the question of how the courts treat situations where a contracting party deliberately prevents their counterparty from fulfilling a condition precedent to the contract. The focus of the appeal, in King Crude Carriers SA v Ridgebury November LLC [2025] UKSC 39, was on the earlier decision of the House of Lords in the Scottish case of Mackay v Dick (1881) 6 App Cas 251. Mackay v Dick is uncontroversial authority for there being an implied duty to cooperate, whereby contracting parties are obliged to cooperate to ensure performance of their bargain. However, the speech of Lord Watson in Mackay v Dick has long been controversial, as it had indicated that there was a principle of law that, where a party wrongfully prevents the fulfilment of a condition precedent to that party’s debt obligation, that condition is treated as being fulfilled. The status of that “deemed fulfilment” principle, has long been a matter of debate, which the decision in King Crude has now settled.

Background

The case arose in the context of three Memoranda of Agreement (the “MOAs”) for the sale and purchase of three tanker vessels on the Norwegian Saleform 2012. Under the MOAs, the appellants / buyers (the “Buyers”) were obliged to lodge a deposit of 10% of the purchase price with a deposit holder. The deposit was required to be paid within three banking days of the deposit holder confirming in writing that the deposit account had been opened. The parties were obliged to provide all necessary documentation for the opening of the account. In breach of the contract, the Buyers (by reason of their own conduct) never did so. The respondents / sellers (the “Sellers”) terminated the three contracts and claimed the deposits in debt relying on Mackay v Dick. The Buyers contended that the Sellers’ sole remedy was in damages and that no loss had been suffered. 

Importantly, one of the assumed facts of the case was that the market price for each of the vessels was higher upon termination than the purchase price under each of the MOAs. Accordingly, on the face of it, the Sellers suffered no net loss by reason of the Buyers’ breach of contract, so the framing of the claim as an entitlement to payment of the deposit as a claim in debt was critical for the Sellers.

The Sellers commenced arbitrations under the MOAs, successfully claiming payment of the deposits as debts.

The Buyers then appealed to the Commercial Court, which held that the Sellers’ claim must be in damages because, having conducted a careful and wide-ranging review of the authorities, the Court concluded that the doctrine of deemed fulfilment (or deemed waiver) did not form part of English law.

The Court of Appeal subsequently allowed the Sellers’ appeal and the Buyers then appealed to the Supreme Court.

The appeal raised the issue of whether there is a “Mackay v Dick principle of law” in English law.  Very closely related to that is the question whether, even if there is no such principle of law, contractual interpretation or an implied term achieve much the same outcome.

Supreme Court decision

Issue of deemed fulfilment

The Supreme Court reviewed the question of what happens where a party who has an obligation to make a payment when a pre-condition is fulfilled does not fulfil the precondition and the failure to do so is a breach of the contract. Having surveyed the most relevant case law and academic commentary, the Supreme Court decided that Mackay v Dick is not a principle of law in English law.  This was for the following main reasons:

1. Lord Watson in Mackay v Dick did not cite or rely on any English law authorities in support of the principle he stated. Rather, he relied upon what he understood to be “a doctrine borrowed from the civil law”.
2. The English law authorities did not speak with one voice. The four main cases relied on by the Sellers supported such a principle of law, whilst the cases relied on by the Buyers have voiced persuasive views to the contrary. 
3. Such a principle of law was contradicted by the previous authority of Colley v Overseas Exporters [1921] 3 KB 302. As the Court in that case recognised, it would fundamentally undermine the law on contracts for the sale of goods if Mackay v Dick were to apply to a failure to fulfil a condition precedent to the passing of property. 
4. The various formulations or explanations of the Mackay v Dick principle of law were all ‘fictional’.  The language of there being a deemed performance, or a deemed waiver, or a quasi-estoppel immediately made that clear. The Court observed that, in reality, there had been no performance, and the ingredients of a true waiver or of a true estoppel had not been satisfied.
5. The Court regarded the previous decision in Thompson v ASDA-MFI Group plc [1988] 1 Ch 241 as being correct that the English law of contract in this area proceeds on the basis of the terms of the contract, express and implied, and their proper interpretation rather than by way of fictional fulfilment of a condition precedent. This is consistent with the importance which English law attaches to freedom of contract, and to the application and enforcement of the terms of the bargain which the parties have made. This promotes certainty and predictability, which are important considerations, especially in the commercial law context.
6. The consequence of rejecting Mackay v Dick as a principle of English law did not lead to injustice.  Where a condition precedent has not been fulfilled because the debtor’s breach of contract, that breach is appropriately and adequately dealt with through the claimant’s remedy in damages.  The Court held that there was no good reason to strain to uphold a claim for debt where, as illustrated by this case, this involved disregarding the terms of the contract and where, in contrast to damages, allowing the debt claim may have exceeded the claimant’s loss.

Issue of implied term

On the issue of whether the Sellers could succeed by relying on Mackay v Dick as an aid to contractual interpretation or as based on an implied term, the Court held that parties should be understood to mean what they say. The Sellers’ case on interpretation meant that a payment obligation of this kind required payment to be made regardless of whether the condition was performed. But if the parties intended it to be paid regardless, the Court held that they would not have made it conditional.

The Court stressed that it is always open to the parties to include a term in the contract making clear that a condition precedent to a debt obligation does not apply where the failure of the condition precedent is caused by the debtor’s breach.

The Court also rejected the implied term argument made by the Sellers, that the deposit arrangements were for the benefit of the Buyers and as such there was an implied term to the effect that they could not be insisted upon in circumstances where the Buyers had made them impossible to carry out. Any such term would have contradicted the express terms agreed which contemplated a third party deposit holder and there was already a clause contained within the agreement that expressly governed what would happen in that scenario (i.e., the Sellers would be entitled to cancel and claim compensation).

Comment

This significant Supreme Court decision has clarified this area where there was a lack of consistent authority and it is now clear that parties to a contract should be understood to mean what they say in this arena. There is no concept of “deemed fulfilment” in English law. The decision is a win for certainty and predictability in contract law, as a decision to the contrary would have left many contract makers in uncertain positions with respect to any unfulfilled conditions precedent. As a practical point, if parties to a contract intend for a condition precedent not to be conditional, they will need to reflect that intention in the drafting of the contract.