Barry v Davies (t/a Heathcote Ball & Co.) [2001] 1 All ER 944

Key Point

  • If goods are auctioned without a reserve price (i.e. minimum price the seller is willing to accept), a collateral contract is formed between the auctioneer and the highest bidder that his bid will be accepted

Facts

  • C went to D’s auction house and placed the only bid for two engine analysers at £200 each
  • The auction was without reserve, and D said the items were to be “sold that day”
  • The auctioneer refused to sell the machines, considering it too small a sum
  • C successfully sued D, claiming £27,600 for the cost of his bids and the price he would likely pay to purchase similar machines elsewhere
  • The jude held that there was a collateral contract between the auctioneer and the highest bidder constituted by an offer by the auctioneer to sell to the highest bidder which was accepted when the bid was made
  • D appealed, claiming there was (i) no promise from D merely because it was an auction without reserve (ii) no consideration (iii) no contractual  liability from D as he was acting as an agent for a vendor

Held (Court of Appeal)

  • Appeal dismissed
  • There was a binding contract

Sir Murray Stuart-Smith

Was there a collateral contract?

  • Citing previous cases, he thought that there was a binding promise from D to C. In Warlow v Harrison [1859] 1 E & E 309, it was stated “the auctioneer who puts the property up for sale upon such a condition pledges himself that the sale shall be without reserve”
  • “As to the agency point, there is no doubt that when the sale is concluded, the contract is between the purchaser and vendor and not the auctioneer. Even if the identity of the vendor is not disclosed, it is clear that the auctioneer is selling as agent. It is true that there was no such [collateral] contract [to sell with no reserve price] between vendor and purchaser. But that does not prevent a collateral agreement existing between the auctioneer and bidder. A common example of this is an action for breach of warranty of authority, which arises on a collateral contract”:p. 1968
  • “As to consideration, in my judgment there is consideration both in the form of detriment to the bidder, since his bid can be accepted unless and until it is withdrawn, and benefit to the auctioneer as the bidding is driven up. Moreover, attendance at the sale is likely to be increased if it is known that there is no reserve”: p. 1967

Damages

  • “Where a seller wrongfully refuses to deliver goods to the buyer, the measure of damages where there is a market in the goods is prima facie to be ascertained by the difference between the contract price and the market or current price of the good”: p. 1969

Commentary

  • The damages may appear harsh, but are simply an extension of the principle that D must place C in the position he would have been had the contract been performed