Deemed Fulfilment Dethroned: UK Supreme Court Gives Important Decision on Conditions Precedent

In King Crude Carriers SA v Ridgebury November LLC ¹King Crude Carriers SA and others v Ridgebury November LLC and others [2025] UKSC 39., the Supreme Court has handed down an important decision relating to contractual conditions precedent which will be of relevance across many different contractual settings under English law. The case concerned a breach of contract in relation to third-party deposit accounts and the so-called ‘deemed fulfilment principle’ (also known as the ‘Mackay v Dick principle’). The deemed fulfilment principle results in the deemed fulfilment (or waiver) of a condition precedent to a debt obligation where the failure of the condition is caused by the debtor’s breach.

The key issue before the Supreme Court was whether, under English law, such a principle actually exists. After many years of uncertainty, the Court decided that it does not.  

Facts and the Courts Below

By way of brief background, King Crude Carriers concerned contracts for the sale of three vessels. Under the contracts, the buyers (the appellants in the Supreme Court) were obliged to lodge deposits of 10% of the purchase price with a third-party escrow deposit holder. The deposits had to be paid within three banking days of the deposit holder confirming in writing that the deposit accounts had been opened. The parties were obliged to provide all necessary documentation for the opening of the accounts. In breach of contract, the buyers never did so and, therefore, the accounts were not opened, and the deposits were not paid. The sellers terminated the three contracts and claimed the amount of the deposits in debt, relying on the deemed fulfilment principle.

The buyers contended that the sellers’ sole remedy was in damages and that no loss had been suffered. The sellers’ claim succeeded in arbitration, before failing on appeal before the Commercial Court, and then succeeding (again) before the Court of Appeal. Upon appeal to the Supreme Court, the buyers primarily submitted that there is no deemed fulfilment principle in English law and, alternatively, that neither contractual interpretation nor an alleged implied term assisted the sellers in establishing their debt claim.

The difference in the parties’ positions was not academic: due to a subsequent increase in the market price of the tankers, the sellers would not be able to establish any loss and therefore any damages awarded would have been nominal.  

The Deemed Fulfilment Principle

The Mackay v Dick or deemed fulfilment principle²Not to be confused with the other, important principle for which Mackay v Dick is known, namely, the implied duty to co-operate, whereby contracting parties are obliged to co-operate to ensure the performance of their bargain.  That principle is unaffected by King Crude Carriers and remains good law., in its simplest form, is that “where a party wrongly prevents the fulfilment of a condition precedent (i.e. a pre-condition) to that party’s obligation... that condition is treated as being fulfilled”. In practical terms this means that where the fulfilment of a contractual pre-condition triggers a debt payment and one party breaches that condition, it is treated as met (or waived) such that the breach can be enforced as a debt.

The principle is said to have arisen from a well-established tenet of English contract law, namely, that a party cannot benefit from its own wrong. However, there has been extensive case law casting doubt on the necessity for and existence of the deemed fulfilment principle.

Decision of the Supreme Court

Deemed fulfilment

Overturning the decision of the Court of Appeal, the Supreme Court found that the deemed fulfilment principle is not a principle of English law, for six reasons:

1. The doctrine had its roots in civil law rather than English law authorities, as Mackay v Dick was an appeal from a decision of the Scottish courts.
2. The relevant case law is inconsistent in its approach to and application of the principle. The Supreme Court considered it possible that in certain cases, the same result could be reached through the application of the law on damages for breach of contract, rather than the law on debt.
3. The principle does not apply uniformly across all areas of contract law (in particular, the sale of goods or land) and there are instances where it would “undermine the established law as to when a debt accrues.”
4. The principle itself is based on a fiction as it deems waiver or satisfaction of the relevant condition, when in reality that has not occurred, and that such “[f]ictions tend to obscure transparent reasoning and, wherever possible, should be removed.”
5. The English law of contract 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 of freedom of contract and certainty and predictability in English law.
6. Rejecting the deemed fulfilment principle would not lead to injustice; the claimant’s remedy in damages adequately deals with a debtor’s breach of contract.

Contractual interpretation and implied terms

The sellers alternatively argued that, on the basis of the true construction of the contracts in this case, or an implied term, the deposits were nonetheless owed to the sellers as a debt.

The sellers relied on the presumption that a party cannot take advantage of its own wrong to argue that the contract should be interpreted in line with that presumption. However, this was rejected by the Court on the basis that the presumption is not of general application and the present case diverged from those cases where the presumption has tended to apply, namely, where the breaching party attempts, offensively, to use their own breach to treat the contract as being at an end or to claim a benefit under it (rather than relying on it defensively, as the buyers did in this case). Furthermore, the Court found that the sellers’ attempts to interpret the contract to oblige payment subject to a promissory condition, regardless of whether the condition is fulfilled, was, in fact, an attempt to rewrite the contract.

As to the sellers’ proposed implied terms, they argued that there should be an implied term which negated the effect of the deposit arrangements, given that those arrangements were for the buyers’ benefit. However, the Court rejected this argument because the proposed additional wording would make a key part of the buyers’ obligations impossible to perform and would contradict and be inconsistent with the express terms agreed.

What Can we Take Away from King Crude Carriers?

Conditions precedents are a common and widely used contractual mechanism.  Therefore, King Crude Carriers will be of interest to many contracting parties, in a wide array of contractual settings.  We would draw the following conclusions from the decision:

• First, this is another ‘win’ for contractual certainty and predictability in English law. In considering the implications of the decision, Lord Hamblen and Lord Burrows (with whom Lord Reed, Lord Hodge and Lord Stephens agreed) stated that this approach “promotes certainty and predictability, which are important considerations, especially in the commercial law context."
• Secondly, it is also a decision rooted firmly in contractual freedom, a cornerstone of English contract law. If contracting parties have clearly stipulated that performance is to occur on a conditional basis, they are entitled to do so, and the Courts will shy away from ‘rewriting’ their bargain to circumvent that clear intent, whatever the ‘merit’ of doing so may be in a particular case.
• Thirdly, a key practical consequence of the decision is that where parties wish to treat a condition precedent as being satisfied or waived in certain circumstances, they should consider expressly spelling that out. The previous fiction of the deemed fulfilment principle will no longer protect an innocent party in that situation (nor should the possibility of an implied term to fill any gap be counted on).
• Fourthly, the facts of King Carrier itself demonstrate quite starkly at least one reason why contracting parties should perhaps turn their minds more closely to the risks associated with the non-fulfilment of important conditions precedent. Claiming for damages, rather than in debt, is not only a more involved and potentially more costly process (given that, when claiming damages, issues of causation, mitigation and remoteness need to be navigated), it can, depending on the facts, lead to no meaningful economic recovery at all.   

Additional Contributors: Jack Ledigo