Last November the Supreme Court handed down judgment in King Crude Carriers SA v Ridgebury November LLC [2025] UKSC 39, in which it reversed the decision of the Court of Appeal and held that the doctrine of deemed waiver or fulfilment – or the Mackay v Dick principle – is not part of English law.

The origins of the Mackay v Dick principle

Mackay v Dick (1881) 6 App Case 251 (HL) concerned the sale of a steam-operated digging machine for use in the construction of a railway. The contract stipulated that the machine should be able to dig out 350 cubic yards of clay per day and that this was to be tested on a properly opened up face; if the machine passed the test, the Buyer would pay the agreed price, and if it failed, the Seller would remove the machine. The Seller delivered the machine to the railway cutting, but the Buyer did not provide a properly opened up face with the result that a fair trial of the machine could not take place as agreed. When the case reached the Court of Session, it held that the Buyer was obliged to pay the price.

The Buyer’s appeal from the Court of Session was unanimously dismissed by the House of Lords, although the two leading judgments of Lord Watson and Lord Blackburn contained substantially different reasoning for this outcome.

Lord Watson held that as the Buyer’s default had prevented the machine’s capabilities from being tested fairly, this condition precedent to the payment of the price should be treated as fulfilled. In the following passage he approved of the judgment of Lord Shand in the Inner House (p. 270):

“The passage cited by Lord Shand from Bell's Principles (para 50) to the effect that, ‘If the debtor bound under a certain condition have impeded or prevented the event, it is held as accomplished. If the creditor had done all that he can to fulfil a condition which is incumbent on himself, it is held sufficient implement,’ expresses a doctrine, borrowed from the civil law, which has long been recognised in the law of Scotland, and I think it ought to be applied to the present case.”

Lord Blackburn’s judgment, on the other hand, applied what is known nowadays as the implied duty of co-operation. He reasoned that the Buyer was bound to keep and pay for the machine unless the condition subsequent of its failure at trial occurred. As the Buyer had breached its duty of co-operation by failing to provide a properly opened up face, this condition subsequent had not occurred so that it was bound to pay the price.

Lord Selborne, somewhat ambiguously, agreed with both speeches.

Subsequent case law

Prior to King Crude Carriers SA, some support for the existence of the Mackay v Dick principle in English law could certainly be found in the authorities.

In Hotham v East India Co (1787) 1 Durn & E 368, a charterparty contained a condition that a claim for deadfreight could not be made unless the deficiency was certified by the charterers’ agents following loading in India. The shipowners’ claim was upheld by Ashhurst J despite no such certificate being provided upon request, because the shipowners “having taken all proper steps to obtain the certificate, and it being rendered impossible to be performed by the neglect and default of the [charterer's] agents, which the jury have found to be the case, it is equal to performance” (p. 645).

Another supportive authority was Comp. Noga d'Importation et d'Exportation Sa v Abacha (No. 3) [2002] CLC 2007. In that case, a settlement agreement provided for the Federal Government of Nigeria (“FGN”) to be paid DM300m by the defendants – a group of companies and individuals associated with the former ruler of Nigeria, General Abacha – “upon release of their accounts frozen in this action”. The defendants failed to co-operate in the release of the frozen bank accounts, and Rix LJ held that “Mackay v Dick is not only authority for the implication of the implied term of co-operation, but also authority for the potential waiver or deemed fulfilment of the condition precedent of release of the… defendants’ accounts by means of discharge of the court's freezing orders” ([107]).

However, Hotham and Abacha were both cases in which the defendant parties were in breach of contract and therefore liable in damages, the measure of which may have been no different to the amount that could have been claimed as a debt. In Hotham Ashhurst J did not even say whether the certificate was a condition precedent or not, and Rix LJ in Abacha only concluded that the doctrines of waiver or deemed fulfilment were “fictions designed to achieve the right result to which common sense and fairness seem to point” ([106]).

Moreover, doubt had also been expressed about the Mackay v Dick principle in the authorities. In Thompson v ASDA-MFI Group plc [1988] Ch 241, Scott J said at p. 266:

“The principle expressed by Lord Watson in Mackay v Dick, 6 App Cas 251, 270, is not, in my view, a principle of English law. The fictional fulfilment of conditions precedent and the fictional nonfulfillment of conditions subsequent may be principles of the civil law, but they are not principles of English law. In this area of the law of contract English law proceeds, in my view, by means of implied terms. If a term can be implied that a party will not do an act that, if done, would prevent the fulfilment of a condition precedent, then the doing of that act will be a breach of contract; if a term can be implied that a party will not do an act that, if done, would cause a condition subsequent to be fulfilled, then the doing of that act will be a breach of contract. But if a suitable term cannot be implied into the contract then in my judgment, the contract will take effect according to its tenor. The condition precedent will fail and the condition subsequent will be fulfilled.”

Clarification by the Supreme Court

The case of King Crude Carriers SA v Ridgebury November LLC was an appeal under the Arbitration Act 1996 from three arbitrations concerning the sale of second-hand oil tankers under Memorandums of Agreement (MOAs) concluded on an industry standard form contract for the sale of ships called the Norwegian Saleform 2012.

Clause 2 of the contracts stipulated that the Buyers of the oil tankers were to lodge a deposit of 10% of the purchase price with a Deposit Holder to be held in escrow, and that “The Parties shall provide to the Deposit Holder all necessary documentation to open and maintain the account without delay”.

The Buyers failed to provide the necessary documentation for the deposit account to be opened, and to pay the 10% deposit, leading the Sellers to terminate the MOAs and commence arbitrations seeking to recover the amount of the deposit.

Critically, it was a presumed fact that the market value of the tankers after termination was higher than their purchase price under the MOAs. The Sellers were accordingly only entitled to nominal damages, making it essential that they claimed payment of the deposit as a debt, which they would be entitled to irrespective of the fact that they had suffered no net loss because of the Buyers’ breach of clause 2.

The majority of all three arbitration panels held that the Sellers were entitled to claim the deposit as a debt; the deposit account had not been opened because of the Buyers’ breach of contract in failing to provide the necessary documentation, so under the principle in Mackay v Dick this condition precedent should be deemed to be waived or fulfilled.

Allowing the Buyers’ appeal, Dias J sitting in the High Court held that the arbitration panels had erred in law as “the doctrine of deemed fulfilment does not form any part of English law” ([95]). However, the Sellers’ appeal was allowed the Court of Appeal; Popplewell LJ in his leading judgment stated that a “consistent body of case law” ([77]) supported the following reformulation of the Mackay v Dick principle ([85]):

“[A]n obligor is not permitted to rely upon the non-fulfilment of a condition precedent to its debt obligation where it has caused such non-fulfilment by its own breach of contract, at least where such condition is not the performance of a principal obligation by the obligee, nor one which it is necessary for the obligee to plead and prove as an ingredient of its cause of action, and save insofar as a contrary intention is sufficiently clearly expressed, or is implicit because the nature of the condition or the circumstances of the case make it inappropriate.”

Finally, the Supreme Court reversed this decision and restored the order of Dias J. The Court confirmed the Mackay v Dick principle was not part of English law for six main reasons provided in the leading judgment of Lords Hamblen and Burrows JJSC ([62]-[68]):

(1)  No English law authorities were cited in support of the principle stated by Lord Watson in Mackay v Dick; it was a principle of Scottish law contained in Bell’s Principles said to be supported by Pothier drawing upon Roman law

(2)  The English law authorities since that case “do not speak with one voice”, and those which seemingly supported Mackay v Dick would have achieved the same result through the remedy of damages than the law on debt

(3)  It would fundamentally undermine the law on contracts for the sale of goods and land if the principle in Mackay v Dick applied to a condition precedent to the passing of property. Indeed, McCardie J in Colley v Overseas Exporters [1921] 3 KB 302 had to distinguish Mackay v Dick as a case where the property in the digging machine passed to the Buyer on delivery (therefore relying on Lord Blackburn’s ‘condition subsequent’ reasoning) to avoid the consequences of the principle which “would be most far reaching, and the results extraordinary” (p. 307).

Furthermore, any exceptions to the principle to scale back this effect, such as those suggested in Popplewell J’s formulation, would be uncertain and not make for a robust principle of law

(4)  The principle in Mackay v Dick is a legal fiction with no convincing explanation. As Dias J remarked in her judgment “[t]he primary fact-finding function of the court is thereby removed and it is required to assume as true facts which are not or may not be true” ([28]).

Indeed, the Buyers had argued that the result of the arbitrations – that the deposits became directly payable to the Sellers as debts which they were unconditionally entitled to retain – would not have occurred if the Buyers had actually provided the documentation; the deposits would merely have been payable to the Deposit Holder on the terms of the escrow agreement and would not have been forfeitable by the Sellers until the Buyers failed to pay the purchase price, which never fell due.

(5)  Scott J was right in Thompson v ASDA-MFI Group plc [1988] Ch 241 to hold that the English law of contract proceeds on the basis of the express or implied terms of the contract rather than fictional fulfilment of a condition precedent (p. 266), as this promotes the freedom of contract, certainty and predictability.

(6)  Rejecting Mackay v Dick as a principle of law does not lead to injustice; the debtor’s breach leading to non-fulfilment of a condition precedent is adequately dealt with in English law through the remedy of damages. The controls on damages, such as mitigation and remoteness, are bypassed by deemed fulfilment and where the claimant’s loss is not the same as the amount of the debt, this risks placing the claimant in a better position than if the contract had actually been performed and thereby introduces a punitive element unnecessarily.

Key takeaways

Three key takeaways from the Supreme Court’s decision in King Crude Carriers SA are as follows

(1)  As is almost always the case, the main lesson is that if the parties want something to be true, the best option is to insert an express term in the contract to this effect. As the Court noted, it is open to the parties to include a clause providing that if failure of a condition precedent to a debt obligation is caused by the debtor’s breach then it should not apply ([82]).

This is why, while it may seem unfair that the Buyers’ breach of contract effectively prevented the Sellers from having the security of the deposit, to defer this protection until a number of pre-conditions had been satisfied is what the Sellers agreed to. If they did not want this to be the case, they could have included a term to the contrary.

(2)  The Sellers’ case could also not be saved by the use of Mackay v Dick as an aid to contractual interpretation or as based on an implied term.

The Supreme Court confirmed that the maxim that a party should not be entitled to take advantage of its own wrong is restricted to cases concerning a claimed entitlement to treat the contract as being at an end or to obtain a benefit under it ([78]). However, the contract in this case could only be terminated by the election of the Sellers, and the Court agreed with Dias J’s analysis that rather than the Buyers’ deriving a benefit from their breach, they had merely exposed themselves to liability in damages.

While there is generally an implied term of co-operation, deriving from Lord Blackburn’s judgment in Mackay v Dick, this will sound in damages so was also of no assistance to the Sellers.

Moreover, the Court refused to hold there was a term implied by fact, whether on the grounds of obviousness or business efficacy, to the effect that the deposit arrangements in clause 2 could not be insisted on by the Buyers where they had made them impossible to carry out ([91]). Any suggested wording was inconsistent with the terms of clause 2; the Buyers’ obligation to provide the documentation was essential to open the deposit account and the payment of the deposit could not proceed without this even if the Buyers’ default prevented it being possible.

(3)  The Sellers’ additionally argued that the deposit accrued when the MOA was concluded, so that the pre-conditions in clause 2 of the saleform were pre-conditions to payment rather than accrual, meaning that the Buyers’ breach was a failure in the ‘machinery of payment’ that did not prevent the accrual of the debt.

However, this argument was rejected by the Court who confirmed that this state of affairs was not necessary to meet the commercial purpose of deposits, nor did it prevent the deposit being “security for the correct fulfilment of this Agreement” as stated in the saleform. If the parties intend for such a distinction to be drawn, they should make that clear in the contract ([111]).

Note: This is a general summary of an evolving field of law, and is made available for general discussion purposes only between CANDEY and its clients and prospective clients. This memorandum does not constitute legal advice and must not be relied on as such. It should also not be cited as legal or academic authority

CANDEY is a boutique litigation law firm that has extensive experience in complex contractual disputes. We can guide clients through all aspects of contractual litigation, including breach and termination issues, and help assess the procedural and substantive challenges involved.