Debt or Damages? The Supreme Court Answers

The Supreme Court’s judgment in King Crude Carriers SA & Ors v Ridgebury November LLC & Ors [2025] UKSC 39 delivers clarity on the operation of conditions precedent, the nature of contractual debts, and the appropriate remedies for breach under English law. The unanimous judgment, handed down on 12 November 2025, reaffirms core principles of contractual certainty and freedom of contract.

Background: The Dispute

The case arose from three standardised sale contracts for the purchase of vessels based on the Norwegian Saleform 2012 (“MOAs”) terms. Under clause 2 of each MOA, the buyers were obliged to:

1. provide documentation necessary to open escrow accounts with a third‑party deposit holder, and
2. pay a 10% deposit within three banking days of the deposit holder confirming that the accounts were open and ready to receive funds.

In breach of contract, the buyers failed to deliver the necessary documentation, meaning the escrow accounts were never opened and the deposits were not paid. The sellers terminated the contracts and commenced arbitration, seeking to recover the deposits as debts on the basis that the buyers could not rely on their own breach to prevent fulfilment of the condition precedent.

After mixed results in arbitration and the lower courts, the case reached the Supreme Court.

No Doctrine of “Deemed Fulfilment” in English Law

A principal feature of the Supreme Court’s ruling is the emphatic rejection of any English law doctrine of “deemed fulfilment” of conditions precedent. The concept, centred on Mackay v Dick (a 19th‑century Scottish case) advances the position that a condition precedent should be treated as satisfied where a party in breach had prevented its fulfilment.

In a clear departure from the Court of Appeal’s approach, the Supreme Court confirmed that English law does not recognise such a doctrine. Where a contractual condition precedent is not satisfied, even due to a counterparty’s breach, it does not arise unless the contract expressly provides for this. The Sellers’ attempt to rely on Mackay v Dick was firmly rejected

By underscoring that English contract law proceeds by applying the parties’ agreed terms and not by judicial legal fictions, the judgment brings much‑needed certainty to an area previously beset by inconsistent authority. As the Court explained, a party cannot simply disregard a contractual condition because of a counterparty’s default when the contract makes no provision for doing so.

Contractual Certainty

A central theme of the Supreme Court’s reasoning was that the contract must be enforced according to its express terms. Clause 2 of the MOAs made payment of the deposit contingent upon the opening of the escrow account. To allow recovery of the deposit as a debt despite the non‑fulfilment of the previous condition would read the pre‑condition out of the contract and undermine the parties’ bargain.

This outcome reflects a disciplined approach to contractual interpretation, particularly important in commercial and standard form contracts where the allocation of risk and timing of obligations is carefully negotiated. English law, the Court reaffirmed, does not permit courts to reallocate risk or rewrite bargains in pursuit of what might appear to be a fairer outcome.

Debt vs Damages

The Supreme Court clarified the distinction between a debt and a claim for damages. A claimant cannot recover a debt unless the contractual right to that debt has accrued and accrual depends on fulfilment of the condition precedent. Where a party’s breach has prevented fulfilment, the right to the debt never arises; the claimant’s remedy is therefore damages for breach, subject to the usual rules on mitigation and remoteness.

Importantly, this distinction has real commercial consequences. In King Crude, it was assumed at trial that the market price of the vessels at the date of termination was higher than the contract price which meant the sellers suffered no loss.

Under long‑standing principle of English Law, this meant only nominal damages were recoverable. The Court’s decision confirms that the law remains compensatory, not punitive: a creditor cannot obtain a “windfall” simply because the debtor’s breach prevented a condition precedent from being satisfied.

This reassertion of compensatory principles reinforces the difference between an accrued contractual debt, which is payable irrespective of loss, and damages for breach of contract, which are measured by loss.

Practical Implications

King Crude carries important practical lessons for commercial practitioners and drafters:

• If parties intend that a deposit or other payment should accrue regardless of non‑fulfilment of a condition, this must be stated expressly in the contract.
• Parties should carefully consider whether conditions precedent are intended to go to accrual of rights or merely to the mechanics or timing of payment.
• Clear drafting reduces the risk of expensive and uncertain disputes over whether rights have accrued and what remedies are available.

The decision therefore places responsibility squarely on contracting parties to anticipate contingencies and to address them expressly, rather than relying on judicial intervention.

Hamza Ayub