Godecke v Kirwan [1973] HCA 38; (1973) 129 CLR 629 (20 September 1973)

HIGH COURT OF AUSTRALIA

GODECKE v. KIRWAN. [1973] HCA 38; (1973) 129 CLR 629

Vendor and purchaser - Contract

High Court of Australia.
Walsh(1), Gibbs(2) and Mason(3) JJ.

CATCHWORDS

Vendor and purchaser - Agreement contemplating execution of formal contract - Possession to be given and instalment of purchase price to be paid upon execution of formal contract within specified period of acceptance of offer - Formal contract to contain such additional terms as vendor's solicitors "may reasonably require" - Formal contract not executed - Whether concluded contract.

Contract - Vagueness and uncertainty - Agreement contemplating execution of formal contract containing such additional terms as vendor's solicitors "may reasonably require".

HEARING

Perth, 1973, July 2;
Sydney, 1973, September 20. 20:9:1973
APPEAL from the Supreme Court of Western Australia.

DECISION

September 20.
The following written judgments were delivered:-
contract for the sale of certain land was made between the respondent and the appellant Robert Harold Godecke (Godecke). It is an appeal from an order made by the Supreme Court of Western Australia (Virtue J.) upon an application made by the respondent, pursuant to s. 138 of the Transfer of Land Act 1893 (W.A.), as amended, seeking an order for the removal of a caveat which had been lodged by the appellant R. H. Godecke Pty. Ltd. (the company), claiming an estate in fee simple as purchaser by virtue of a contract of sale. The appellants claim that this contract was made by means of the signing by Godecke and the respondent of the document which will presently be described. The respondent disputes that there was a binding contract. (at p633)

2. As the learned primary judge pointed out, an application to remove a caveat is not normally an appropriate proceeding in which to determine a disputed question as to the making of a contract for the sale of land or to determine in effect whether the party alleging the existence of such a contract is entitled to specific performance of it. But his Honour stated that the parties had assured him that the only questions to be determined were questions of law as to the proper construction of the offer and acceptance contained in the document and had agreed, subject to rights of appeal, to accept his decision and to be bound by it. In this Court learned counsel for the appellants stated that the question for decision was whether upon the proper construction of the offer and acceptance the parties intended to reach a concluded agreement or should be taken to have done no more than negotiate the terms and conditions of a proposed arrangement. Learned counsel for the respondent did not dissent from that formulation of the question and informed the Court that if it came to the conclusion that there was an enforceable contract it could be worked out by mutual agreement. I understand this to mean that the respondent agrees that if the document is construed as constituting a concluded agreement he will carry it out, notwithstanding that because of the lapse of time since it was made an exact compliance with some of its terms is no longer possible. (at p633)

3. The document consists in part of printed matter and in part of provisions that have been typed or written on the printed form. It has the heading "Offer and Acceptance" and is addressed to "CAMPBELL CONSOLIDATED, R.E.I.W.A. As Agents for the Vendor/s". It begins thus:

"I/We, ROBERT HAROLD GODECKE OR NOMINEE of Duffy
Road, Balcatta hereby offer to purchase (through you as
Agent for the Vendor/s) the land and all improvements thereon
situated and known as..."

Then there is a description of the land, which includes the statement that it is vacant land and consists of about 156 acres and this is followed by the words:

"for the price or sum of $110,000.00 (One hundred and
ten thousand dollars) upon and subject to the conditions of
the Twenty-sixth Schedule of the Transfer of Land Act 1893
and also upon and subject to the special conditions, if any,
endorsed on the reverse side hereof".

The document proceeds to state "The terms of the purchase shall be as follows" and to set out eleven numbered clauses which include the following:

"1. By a deposit of $8,000.00 (Eight thousand dollars)
receipt of which amount is hereby acknowledged by you as
agent for the vendor/s to be paid to the vendor on request.
2. The balance of purchase price shall be paid by bank
cheque made payable to the Vendor or his solicitor or such
other person or persons as the Vendor shall in writing nominate.
See Special Conditions (or such date as may be agreed) against
receipt from the Vendor of a proper registrable Transfer of
the land in favour of the Purchaser or in favour of me/us
free from encumbrances together with the duplicate Certificate
of Title relating thereto. I/We shall at my/our expense
tender the said Transfer to the Vendor or his solicitor at a
reasonable time prior to the settlement date.
The Purchase price shall be allocated as follows:
Land and fixed improvements $110,000.00 Chattels $---.
3. Possession shall be given and taken on settlement upon
signing and execution of a formal contract of sale within 28
days of acceptance of this offer.
4. All Rates, Taxes, Rents (if any) and other outgoing
shall be adjusted to the date of possession/settlement.
...
6. 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.
...
11. Time shall be the essence of this contract." (at p634)

4. It is evident that in cl. 2 the words "See Special Conditions" have been used instead of the filling in of a date for the payment of the balance of the purchase price, in the space provided in the printed form. Below the eleven clauses appear the words:

"I/We, the abovenamed Purchaser/s, having read this offer,
acknowledge that I/we have this day purchased the above
described property upon the conditions and for the price stated."

Then there is the signature of Godecke as purchaser and the date 22nd November 1971. This is followed by an acceptance in these terms:

"I/We, the undersigned Vendor/s, having read this offer
hereby accept it.
I/We agree to fulfil in all respects the terms and conditions
of sale on my/our part and further agree to pay CAMPBELL
CONSOLIDATED their commission on the full sale price as
stated above. I/We shall do all things necessary to enable
the transfer of the land to be accepted and registered by the
Land Titles Office, Perth, and shall at the request of the
Purchaser give at settlement an undertaking in favour of the
Purchaser's mortgagee (if any) to comply with this clause."

This is signed by the respondent as vendor and is dated 23rd November 1971. Under the heading of "SPECIAL CONDITIONS" the following terms appear:

"The Purchaser accepts the actual occupation of the property
sold as being identical with the Title particulars of the
property and shall make no requisition nor claim any compensation
in respect of any discrepancies.
Balance of purchase price to be paid as follows
1. A further $32,000 to be paid upon signing and execution of
a formal contract of sale within 28 days of acceptance of
this offer.
2. A further $20,000 to be paid on the last day of April 1972.
3. Balance of monies due namely $50,000 to be paid in equal
annual instalments on the last days of April 1973 1974"

The signatures of Godecke and the respondent appear again below the "Special Conditions". (at p635)

5. On 25th November 1971 the agent wrote to Godecke "confirming your purchase of the above property", attaching a photocopy of "the relevant Offer and Acceptance" and asking to be informed what solicitor would be preparing the transfer and attending to settlement on his behalf. The $8,000 mentioned in cl. 1 had been paid to the agent. The sum of $1,625 for stamp duty was sent on 9th December 1971 to the agent by the solicitors for the appellants. At about the same time, according to an affidavit sworn by the respondent, the agent was advised that the company was the nominee of Godecke and that the further agreement required by cl. 6 would be between the respondent and the company. There was evidence that the respondent telephoned Godecke to say that he (the respondent) would like to get out of the contract and asked whether Godecke would agree to it being cancelled. This was refused. On 17th December 1971 the respondent's solicitors wrote to the appellants' solicitors returning the cheque for $1,625 and stating that the respondent had decided not to proceed with the proposed sale of the property to Godecke and was withdrawing from his negotiations in that connexion. They added that the refunding of the $8,000 paid to the agent had been arranged. The tender of certain moneys in part payment of the purchase price was afterwards made and refused, on 1st January 1972 and again in April 1972. In my opinion, nothing turns on the fact that the first of these tenders was made outside the period of twenty-eight days mentioned in special condition 1. Within that period of twenty-eight days the respondent had declined to proceed with the sale. No argument has been advanced that the appellants are not entitled to succeed for the reason that they did not carry out their obligations under the contract. (at p636)

6. The learned primary judge held that there was no binding contract. He said that in cl. 3 the execution of a formal contract appeared to be a condition precedent of the right of the purchaser to possession and that in the Special Conditions the reference to a contract was apparently inserted for the purpose of fixing the time for payment of an instalment of $32,000. He was of opinion that this indicated that it was agreed that the execution of a formal contract was a necessary term of the offer and acceptance. He pointed out that cl. 6 indicated that a contract would be necessary only if the vendor required it, but he considered that the written words in the other clauses, which could only be consistent with a requirement that a further contract had to be prepared, should prevail in the construction of the Offer and Acceptance. His Honour said that whether that was so or not, cl. 6 showed clearly that it was within the contemplation of the parties that a formal contract could include terms other than those included in the offer. He concluded from this that all the terms of the contract had not been settled and he was of opinion that the case came within the third class of cases mentioned in Masters v. Cameron [1954] HCA 72; (1954) 91 CLR 353, at p 360 . He ordered that the caveat be removed. (at p636)

7. It appears, therefore, that his Honour's conclusion in favour of the respondent was based upon a consideration of the provisions of cl. 3 and of special condition 1, which indicated to him that it was regarded by the parties as necessary that there should be a formal contract, and of cl. 6, which indicated that terms other than those to which the parties had already agreed might be incorporated into their bargain. It is to those provisions that the arguments in this Court have been mainly directed. But before considering what construction should be put upon them it is desirable to refer to some of the other provisions of the Offer and Acceptance. (at p637)

8. The offer is expressed, as part of the printed form, to be subject to the conditions of the 26th Sch. of the Transfer of Land Act 1893. Condition 1 of the schedule has provisions as to completion of the purchase and the entitlement of the purchaser to possession which are not consistent with the terms of the Offer and Acceptance. Conditions 3 and 4 in the schedule cannot be easily accommodated to those terms. But, in my opinion, these difficulties should not be regarded as rendering the alleged contract void for uncertainty. It has not been argued that they should be so regarded. In my opinion, the document signed by the parties should be construed as making applicable the conditions in the schedule to the extent only that these could operate consistently with the specific provisions contained in the "terms of the purchase" and in the special conditions. (at p637)

9. Clause 2 is in language more appropriate to an agreement providing for the balance of the purchase price being paid by one payment than to one providing for several separate payments. But the provision that it is to be paid against receipt from the vendor of a proper registrable transfer, together with the duplicate certificate of title, must be read, in my opinion, as applying only to the final payment. (at p637)

10. Clause 4 raises a question whether the outgoings are to be adjusted to the date of giving possession or to the date of settlement, if the latter date is taken to be that on which the final payment of purchase money is paid and the transfer handed over. It could be argued that the inclusion in cl. 3 of the word "settlement" has the effect that the date of settlement is the same as the date for giving and taking possession. But I do not think that it should be so read. Clause 3 provides that possession is to be given and taken upon signing and execution of a formal contract of sale. That cannot have been intended to be also the date for "settlement", in the sense of the completion of the contract. Clause 4 should be read, in my opinion, as providing that the outgoings should be adjusted at the date when possession is given. (at p637)

11. Such ambiguities as those to which I have referred ought not to be held, in my opinion, to make the terms of the Offer and Acceptance too uncertain to constitute a binding contract or to provide an indication that the parties did not intend that they should be bound in any way unless and until a formal contract had been executed. (at p637)

12. I turn to a consideration of the particular provisions which led the primary judge to the conclusion that there was no binding contract. I think it is clear that it was contemplated by cl. 3 and special condition 1 that a formal contract of sale would be executed and that this would be done within twenty-eight days of the acceptance of the offer. If cl. 6 had not been included, it would have been proper, in my opinion, to hold that the parties intended that the formal contract would not introduce any new terms which would alter the effect of those upon which they had already agreed. Clause 6 contemplates, however, that there may be a further agreement which will contain other covenants not included in the offer. The purchaser agrees to execute such a further agreement, if required to do so by the vendor. I think that two views are open as to how this clause is to be read with cl. 3 and special condition 1. The first view is that if the vendor decides to take advantage of cl. 6, he must ensure that the covenant and the conditions which his solicitors "may reasonably require" are embodied in the formal contract contemplated by cl. 3 and special condition 1. The second view is that, at the option of the vendor, the purchaser may be required to execute a separate agreement in addition to the formal contract which those provisions contemplate. The latter view may be thought to gain some support from the use in cl. 6 of the expression "a further agreement" instead of the expression a "formal contract of sale" and from the fact that cl. 6 imposes no express time limit on the obligation imposed by it. But I prefer the former view, as it seems to me that the intention ought not to be attributed to the parties that there might be two further agreements or that after the purchaser had paid the large sum of $32,000 and had been given possession, the vendor might subsequently require him to enter into additional covenants. (at p638)

13. The principles to be applied in deciding the question at issue have been discussed in numerous cases and it is not necessary to refer to many of them here. It has been held repeatedly that the question is one of construction in each case of the document or documents which are put forward as showing that a contract was made. But it is necessary to make some reference to the authorities. In Von Hatzfeldt-Wildenburg v. Alexander (1912) 1 Ch 284, at pp 288-289 Parker J. used language which has been cited with approval in many later cases. He said:

"It appears to be well settled by the authorities that if the
documents or letters relied on as constituting a contract
contemplate the execution of a further contract between the
parties, it is a question of construction whether the execution
of the further contract is a condition or term of the bargain
or whether it is a mere expression of the desire of the parties
as to the manner in which the transaction already agreed to
will in fact go through. In the former case there is no enforceable
contract either because the condition is unfulfilled or
because the law does not recognize a contract to enter into a
contract. In the latter case there is a binding contract and
the reference to the more formal document may be ignored."

The court was there concerned with a case in which an acceptance of an offer had been stated expressly to be "subject to" certain conditions, including a condition that the purchaser's solicitors "approved the title to, and covenants contained in the lease, the title from the freeholder and the form of contract". The quoted passage cannot be accepted, in my opinion, without further explanation or elaboration, as a comprehensive statement of the tests by which in all cases it is to be determined as a matter of construction whether or not a binding contract has been made. It postulates a choice between two alternatives. It assumes that it must always be intended either that the execution of a further contract "is a condition or term of the bargain" or "a mere expression of the desire of the parties" as to the manner in which the transaction will go through. But there are cases in which a provision as to the execution of a further contract is not to be construed as a mere expression of desire or as a "condition" of the bargain, if by that is meant a condition upon which is dependent the coming into existence of a binding agreement. It may be a term of a concluded agreement and may place upon the parties an obligation, capable of being specifically enforced by the court, to sign a further contract in accordance with the agreement which they have already made. The decision of this Court in Niesmann v. Collingridge [1921] HCA 19; (1921) 29 CLR 177 is a direct authority for those propositions, which I have stated in a form based upon the language used in their judgment in that case by Rich and Starke JJ. (1921) 29 CLR, at pp 184-185 . In the same case Knox C.J. expressed (1921) 29 CLR, at p 182 the opinion that it was in the contemplation of the parties that a formal contract should be signed and that they meant that the acceptance of the offer should be followed by the execution of a contract by both parties. Thus the provision referring to a further contract was held not to be a mere expression of desire but to be one of the terms to which the parties had agreed. The exposition of the law on this subject which is contained in the judgment of this Court in Masters v. Cameron [1954] HCA 72; (1954) 91 CLR 353, at pp 360-364 recognizes the case of Niesmann v. Collingridge [1921] HCA 19; (1921) 29 CLR 177 as a case belonging to the second of the three classes described (1954) 91 CLR, at p 360 , in which the execution of a formal contract is not a condition of the existence of a binding agreement, but is a condition of the performance of one or more of the terms of an agreement by which the parties are immediately bound. (at p640)

14. I have reached the conclusion that the references in cl. 3 and in special condition 1 to the signing and execution of a formal contract should be held to have a similar effect to that which was attributed to the provision as to payment of the purchase price in Niesmann v. Collingridge [1921] HCA 19; (1921) 29 CLR 177 . I shall refer later to the problems arising out of the inclusion in the offer of cl. 6. But leaving these aside for the moment, I think that there are several indications in the offer and acceptance that the parties did intend to make a bargain to take effect immediately and did not intend that each of them should be at liberty to withdraw at any time until a further contract was signed. The provision for the immediate payment of the considerable sum of $8,000 is, I think, some indication of this. The facts that in the document there was provision for the "acceptance" of the "offer" therein set out and that it was duly accepted point in the same direction: see Niesmann v. Collingridge (1921) 29 CLR, at p 183 . The acknowledgment by the purchaser that he has "this day purchased" the property is inconsistent with the notion that the parties are still engaged in negotiations. Neither the offer nor the acceptance is expressly stated to be "subject to" the signing of a further contract. Unlike those cases in which the documents under consideration consist of telegrams, letters or memoranda containing no reference to important matters upon which it might be expected that the parties would wish to reach a definite agreement before becoming bound, the document here sets out detailed terms and conditions of the sale and purchase. In this respect it is to be contrasted with the memoranda considered in Sinclair, Scott & Co. Ltd. v. Naughton [1929] HCA 34; (1929) 43 CLR 310 (see the judgment of Knox C.J., Rich and Dixon JJ. (1929) 43 CLR, at pp 316-317 and that of Starke J. (1929) 43 CLR, at p 332 ) and with the documents examined in Farmer v. Honan [1919] HCA 13; (1919) 26 CLR 183 (see the judgment of Barton J. (1919) 26 CLR, at p 192 and of Isaacs and Rich JJ. (1919) 26 CLR, at p 197 ). (at p640)

15. I agree with the opinion of the learned primary judge that the parties intended that a further contract should be executed. The language used does not indicate a mere desire that this should be done. But, in my opinion, they did not intend to make the execution of a formal contract a condition of the coming into existence of a binding agreement. They made an agreement of which one term was that possession was to be given and taken upon the signing and execution of a formal contract of sale within twenty-eight days and of which another term was that a further $32,000 should be paid at that time. From these provisions there should be implied a promise by each of the parties that he would sign a formal contract within the twenty-eight days and would do everything necessary to enable this to be done within that time. As in Niesmann v. Collingridge [1921] HCA 19; (1921) 29 CLR 177 this was a term of the bargain that could be specifically enforced. (at p641)

16. It is necessary now to consider whether the foregoing view as to the effect of the document can be supported, having regard to the inclusion in it of cl. 6. In many cases there has been an acceptance of the principle which in Rossiter v. Miller (1878) 3 App Cas 1124, at p 1149 Lord O'Hagan expressed by saying that "if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed": see also the speech of Lord Blackburn in the same case (1878) 3 App Cas, at p 1151 ; the citation of the statements of Lord O'Hagan and Lord Blackburn in Niesmann v. Collingridge (1921) 29 CLR, at pp 181-182 ; and see Masters v. Cameron (1954) 91 CLR, at pp 361-362 . The question arises whether or not that principle is made applicable here by cl. 6, under which the respondent might have required the signing of a contract containing terms other than those set out in the offer. On this question I have obtained much assistance from the judgment of Bray C.J. in Powell v. Jones (1968) SASR 394 , a case to which we were not referred in argument. His Honour was there concerned with a clause in an agreement for a lease, but I think that his discussion of that clause is applicable to a similar clause contained in an agreement for sale. The offer to take a lease included a provision that the agreement for lease was "to be in terms and to contain such special clauses as the Landlord may require" to be prepared by the landlord's agent and signed when ready. His Honour construed this as meaning that both the terms and the special clauses were to be such as the landlord might require. His Honour (1968) SASR, at p 398 quoted passages from the speech of Viscount Dunedin in May and Butcher Ltd. v. The King (1934) 2 KB 17, at p 21 including the statement that "a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties". His Honour referred also to other authorities including Sweet and Maxwell Ltd. v. Universal News Services Ltd. (1964) 2 QB 699, at p 704 in which an agreement contained a provision for a lease to be taken on certain terms one of which was "the lease shall contain such other covenants and conditions as shall be reasonably required by Sweet and Maxwell" (1968) SASR, at p 399 . In that case the Court of Appeal held that there was a concluded contract for the taking of a lease which was capable of specific performance. What the lessor could demand was limited by the requirement that it must be reasonable and in the event of a dispute between the parties as to the reasonableness of a requirement the court could decide whether it was reasonable or not: see (1964) 2 QB, at pp 726, 733 and 735 . Bray C.J. considered that the provision with which he was concerned was not a mere agreement to agree, notwithstanding that it did not refer to the reasonableness of what the landlord might require. His Honour considered that the agreement was enforceable because what the relevant provision left to be determined was not dependent upon any further agreement between the parties. It is clearly established that a binding agreement may be made which leaves some important matter, e.g. the price, to be settled by the decision of a third party. I agree with respect with the view of Bray C.J. that, subject to the qualifications to which he refers (1968) SASR, at p 398 , there is no reason in principle for holding that there cannot be any binding contract if some matter is left to be determined by one of the contracting parties. (at p642)

17. In the present case the parties set out all the principal terms which were to govern the sale and purchase of the land and these included provisions which imposed by implication an obligation to execute a formal contract. There was also a promise by the purchaser to execute, if required to do so, a further agreement in accordance with cl. 6. In my opinion, that clause should be construed as limited to permitting the insertion of covenants and conditions not inconsistent with those contained in the offer. It was limited also by the reference to the reasonableness of requiring the inclusion of the covenants and conditions. In my opinion, this does not mean that anything may be required which in the opinion of the solicitors is reasonable. It means that what is required must be reasonable in an objective sense, and in case of dispute this is a matter which the court can decide. Clause 6 does not mean that the purchaser is making an agreement to agree later upon additional provisions to govern the bargain. It means that he is agreeing presently to accept as part of the bargain such additional provisions, if any, as are required, provided that they satisfy the requirements of consistency with the other terms and of reasonableness to which I have referred. (at p643)

18. If, contrary to my view, cl. 6 authorizes the vendor to require the execution of a further agreement after the contract contemplated by cl. 3 and special condition 1 has been executed, then cl. 6 would still operate subject to the limitations already discussed and, in my opinion, the vendor, if he wished to take advantage of it, would have to invoke it within a reasonable time, this again being a matter for decision if necessary by a court. The fact that more than one view may be open as to the time at which and the manner in which cl. 6 was intended to operate does not itself require a conclusion that the agreement is void for uncertainty: see Upper Hunter County District Council v. Australian Chilling and Freezing Co. Ltd. [1968] HCA 8; (1968) 118 CLR 429, at pp 436-437 . (at p643)

19. For the foregoing reasons I am unable to agree with the view of the learned primary judge that this was a case in which all the terms of the contract had not been settled and which for that reason fell within the third class of the cases discussed in Masters v. Cameron [1954] HCA 72; (1954) 91 CLR 353 . I am of opinion that a binding agreement was made. (at p643)

20. If the matter before the Supreme Court had been a suit for specific performance it would have been proper for the Court to make a decree in which the first step would be the settlement and execution of a proper contract: see Niesmann v. Collingridge [1921] HCA 19; (1921) 29 CLR 177 . But having regard to the agreement of the parties as to procedure which has been described above, I think that in order to give effect to that agreement and to the conclusion which I have reached, it will be sufficient for this Court to make a declaration that a binding contract for the sale and purchase of the land was made, and to make orders for the setting aside of the order of the Supreme Court and for the dismissal of the summons. To meet any future difficulty that may arise as to the manner in which the contract is to be carried out, the parties should be granted liberty to apply to the Supreme Court for any further orders or directions that may appear necessary. (at p643)

21. In my opinion the appeal should be allowed. (at p644)

GIBBS J. The facts of this case are set out in the judgment of Walsh J., which I have had the advantage of reading. (at p644)

2. 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 [1921] HCA 19; (1921) 29 CLR 177 . The effect of the decision in that case was summed up as follows in the judgment of this Court in Masters v. Cameron [1954] HCA 72; (1954) 91 CLR 353, at p 361 :

"A case of the second class came before this Court in Niesmann
v. Collingridge [1921] HCA 19; (1921) 29 CLR 177 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'." (at p644)

3. 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. (at p645)

4. 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 [1921] HCA 19; (1921) 29 CLR 177 . (at p645)

5. 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 (1888) 38 Ch D 130 ; May and Butcher Ltd. v. The King (1934) 2 KB 17, at p 21 . 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 [1949] HCA 18; (1949) 80 CLR 219 (see also Suttor v. Gundowda Pty. Ltd. [1950] HCA 35; (1950) 81 CLR 418, at pp 444-445 , and Christison v. Warren (1903) St R Qd 186 ). In Axelsen v. O'Brien [1949] HCA 18; (1949) 80 CLR 219 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 500 pounds 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 C.J. pointed out (1949) 80 CLR, at p 225 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 (1949) 80 CLR, at pp 225-226 . 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. (at p646)

6. 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 (1934) 2 KB, at p 21 , 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 [1964] HCA 41; (1964) 112 CLR 597, at p 605 , citing Loftus v. Roberts (1902) 18 TLR 532, at p 534 ; Placer Development Ltd. v. The Commonwealth [1969] HCA 29; (1969) 121 CLR 353, at pp 359-361 . 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 (1925) VLR 363 , 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 (1902) 18 TLR 532 , 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 (1888) 38 Ch D 130, at pp 132-133 ). 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. (1964) 2 QB 699 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 (1968) SASR 394 , 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 (1968) SASR, at p 400 that "there is nothing in the Sweet and Maxwell Case (1964) 2 QB 699 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. (1964) 2 QB 699 placed considerable reliance on the fact that the parties had imported the familiar and objective standard of reasonableness - see (1964) 2 QB, at pp 726, 733, 735 . 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. (at p647)

7. Further, in my opinion the presence of cl. 6 does not distinguish the present case from Niesmann v. Collingridge [1921] HCA 19; (1921) 29 CLR 177 . It is true that in Masters v. Cameron (1954) 91 CLR, at p 360 the Court described the class of case to which Niesmann v. Collingridge [1921] HCA 19; (1921) 29 CLR 177 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 (1957) St R Qd 376 , 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 (1957) St R Qd, at p 384 : "Cases like Niesmann v. Collingridge [1921] HCA 19; (1921) 29 CLR 177 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. (at p648)

8. I hold, therefore, that the Offer and Acceptance constituted a valid and binding contract capable of being enforced by specific performance. (at p648)

9. I would allow the appeal. (at p648)

MASON J. I agree with the reasons for judgment prepared by my brother Walsh. I agree that the appeal should be allowed. (at p648)

ORDER

Appeal allowed with costs.

Order of the Supreme Court of Western Australia set aside.

In lieu thereof order that the application made to that

Court by the originating summons issued on 15th
June 1972 be dismissed with costs.

Declare that upon the acceptance by the respondent of the

offer contained in the document signed by the appellant
Robert Harold Godecke on 22nd November 1971 there
was a binding contract for the sale and purchase of the
land therein described and that that contract ought to
be specifically performed.

Order that the appellants and the respondent are to be at

liberty to apply to the Supreme Court of Western
Australia for any such further directions or orders as
may appear necessary or desirable in relation to the carrying into effect of the said contract.