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Deemed fulfilment: is it fictional?

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A harsh outcome does not an implied term make

The High Court has ruled that English law does not recognise a doctrine that deems conditions precedent to a debt as having been fulfilled where the reason they have not been is the fault of the person that would owe the debt, so as to make the debt be payable in full. If a breach prevents a condition precedent from being fulfilled in these circumstances, the law provides a remedy in damages.

Ridgebury and King Crude contracted to buy four second-hand oil tankers. Ridgebury failed to provide certain documentation to the escrow agent and to pay the deposit in breach of the contract. King Crude then terminated the contract and claimed the deposit as debt (presumably since any damages would have been minimal). 

The High Court had to determine whether English law recognised any doctrine of “deemed fulfilment” of a condition precedent to a debt on the basis that a wrongdoer should not be permitted to derive an advantage from their own breach. The origin of the doctrine was a House of Lords case based on Scottish law: Mackay v Dick.

The court said that this doctrine did not form part of English law as a matter of precedent and by reasoning from first principles. It held that, in general, a legal fiction should not be adopted unless both “necessary and in the interests justice”. This was not the case here; therefore, the court could not “fictionally fulfil” the condition precedent when Ridgeway had failed to do so. This would have removed the burden from King Crude of having to prove the loss and stopped Ridgeway from raising legitimate arguments as to the extent of the loss. The court was concerned that deemed fulfilment would introduce “an unnecessarily punitive element into the law of contract”. 

The court found what English law does recognise (and which also derives from Mackay v Dick) is that a contract may be construed as containing an implied term of co-operation. But this would not give King Crude the debt claim it sought. 

Judgment: King Crude v Ridgebury