Godecke v Kirwan
129 CLR 6291 ALR 457
(Judgment by: Gibbs J)
Between: Godecke
And: Kirwan
Judges:
Walsh J
Gibbs J
Mason J
Subject References:
Real property
Formal contract not executed
Whether contract concluded Contract
Vagueness and uncertainty
Judgment date: 20 September 1973
SYDNEY
Judgment by:
Gibbs J
The facts of this case are set out in the judgment of Walsh J., which I have had the advantage of reading.
The document signed by both parties, and which the appellants (the purchaser and his nominee) seek to enforce, is headed "Offer and Acceptance" and purports to set out the terms and conditions of an offer made by the purchaser and accepted by the vendor. It includes an acknowledgment by the purchaser that he has purchased the property upon the conditions and for the price stated and contains also an agreement by the vendor to fulfil the terms and conditions of sale on his part, to pay commission to the agent who effected the sale, and to do all things necessary to enable the transfer of the land to be accepted and registered by the Land Titles Office. It contains all the terms essential to a contract for the sale of land. It is not expressed to be subject to the execution of a formal contract of sale, although by providing that possession shall be given and taken, and that $32,000 (part of the purchase price) shall be paid, "upon signing and execution of a formal contract of sale within 28 days of acceptance of this offer" (see condition 3 and special condition 1) it necessarily contemplated that a formal contract would be executed within that time. Apart from cl. 6, to whose provisions I shall in a moment refer, the Offer and Acceptance is in my opinion indistinguishable from the contract considered in Niesmann v Collingridge. [F32] The effect of the decision in that case was summed up as follows in the judgment of this Court in Masters v Cameron: [F33]
"A case of the second class came before this Court in Niesmann v Collingridge [F34] where all the essential terms of a contract had been agreed upon, and the only reference to the execution of a further document was in the term as to price, which stipulated that payment should be made 'on the signing of the contract'. Rich and Starke JJ. observed that this did not make the signing of a contract a condition of agreement, but made it a condition of the obligation to pay, and carried a necessary implication that each party would sign a contract in accordance with the terms of agreement. Their Honours, agreeing with Knox C.J., held that there was no difficulty in decreeing specific performance of the agreement, 'and so compelling the performance of a stipulation of the agreement necessary to its carrying out and due completion'."
In the present case, unless the provisions of cl. 6 invalidated the purported agreement of the parties, it should similarly be concluded that the execution of a formal contract of sale was not a condition of agreement, but was a condition of the obligation to give and take possession and of the obligation to pay part of the purchase price, and that the Offer and Acceptance bound the parties to execute a formal contract and to carry out its terms.
Clause 6 reads:
"If required by the Vendor/s I/we shall execute a further agreement to be prepared at my costs by his appointed Solicitors, containing the foregoing and such other covenants and conditions as they may reasonably require."
This clause clearly enough provided that the further agreement whose execution the vendor was entitled to require might contain terms additional to those already expressed in the Offer and Acceptance. Although the document is not very clear on the point, it is my opinion that this "further agreement" is intended to be the same instrument as the "formal contract" referred to in the other provisions, but whether this is so or not is immaterial to my conclusions. The word "they" in the clause refers to "his appointed Solicitors", and not to "Vendor/s"; the latter word forms part of a printed form and should have been reduced to the singular, since there was only one vendor, but the words commencing with "containing" have been added in type. The question is whether the clause renders the Offer and Acceptance void for uncertainty, or for some other reason prevents it from being a contract of the same kind as that considered in Niesmann v Collingridge. [F35]
Clause 6 does not require that the additional terms should be the subject of agreement between the parties. The inclusion of additional terms depends on the unilateral requirement of the solicitors for the vendor, subject to the qualification that the requirement must be reasonable. It is well established that the parties to a contract may leave terms-even essential terms-to be determined by a third person: Foster v Wheeler; [F36] May and Butcher Ltd v The King. [F37] In such a case the contract is not bad for uncertainty because if the third person settles the terms the contract will thereby be rendered certain. It is no objection that the power to determine the terms and conditions to be incorporated in the contract is left to the solicitors for one of the parties: Axelsen v O'Brien [F38] (see also Suttor v Gundowda Pty Ltd, [F39] and Christison v Warren [F40] ). In Axelsen v O'Brien [F41] an agreement for the sale of land provided (inter alia) that the vendor should execute a nomination of trustees over the land to trustees appointed by the purchasers and should hand such nomination to the solicitors for the purchasers upon the purchasers paying PD500 and upon the trustees executing a bill of mortgage securing payment of the balance of the purchase price. The agreement further provided:
"The bill of mortgage shall contain such other terms and conditions as shall be required by Corser Sheldon & Gordon of Maryborough, solicitors, not inconsistent with the above terms."
It appears that that firm of solicitors, which consisted of one member only, was acting for the purchasers. It was contended that there was no complete and concluded contract because the further terms of the bill of mortgage remained to be arranged or determined. The Court rejected this contention. Latham CJ pointed out [F42] that the terms of the bill of mortgage did not depend upon agreement between the parties because it was for the solicitor to settle the terms. The Court further held that the terms of the bill of mortgage were not an essential part of the contract, but merely a subsidiary means of carrying it into effect, and that the failure of the solicitor to settle the terms would not be a bar to specific performance-the Court in granting specific performance would settle the terms if the solicitor did not. [F43] The same considerations seem to me to be applicable in the present case. The fact that cl. 6 left it to the solicitors for the vendor to decide what other covenants and conditions should be included in the "further agreement" did not mean that it was necessary that the parties should agree as to further terms. The clause does not introduce any uncertainty into the agreement, or render it in any way incomplete and would present no obstacle to its specific performance.
I should perhaps make it clear that it does not necessarily follow from what I have said that an agreement which left further terms to be settled by one of the parties, rather than by his solicitors, would be treated as a concluded contract. In May and Butcher Ltd v The King, [F44] Viscount Dunedin suggested that a sale of land which left the price to be settled by the buyer himself would be good. With great respect, it seems to me that there would be no binding contract in such a case, which would fall within the principle that "where words which by themselves constitute a promise are accompanied by words which show that the promisor is to have a discretion or option as to whether he will carry out that which purports to be the promise, the result is that there is no contract on which an action can be brought": Thorby v Goldberg, [F45] citing Loftus v Roberts; [F46] Placer Development Ltd v The Commonwealth. [F47] It might be suggested that the same principle would not apply if the determination of the price were left to the seller, for then it would be the promisee, not the promisor, who was left with the discretion as to performance. However, in Beattie v Fine, [F48] Cussen J. drew no such distinction and held that an option for renewal "at a rental to be agreed upon by the lessor" did not give rise to any contractual obligation. He based his decision on the principle of Loftus v Roberts, [F49] but the same conclusion might have been reached by holding that there can be no concluded bargain if a vital matter (such as price or rental) has been left to the determination of one of the parties (see also the dicta in Foster v Wheeler [F50] ). Perhaps it may be different where agreement has been reached on all essential terms but the determination of subsidiary matters has been left to one of the parties. In Sweet & Maxwell Ltd v Universal News Services Ltd [F51] it was held by the Court of Appeal that an agreement for a lease which was to contain "such other covenants and conditions as shall be reasonably required" by the lessor was sufficiently certain to be a concluded contract for a lease and was capable of specific performance. In Powell v Jones, [F52] Bray C.J. went further and upheld the validity of an agreement for a lease which was "to be in terms and to contain such special clauses as the landlord may require". His Honour said [F53] that "there is nothing in the Sweet and Maxwell Case [F54] to indicate that the Court of Appeal would have held the agreement to make the lease unenforceable if the word 'reasonably' had been omitted". I am, with respect unable to agree with that observation, for it seems to me that the members of the Court of Appeal in Sweet & Maxwell Ltd v Universal News Services Ltd [F55] placed considerable reliance on the fact that the parties had imported the familiar and objective standard of reasonableness-see. [F56] However, it is unnecessary to express any concluded opinion on these matters because, as I have said, in the present case the settlement of the further terms is left to the determination of persons who are not parties to the contract.
Further, in my opinion the presence of cl. 6 does not distinguish the present case from Niesmann v Collingridge. [F57] It is true that in Masters v Cameron [F58] the Court described the class of case to which Niesmann v Collingridge [F59] belongs as "a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document". In these remarks the Court was not, in my opinion, intending to exclude from the class a case in which the formal document, when executed, would include terms additional to those already expressed, provided that the additional terms did not depend on further agreement between the parties. In a later case before this Court, Goodwin v Temple, [F60] an option agreement contained a condition that the purchaser should enter into a written agreement of purchase "embodying all usual conditions". The majority of the Court held that this provision did not render the agreement uncertain, and said: [F61] "Cases like Niesmann v Collingridge [F62] are doubtless not common but this option agreement appears to provide an example." Similarly, the fact that the further agreement contemplated in the present case will contain additional covenants and conditions if the solicitors reasonably require them does not mean that the parties had not reached complete agreement, and the language of cl. 6 does not in any way suggest that the terms of the Offer and Acceptance were not intended to have binding force and to give rise to legal rights and duties.
I hold, therefore, that the Offer and Acceptance constituted a valid and binding contract capable of being enforced by specific performance.
I would allow the appeal.