The Illusory Deposit
Supreme Court Exposes Critical Flaw in Standard Ship Sale Contracts

The Supreme Court’s landmark judgment in King Crude v Ridgebury [2025] has dismantled the 144-year-old ‘deemed fulfilment’ doctrine, exposing a critical vulnerability in standard ship sale contracts like the Norwegian Saleform 2012. If a buyer prevents a deposit account from opening, sellers can no longer claim the deposit as a debt – leaving them exposed in rising markets. This article analyses the death of the Mackay v Dick principle in English law and provides a robust drafting solution to ensure your deposit clauses remain enforceable.

Obligation to pay Deposit under the typical MOA

A typical Memorandum of Agreement (“MOA”) for the sale of a ship will require the buyer to lodge a deposit with a deposit holder as security for the due fulfilment of the contract, the deposit forming part of the purchase price.

Typically, the buyer is given a short window, such as three banking days, to lodge the deposit. Crucially, this timeline triggers only when the deposit holder confirms the account is open. Opening the account requires the parties’ cooperation, including the provision of KYC documents, which they are obliged to provide.

If the buyer fails to pay the full purchase price, which includes the deposit, as agreed, the seller may terminate the agreement and forfeit the deposit.

Once the deposit account is confirmed open, the buyer’s failure to lodge the deposit within the agreed three banking days is a breach entitling the seller to terminate and forfeit the deposit. On expiry of that period, the deposit has accrued and become payable and is recoverable as a debt, without proof of loss.

But what happens if the buyer changes their mind and deliberately refuses to provide the required KYC documents, preventing the deposit account from opening?

If the market falls, the seller can claim the difference in value as damages for the breach of the agreement to cooperate. But if it rises, there is no loss; the seller will seek the deposit as an accrued debt – a fixed sum payable regardless of loss.

Mackay v Dick (1881) 6 App Cas

For 144 years, English law flirted with a principle arguably derived from Mackay v Dick (1881) 6 App Cas 251 (HL, Scotland), decided by three Law Lords.

There, a buyer agreed to keep and pay for a digging machine if it passed a site test. The seller delivered the machine at site, but the buyer failed to provide the site for the test. The seller sued for the price and succeeded. Lord Watson held that because the buyer wrongfully prevented the test (condition precedent to payment), the condition was “deemed fulfilled”, and hence allowed the claim. Lord Blackburn allowed the claim for a different reason – the buyer must keep and pay for the machine unless the machine failed the site test (condition subsequent to contract). Lord Selborne LC agreed with both.

Sellers have long invoked this “deemed fulfilment” principle to argue that if a buyer prevents the deposit account from opening, the condition is treated as met and the deposit becomes due as a debt. English cases on this principle were divided.

The Supreme Court Ruling: King Crude v Ridgebury November [2025]

On 12 November 2025, the Supreme Court, in its landmark judgment in King Crude Carriers SA and others v Ridgebury November LLC and others [2025] UKSC 39, finally resolved the “deemed fulfilment” controversy.

The Facts: The owners of three vessels (the “Sellers”) and three buyers (the “Buyers”) contracted on amended Norwegian Saleform 2012 terms. The Buyers had to lodge a 10% deposit within three days of confirmation from the deposit holder of the opening of the account, failing which the deposit would be forfeited.

The Buyers changed their minds and withheld the KYC documents, so the accounts never opened. The Sellers terminated and claimed the deposits as accrued debt. As market values had risen, the Sellers had suffered no loss.

The case turned at every level: the Sellers won in arbitration, lost in the Commercial Court, and won in the Court of Appeal.

The Decision: The Supreme Court unanimously allowed the Buyers’ appeal, dismissing the deposit claim.

1. “Deemed Fulfilment” is Not English Law: The Court held that there is no principle of “deemed fulfilment” in English law. Lord Watson’s maxim in Mackay v Dick was a civil law fiction. English law responds with damages and not by deeming conditions met. No injustice is caused by rejecting the maxim. If non-cooperation, in breach of the agreement, causes loss, damages follow. If no loss, only nominal damages.

2. No rule against “benefiting from one’s own wrong”: The Sellers argued that the contract should be interpreted to prevent a party from profiting from their own wrong. The Court rejected this. The “prevention principle” is based on the presumed objective intention of the parties. It usually stops a party from relying on its breach to terminate a contract or claim a contractual benefit. It does not extend beyond that to prevent a party from relying on that breach to defend the counterparty’s claim.

3. No “rewriting” by implication: The Sellers argued that it was implied that if the Buyers wrongfully prevent the opening of the deposit account, the deposit becomes payable to the Sellers. The court rejected this; it would “rewrite” and not “interpret” the contract.

4. Deposit accrues when it is due: The Sellers argued the deposit “accrued” when the MOA was signed, and the account opening was merely a mechanical timing issue. The Court disagreed; unless a contract clearly draws a distinction between accrual and payment, ordinarily, accrual and due date coincide.

Takeaway from King Crude v Ridgebury

A wake-up call for drafters: a deposit is illusory security if the time for payment never arrives; “cooperation” duties are no longer a safety net for debt claims.

1.          Draft for Accrual: If you want a deposit to accrue on signing and be claimable as a debt, say so expressly. Currently, standard forms like the Norwegian Saleform make the deposit accrual conditional on the account opening.

2.          Express “Deemed Fulfilment”: If parties wish to mimic the Mackay v Dick outcome, they must expressly say that the condition precedent for accrual of the deposit is deemed fulfilled if the buyer prevents the account from opening.

3.          Industry Response: The decision underscores the need for bodies like BIMCO and the Norwegian Shipbrokers’ Association (NSA) to amend their standard forms or issue a recommended accrual clause to restore the certainty of the deposit as security.

Draft Accrual Clause

Here is a draft Accrual Clause (of the author) to go with the Norwegian Saleform 2012, with any desired modifications:

“Deposit earned upon signing Notwithstanding any other provision of this Agreement, the Sellers’ right to the Deposit shall accrue immediately upon the signing of this Agreement. The provisions of Clause 2 regarding the lodging of the Deposit with the Deposit Holder relate solely to the time and method of payment and shall not affect the accrual of the Sellers’ right to the Deposit as a debt immediately upon signing of this Agreement. In the event the Deposit Account is not opened within [x] Banking Days of signing due to the Buyers’ failure to provide documentation, the Deposit shall be immediately payable by the Buyers directly to the Sellers.”

Disclaimer: The above draft clause is provided without any legal responsibility, and users intending to adopt it must take independent legal advice.