Godecke v Kirwan

Godecke v Kirwan (1973) 129 CLR 629: A Case Summary

Case name & citation: Godecke v Kirwan [1973] HCA 38; 129 CLR 629; 1 ALR 457

  • The bench of judges: Walsh, Gibbs and Mason JJ.
  • Decided on: 20 September 1973
  • The concerned Court: High Court of Australia
  • Area of law: Agreement contemplating execution of formal contract; Certainty of contract

What happened in Godecke v Kirwan?

The case of Godecke v Kirwan (1973) revolved around the central issue of whether a binding contract for the sale of land was established between two parties or were they still negotiating.

Godecke (the buyer) and Kirwan (the vendor) agreed in writing through a document titled “Offer and Acceptance” for the sale of a piece of land for a price of $110,000.

The document outlined the terms and conditions for the sale of the property.

The crux of the matter hinged on the interpretation of several clauses within the document. Clause 3 and special condition 1 suggested that the execution of a formal contract was necessary for the purchaser to gain possession of the property. Additionally, clause 6 indicated that further agreements might be required by the vendor.

Clause 3 & 6 read as follows:

“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.”

“If required by the Vendor/s I/we (the buyer) 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 (the vendor) decided not to proceed with the sale. He argued that there was no binding contract. The case was heard at the Supreme Court of Western Australia.

Hearing and Court’s Judgment

The primary judge initially ruled that there was no binding contract, primarily because the execution of a formal contract appeared to be a condition precedent. However, on appeal to the High Court of Australia, the Court disagreed and decided that while the parties intended to execute a formal contract, it was not a condition for the formation of a binding agreement.

The judges supported the notion that the requirement for a formal contract did not negate the existence of a binding agreement. The execution of a formal contract was seen as a condition of certain obligations (such as giving and taking possession and paying part of the purchase price) rather than a condition of agreement itself.

Additionally, the judges considered the inclusion of clause 6, which allowed for the possibility of further agreements. Clause 6 of the document allowed the vendor to require the execution of a further agreement containing additional covenants and conditions, if deemed reasonable by their solicitors.

The Court discussed the legal principle that parties to a contract can leave certain terms to be determined by a third party without rendering the contract void for uncertainty. Specifically, Clause 6 allowed the solicitors for the vendor to unilaterally include additional terms, provided these terms are reasonable.

The clause allowed the solicitors for the vendor to determine additional terms, which is a common practice and doesn’t invalidate the contract. It allowed to add more conditions to the agreement, but only if these new conditions don’t contradict the existing ones or the original agreement and are reasonable.

Thus, the existing agreement was binding.

Quote from the case

“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.”

(GIBBS J at p 646)

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