Barry v Davies [2000]

Barry v Davies [2000]

Barry v Davies [2000] EWCA Civ 235, [2000] 1 WLR 1962 is a notable English contract law case that reinforces the principle that, in auctions without a reserve price, a collateral contract is formed between the auctioneer and the highest bidder. The case emphasises that the auctioneer's offer to sell without reserve creates a binding promise, and the bidder's acceptance forms a collateral contract.

Barry attended an auction at Davies' auction house and placed the only bid for two engine analysers at £200 each. The auction was conducted without a reserve price, and Davies stated that the items were to be sold that day. However, the auctioneer later refused to sell the machines, considering the bid too low. Barry sued Davies, claiming £27,600 for the cost of his bids and the price he would likely pay to purchase similar machines elsewhere.

The Court of Appeal held that there was a binding promise from the auctioneer to the highest bidder. The auctioneer, by putting the property up for sale without reserve, pledged that the sale would be without reserve. The collateral contract was formed when the bid was made, and the auctioneer accepted it.

The court acknowledged that, upon conclusion of the sale, the contract is between the purchaser and the vendor, not the auctioneer. However, the auctioneer acts as an agent in the sale. The absence of a collateral contract between the vendor and purchaser does not negate the existence of a collateral agreement between the auctioneer and the bidder.

The court found consideration in the form of detriment to the bidder (the bid could be accepted until withdrawn) and benefit to the auctioneer (bidding is driven up). Additionally, the attendance at the sale is likely to increase if it is known that there is no reserve.

The court pointed out that the measure of damages for the wrongful refusal to deliver goods should be determined by the difference between the contract price and the market or current price of the goods, especially when there is a market for the goods. The damages awarded in the case, though seemingly harsh, align with the principle of compensating the buyer for the seller's wrongful refusal to deliver goods, placing the buyer in the position they would have been had the contract been performed.

This case underscores the enforceability of collateral contracts in auction settings without a reserve price, recognising the promises made by auctioneers to bidders and the legal consequences of breaching those promises.
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