12/11/2025

Supreme Court precedent on conditions precedent

Lord Watson held in Mackay v Dick (1881) 6 App Cas 251 that, where a party wrongfully prevented the fulfilment of a condition precedent to a debt, the condition would be deemed fulfilled. It has long been debated whether that is a principle of Scottish law only, or whether it also reflects the law south of the border.

The Supreme Court in King Crude Carriers and others v Ridgebury November and others [2025] UKSC 39 puts an end to that debate, holding that this is not part of English law. In so doing, it overturns a unanimous Court of Appeal judgment and reinstates a judgment by Dias J at first instance.

Julian Kenny KC and Michal Hain acted for the respondents.

Background

The issue arose in the context of contracts for the sale of oil tankers. The contracts provided that the buyers of the tankers were each to pay a deposit. However, the clock on paying the deposits did not start ticking until the deposit holder, which was a firm of solicitors, had confirmed that the deposit-holding accounts were open. The buyers, in breach of contract, prevented the deposit holder from giving that confirmation by failing to provide the necessary KYC documents.

Against this background, the question was whether the obligation to pay the deposit had fallen due absent the written confirmation.

Decisions below

In their awards, the arbitrators found that the obligation to pay the deposits had fallen due.

The buyers appealed under section 69 and Dias J reversed the arbitrators: [2023] EWHC 3220 (Comm).

In the Court of Appeal, Popplewell LJ delivered the leading judgment, Nugee LJ concurred briefly, and Falk LJ agreed with both. Unanimously, they allowed an appeal against the first-instance judgment, [2024] EWCA Civ 719, as to which, see Parties cannot rely on their own wrongs: The Court of Appeal reconsiders conditions precedent (2 July 2024).

Decision of the Supreme Court

The appeal before the Supreme Court raised three critical issues.

First, had the Court of Appeal been right to say that Lord Watson’s speech in Mackay stated a long-established principle of English law, best characterised as a presumptive rule of construction and founded on the fundamental principle that a person should not be permitted to take advantage of their own wrong? This arose because the sellers’ primary argument was that the buyers were unable to rely on the condition precedent (written confirmation) not being fulfilled in circumstances where they had brought that about by their own breach of contract.

The Supreme Court held that Lord Watson in Mackay v Dick did not articulate a principle of English law. The Supreme Court further held that, in this case, the buyers were not relying on their breach to treat the contract as being at an end or to claim a benefit under it such that the principle of construction that a contract will be interpreted in such a manner as not to permit a party to take advantage of their own wrong did not apply.

Second, the buyers sought to argue that the Court of Appeal’s decision in Griffon Shipping LLC v Firodi Shipping Ltd (“The Griffon”) [2013] EWCA Civ 1567; [2014] 1 Lloyd’s Rep 471 was wrong. In light of the Supreme Court’s conclusions on the first and third issue, it did not address this argument.

The third issue was whether the deposits had fallen due as soon as the MOAs had been entered into: that is, whether the written confirmation was a precondition to payability only. The Supreme Court held that, on its proper construction, clause 2 of the MOAs provided that the deposits both fell due and became payable concurrently, i.e. upon the satisfaction of the relevant preconditions.

Significance

Commercial contracts routinely contain obligations that (i) are expressed to be conditional, and (ii) depend upon the parties’ prior cooperation. In such cases, a party may often seek to avoid the conditional obligation by wrongfully causing the condition not to be fulfilled.

The Supreme Court has held that in the four cases – Hotham, Cory, Panamena and Abacha (No 2) – where English courts have held that debts have fallen due in such circumstances, “the same result could have been reached through the application of the law on damages for breach of contract” (at [63]) – i.e. the damages would have been assessed in the amount of the debts.

However, it is unclear whether these decisions, including by the House of Lords in Panamena, have now been overruled. This is particularly so because the Supreme Court did not address the question of whether in such cases damages would, in fact, be awarded in the amount of the debt.

Future parties, tribunals and courts will thus need to decide whether the wrongdoer is claiming an entitlement to treat the contract as being at an end or obtaining a benefit under it, in which case the canon of construction that a party cannot take advantage of their own wrong would still apply.

In rejecting the sellers’ alternative argument that the deposits had fallen due immediately, the Supreme Court accepted that this meant that, under the standard Saleform, sellers would be locked in whilst buyers have a window in which they may choose not to proceed without being at risk of forfeiting a deposit (at [114]).

The real question for the business community and the drafters of the standard form specifically is whether they are satisfied with the outcome. If not, the Supreme Court invites them to change the form (at [122]).

In the High Court, Julian Kenny KC and Michal Hain were instructed by Jamila Khan and Georgia Theakston (then of Parry Khan and Partners, now of WFW Greece) acting through Stephenson Harwood LLP.

In the Court of Appeal and Supreme Court, they were instructed by Michael Volikas, Sophie Henniker-Major and Emma Doyle of Wikborg Rein.