Barry v Davies (t/a Heathcote Ball & Co)
Court of Appeal
Citations:  EWCA Civ 235;  1 WLR 1962;  1 All ER 944;  3 EGLR 7;  47 EG 178; (2000) 97(39) LSG 41; (2000) 150 NLJ 1377.
The claimant attended an auction run by the defendant. They bid £200 each on two machines. There was no reserve price on the machines, and no one else entered any bids. The defendant’s auctioneer (acting at the defendant’s agent) decided that the machines were worth far more than £200 each, being worth around £14,000 each. He withdrew them from the auction before the hammer fell.
The claimant sued the defendant, alleging that withdrawing the machines was a breach of contract. The defendant responded that there was no contract between the parties for two reasons:
- The bidder in an auction does not provide any consideration with his bid;
- The auctioneer acts as an agent for the owner of the goods. Agents ‘drop out of the picture’ and are not party to the contracts they make between their principals and third-parties. Any contract would therefore be between the bidder and the owner, not the bidder and the auctioneer. The auctioneer could not, therefore, be liable for the breach of a contract which he was not a party to.
- Was there an enforceable contract between the bidder and the defendant?
The Court of Appeal held in favour of the claimant. A collateral contract arose between the auctioneer and the claimant. This contract specified that the defendant had to accept the claimant’s bid if it was the highest bid. The defendant had breached this contract by withdrawing the machines from the auction instead of selling the machines to the claimant.
This Case is Authority For…
When goods are sold by auction without a reserve price, there is a collateral contract between the auctioneer and the participants that the auctioneer will sell to the highest bidder. However, the buyer may withdraw their bid at any time before the auctioneer’s hammer falls.
This case demonstrates how parties provide consideration in an auction scenario:
- The bidder supplies consideration by putting themselves at risk of having to pay if they are the highest bidder and fail to withdraw.
- The auctioneer supplies consideration by putting the goods at risk of being sold to the highest bidder.
This case also implies that where goods are auctioned with a reserve price, the collateral contract only requires the auctioneer to accept the highest bid if it exceeds that reserve price.