Barry v Davies [2000]

Court: Court of Appeal

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

Issue: Whether a collateral contract was formed between Barry and the auctioneer, Davies, and if so, whether Davies was liable for breaching this contract by refusing to sell the goods.

Held: The Court of Appeal held that a binding collateral contract existed between Barry and Davies. The auctioneer's promise to sell without reserve created a binding agreement, and Davies' refusal to sell constituted a breach of this contract.

Key Judicial Statements: Sir Murray Stuart-Smith: Affirmed the existence of a collateral contract based on the auctioneer's pledge that the sale would be without reserve. The auctioneer's promise created a binding obligation to accept the highest bid. He also noted that the auctioneer acts as an agent for the vendor, but a separate collateral contract exists between the auctioneer and the bidder. Consideration was found in the bidder's detriment (the bid could be accepted until withdrawn) and the benefit to the auctioneer (bidding is driven up). The court ruled that damages should reflect the difference between the contract price and the market price of the goods.

💡 Leveluplaw: highlights the enforceability of collateral contracts in auction settings where no reserve price is set.