Legal News | 5.01.26

Debt or damages? The Supreme Court’s ruling on Condition Precedents

In contract law, a condition precedent is a requirement or event that must occur before the contract (or parts of it) can come into effect. But if a party’s breach prevents a condition precedent from being fulfilled, does the debt still arise?

The Supreme Court has now given a definitive answer in the recent case of King Crude Carriers SA and others v Ridgebury November LLC and others [2025] UKSC 39.

Background: The King Crude Dispute

The case concerned ship sale contracts based on the Norwegian Saleform 2012, which required that deposits be paid into an escrow account, which was to be set up by a designated deposit holder. The buyers undertook to pay the deposits within three days of the account being opened and to supply the deposit holder with the necessary “know your client” documentation for opening the account.

However, the buyers breached the contract by failing to provide these documents. As a result, the escrow account was never established, and the deposits were not paid.

The Legal Question

The dispute centred on whether English law treats a condition precedent as satisfied when its failure results from a party’s own breach.

The seller claimed the unpaid deposits from the buyer were debts, and this triggered a principle that treated the condition precedent as fulfilled. The Court of Appeal ruled in favour of the seller, on the basis that the judgment in Mackay v Dick [1881] 6 App Cas 251 established a ‘deemed fulfilment principle’,

However, the Supreme Court overturned this, with the reason being that English law has never recognised such a principle.

The Supreme Court’s Decision 

The Supreme Court gave key reasons for rejecting the seller’s argument:

1. Too many exceptions: The principle was riddled with broad and uncertain exceptions, making it unreliable as a rule of law.
2. Legal fiction rejected: The Court dismissed the idea of a deemed waiver without justification. English contract law focuses on the actual terms—express or implied—and their proper interpretation, which promotes certainty and predictability.
3. No injustice in rejection: Damages remain available for breach, whereas a debt claim could allow recovery beyond the claimant’s actual loss.
4. Weak authority: The authorities do not consistently support the existence of such a principle, with the interpretation of Mackay v Dick [1881] being evidently controversial.

The Court also declined to imply a term that the conditions precedent applied only “unless wrongfully prevented by the buyer”, rejecting the seller’s argument that this would allow buyers to escape any debt obligations too easily.

English law does not treat the condition as fulfilled and the debt does not become payable. Instead, the remedy lies with damages, rather than a repayment of the debt. In a world where businesses may often rely on condition precedents in their contracts, this ruling may impact how debt obligations can be triggered.

In summary, the Supreme Court’s ruling offers clear guidance for contract drafting:

• Be clear in your contracts – If you want the debt to be payable regardless of a breach, state this expressly within the contract.
• Don’t rely on implied terms – Courts will not assume this for you.
• Plan for delays – Set clear deadlines for providing documents and consequences if they are missed.
• Review your contract templates – Ensure your contracts reflect this rule to avoid future disputes.

This article should not be relied upon as legal advice.

If you require further information, then please get in touch with your usual contact in the Corporate & Commercial team at Wansbroughs: 020 4549 2460 or 01380 733300 | commercial@wansbroughs.com