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Godecke v Kirwan

(1973) 129 CLR 629

Overview

The Court considered whether or not an agreement was uncertain. The alleged uncertainty arose from a clause that provided that if required the purchaser would execute a further agreement prepared by the vendor's solicitors containing 'such other covenants and conditions' as they may require.

The Court unanimously held that the agreement was not uncertain - it was not an agreement to agree - all material terms had been settled.

Man signing contract

 

Facts

Godecke (purchaser) and Kirwan (vendor) entered into a written agreement for the sale of land which provided, in cl 6, that, if Kirwan required it, Godecke would execute a further agreement containing the terms of that agreement and any other as determined by Kirwan's solicitors (within reason). Specifically, it provided:

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. 

Kirwan subsequently refused to proceed with the sale.

 

Lower courts

The Trial Judge held the agreement was not binding because all of the terms had not been settled. 

 

Held

Justice Walsh

A binding agreement may be made leaving some important matter to be settled by a third party or even, in most cases, by one of the parties. The parties set out all the principal terms governing the sale of land, including 'an obligation to execute a formal contract' and a promise by Godecke to 'execute, if required …, a further agreement'.

The clause in the contract should 'be construed as limited to permitting the insertion of covenants and conditions not inconsistent with those contained in the offer' and such additional conditions needed to be reasonable – in an objective sense. This was not an 'agreement to agree' on additional provisions, but an agreement by Godecke to accept additional provisions if reasonably required.

This was, therefore, not a case 'in which all the terms of the contract had not been settled'. A binding agreement had been made. 

Appeal allowed.

Justice Gibbs

Agreed that the appeal should be allowed:

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: ... 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: ... 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. ...

Justice Mason

Agreed with the reasons of Justice Walsh.