Debt or damages? New UK Supreme Court decision on the Norwegian Saleform 2012

The UK Supreme Court has finally settled a long-running contract law debate, ruling that the “Mackay v Dick principle” does not form part of English law.

There has been long standing debate under English law about what is known as the “Mackay v Dick principle of law”. This principle says that a condition of a contract, which if fulfilled would result in a debt being owed by a party to the contract, should be deemed fulfilled where that party wrongfully prevents the condition from being satisfied.  This outcome prevents a party otherwise benefiting from their own wrongdoing. The “principle” arose out of the judgment of Lord Watson in a nineteenth century House of Lords judgment in a Scottish appeal: Mackay v Dick (1881) 6 App Cas 251. Since then, whether or not this principle actually exists has been a topic of debate.

A few weeks ago, the UK Supreme Court handed down judgment in King Crude Carriers SA and others v Ridgebury November LLC and others [2025] UKSC 39. The Supreme Court held that the “Mackay v Dick principle” does not form part of English law. 

The other key principle from the case of Mackay v Dick, from the judgment of Lord Blackburn, that there is an implied duty to cooperate to ensure performance of the bargain, was not challenged and was described by the Supreme Court as “uncontroversial”.

The facts

The case concerned MOAs for three tanker vessels on amended Norwegian Saleform 2012 forms. The MOAs required the Buyers to lodge deposits in a deposit account with a third party deposit holder and required both parties to provide all necessary documentation for the opening of the deposit account. The Buyers did not provide the documentation, which was a breach of contract. Therefore, the deposit accounts could not be opened and the deposits could not be paid into them. 

The Sellers terminated the MOAs and claimed the deposit amounts in debt, relying on the Mackay v Dick principle. The Buyers argued that the Sellers had no claim in debt and could only bring a claim in damages. However, on assumed facts, the market price for the ships had gone up since the MOAs had been agreed so the Sellers had apparently suffered no loss. 

The Sellers succeeded in arbitration, lost in the Commercial Court and won again in the Court of Appeal. The Buyers appealed to the Supreme Court, arguing that the Mackay v Dick principle did not exist in English law.

The decision

The Supreme Court unanimously allowed the appeal and restored the decision of the Commercial Court, holding that the Sellers only had a claim in damages, not in debt. 

The key takeaway is that the Supreme Court held that the Mackay v Dick principle does not form part of English law. The Supreme Court reviewed the relevant authorities in detail and gave six main reasons for its decision:

1.   Lord Watson in Mackay v Dick did not cite any English law authorities and instead relied on “a doctrine borrowed from the civil law”. 

2.   Subsequent authorities are inconsistent as to the existence of the principle. 

3.   The principle could not be applied to all types of contract without undermining established law (e.g. the law on contracts for the sale of goods), but there is no principled way of excluding certain categories.

4.   The formulations and explanations of the principle are all “fictional” (the condition is “treated” as fulfilled when it is not). The judgment states “Fictions tend to obscure transparent reasoning and, wherever possible, should be removed” (paragraph 66). 

5.   The law of contract in this area is based on the proper interpretation of the terms of the contract, rather than on “fictional fulfilment of a condition precedent”. This is consistent with the importance of freedom of contract under English law and promotes certainty and predictability.

6.   No injustice follows from rejecting the principle because the claimant will have a remedy in damages if a condition precedent is not fulfilled due to a breach of contract.

The Supreme Court then considered the Sellers’ argument which relied on Mackay v Dick as an aid to contractual interpretation or the basis for an implied term, rather than a standalone principle of law. That argument also failed. 

The Supreme Court considered existing case law on the presumption that a party should not be able to take advantage of its own wrong. It found that the cases dealing with this presumption are concerned with the situation where a party claims to be entitled to treat the contract as at an end or to obtain a benefit under it, and do not support a wider and more general presumption. Those circumstances did not apply here; the Buyers did not rely on their own breach to found or invoke a right under the contract. On the contrary, the Buyer’s breach exposed them to a damages claim. The Sellers’ implied terms arguments also failed because the proposed implied terms made the MOAs unworkable or would effectively rewrite the parties’ bargain.

The Supreme Court also rejected the Sellers’ argument that the deposits accrued upon the MOAs being agreed with the terms about the opening of the deposit account and the paying of the deposit being only “machinery for payment”. It was held that the right to the deposit accrued at the same time as it became payable. In other words, the opening of the deposit account was a condition precedent to the accrual of the debt. This conclusion was supported by the Court of Appeal judgment in The “Blankenstein” [1985] 1 WLR 435, which concerned an earlier version of the Norwegian Saleform. 

The judgment underlines the importance of certainty and predictability in English law and brings welcome clarity to an area of long standing debate.