The Supreme Court has finally excised a long-standing anomaly from English contract law. In King Crude Carriers SA & Ors v Ridgebury November LLC & Ors [2025] UKSC 39, Lord Hamblen (with whom Lord Burrows and the other Justices agreed) held that the principle of “deemed fulfilment”, derived from the Scottish case of Mackay v Dick (1881) 6 App. Cas. 251, forms no part of the English common law.
Ridgebury agreed to sell crude carriers to King Crude, with a 10% deposit to be lodged in a joint escrow account. The deposit obligation was subject to a condition precedent: the successful opening of that account. The Buyers breached the contract by failing to provide the necessary documentation, rendering the condition impossible to satisfy. Following the Buyers’ failure to complete, the Sellers sought to recover the deposit as a debt rather than claiming damages. This was a tactical necessity: the market value of the vessels had risen, meaning the Sellers had suffered no financial loss. On Golden Victory principles, damages would be nominal. The Sellers were therefore forced to argue that the condition of opening the account should be “deemed fulfilled” because the Buyers had wrongfully prevented it.
The End of a Legal Fiction
Lord Hamblen was plainly right to reject the Mackay v Dick principle as a fiction (at [66]). The concept of deemed fulfilment, which treats an unfulfilled condition as satisfied where one party prevents its performance, originates from Lord Watson’s dicta in Mackay. However, as Lord Hamblen noted, Lord Watson was a Scottish judge applying a concept from Bell’s Principles and Roman law to a Scottish appeal. It is a distinctly alien concept that has sat uncomfortably within the English common law for over a century.
The Supreme Court instead preferred the analysis of Lord Blackburn in Mackay, which viewed the issue through the lens of proper contractual construction, specifically, a condition subsequent with an implied duty of cooperation (at [26]). Lord Hamblen’s reasoning is principled and compelling: “fictions tend to obscure transparent reasoning and, wherever possible, should be removed.” Relying on such fictions is untenable; it prevents the court from analysing the actual terms of the bargain and the true measure of loss. The decision serves as a necessary warning that civil law concepts should only be permitted where they sit harmoniously with existing common law precepts.
Narrowing the Prevention Principle
The judgment is also significant for its treatment of the “prevention principle”, the maxim that a party should not benefit from their own wrong. Lord Hamblen distinguished between the “presumption” in Chitty regarding this maxim and a prescriptive universal rule. Expressly invoking the theory of efficient breach (at [78]), his Lordship reaffirmed that contract law is concerned with compensation, not punishment.
This robust defence of the underlying principles of contract law is welcome. It is plausible that the prevention principle was the “moral” engine that kept the deemed fulfilment doctrine alive in English law for 145 years, despite its technical flaws. For instance, in Companie Noga d'Importation et d'Exportation SA v Abacha (No 3) [2002] CLC 207, Rix LJ was faced with a settlement agreement where a debtor sought to evade a large financial obligation by blocking the conditions. It is arguable that Rix LJ viewed the debt itself as the “true” bargain, using the prevention principle as a deterrent to enforce that bargain. Abacha has now been rightly overruled.
Lord Hamblen clarified that the prevention maxim is limited in two respects. First, it has a narrow defensive application; it cannot be used as a sword to create new contractual rights or “kill” a contract. In King Crude, the Buyers were using the contract as a shield, insisting on the correct legal remedy (damages) rather than the one the Sellers preferred (debt). Second, applying the modern approach to interpretation in Arnold v Britton and Wood v Capita, the literal contextual analysis showed the parties had agreed to a strict condition for the debt.
The decision brings welcome clarity to the distinction between a claim for damages and a claim in debt. By preventing the maxim from being used to rewrite the bargain, the Supreme Court has reasserted the paramountcy of the contractual text. As Lord Hamblen noted, sophisticated parties have only themselves to blame for ostensibly “unreasonable and absurd consequences” (at [81]).
