Debt, Damages, and The Griffon: Unpacking the Supreme Court decision in King Crude Carriers SA v Ridgebury November LLC
The obligation to pay a deposit is an obligation to pay a debt.
If there are conditions precedent to the accrual of that debt, the debt does not arise until the conditions precedent are satisfied.
If it is up to a party to ensure that a precondition to the debt arising is satisfied, a debt will still only accrue if that condition is met, notwithstanding the party's breach of that obligation.
The Court of Appeal's decision in The Griffon remains good law.
The Supreme Court’s Judgment
The case concerned three Memoranda of Agreement (the "MOAs") on Norwegian Saleform 2012 ("NSF 2012") terms for the sale of second-hand tanker tonnage. Disputes under the MOAs were referred to arbitration in London. On appeal under section 69 of the Arbitration Act 1996, the Courts were asking to determine the following question of law arising out of Clause 2 of NSF 2012 (the payment of the deposit in advance of delivery):
"Where an obligation for payment within a contract is contingent upon the fulfilment by one party of a condition, and that party fails in breach of contract to fulfil that condition, is the condition deemed to be fulfilled with the result that the payment sum can be claimed by the other party in debt? Or must the claim be in damages?"
Find out more in this publication.
Published by Preston Turnbull LLP.
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