Can a condition precedent be deemed satisfied by a defendant’s breach?

In King Crude Carriers SA and others v Ridgebury November LLC and others [2025] UKSC 39 the Supreme Court overturned a decision by the Court of Appeal and held that the principle established by Lord Watson in Mackay v Dick (1881) 6 App. Cas. 251, [1881] 3 WLUK 23, a Scottish appeal, did not form part of English law.

In this case, the memorandas of agreement for the sale of three tanker vessels contained amendments obliging the buyer to lodge deposits with third party holders following the fulfilment of certain conditions precedent.  The buyer breached those conditions leading to the sellers cancelling the sale agreements and commencing arbitration, seeking to recover, inter alia, the deposits as accrued debts by relying on the Mackay v Dick principle i.e. that where a party to a contract wrongfully prevented the fulfilment of a condition precedent to that party’s debt obligation, the condition was treated as being fulfilled.  The buyer disputed this and asserted that the sellers only remedy was a claim in damages.

The Supreme Court rejected the seller’s claim because (amongst other reasons):

  • The English law of contract is concerned with the terms of the contract, express and implied, and their proper interpretation, promoting certainty and predictability.
  • The court rejected the fiction of a deemed waiver without a convincing explanation for it.
  • Regarding the Mackay v Dick principle:
    • it was subject to broad exceptions with an uncertain scope and accordingly cannot be a robust principle of law;
    • rejecting the principle did not lead to injustice. Damages are available to the buyer for the breach while a debt claim potentially allows the claimant to recover more than its loss; and
    • Case law did not consistently support this principle.

The Supreme Court further commented that if the parties had intended a debt to be payable regardless, they would not have provided for any condition’s precedent and the seller’s interpretation would effectively re-write the contract that had been negotiated.

The Supreme Court also declined to imply a term that the conditions precedent applied only “unless wrongfully prevented by the buyer” or to find that the debt accrued before it was payable.  If this was intended to be the case, the seller could have expressly included drafting to allow for deemed fulfilment or waiver of conditions precedent where failure of the condition is caused by the obligor’s breach.

This reinforces the long-held notion in the English law of contract that drafting should be express and clear so as to avoid uncertainty and the need to rely on court interpretation.

 

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