A party cannot deliberately prevent a condition precedent from being fulfilled and then use that failure to escape its contractual obligations.
The English Court of Appeal confirmed this in King Crude Carriers SA v Ridgebury November, and the principle has direct relevance to any international commercial contract your company concludes where payment, performance, or enforceability depends on a condition precedent being met.
What happened
Two ship sale agreements required the buyers to pay deposits. Payment was conditional on opening a designated account, for which the buyers had to provide identification and supporting documents "without delay".
The buyers deliberately withheld those documents, the account was never opened, and the deposits were never paid. The sellers terminated both agreements and claimed the unpaid deposits as a debt.
The Tribunal and the High Court initially found against the sellers on the basis that the condition precedent had not been satisfied, so no liability ever arose. The Court of Appeal disagreed and reversed those decisions.
What the court decided
The Court of Appeal held that a party cannot rely on its own breach to avoid a debt obligation. It applied the principle of deemed fulfilment — where a party's conduct prevents a condition from being met, the condition may be treated as fulfilled, or simply set aside, so that the obligation it was attached to remains enforceable.
Three elements must be present for this principle to apply:
- An agreement capable of giving rise to a debt (not merely a claim for damages).
- A condition precedent to that debt accruing or becoming payable.
- An express or implied obligation on the party responsible for fulfilling the condition not to prevent its fulfilment.
If all three are present, the party entitled to the debt can enforce it, even if the other side's breach caused the condition to fail.
The buyers argued that the remedy should be limited to damages. The court rejected this, holding that the deposit was a forfeitable sum tied to intended performance, not compensation. The obligation to open the account was an administrative step that could not be weaponised to defeat the agreed commercial arrangement.
Rosanne Kinder 9 Sep 2019 Why this matters for your contracts
This decision is a useful reminder that conditions precedent are not escape routes. Courts will look at who controlled the condition and whether that party acted in good faith to fulfil it.
What you should do:
- When drafting, ensure that any condition precedent that requires one party's active cooperation includes an express obligation to perform that cooperation promptly and in good faith. Do not leave it implied.
- Where your company must fulfil a condition, treat that obligation as seriously as any other contractual obligation. Deliberate delay or obstruction carries real legal risk.
- Where a counterparty is obstructing a condition, document this carefully. If the condition involves a debt obligation, you may be entitled to enforce the debt despite non-fulfilment, but your evidentiary position matters.
