Heathcote Ball & Co (Commercial Auctions) Ltd v Barry

A sale advertised as without reserve ordinarily gives rise to a collateral contract between the auctioneer and the highest bona fide bidder. The auctioneer must sell to that bidder, and cannot withdraw the lot merely because the bid is lower than expected. Withdrawal on that ground is tantamount to bidding for the seller. The collateral obligation exists even though the auctioneer acts for a disclosed principal. Consideration is supplied by the bidder’s detriment and the auctioneer’s benefit from the bidding process. Damages are assessed by the ordinary contractual measure, including the market-price rule in section 51(3) of the Sale of Goods Act 1979.

The claimant attended an auction advertised as being without reserve and made the highest bid for two engine analysers. The auctioneer withdrew the machines because the bid was considered too low, and they were later sold elsewhere.

The Northampton County Court held that the auctioneer had made a collateral contractual promise to sell to the highest bidder, and awarded damages of £27,600. The auctioneer appealed, challenging both liability and the measure of damages. The central issues were whether a sale without reserve creates an enforceable obligation to sell to the highest bona fide bidder, whether there is consideration and whether the auctioneer is liable despite acting as agent for the vendor.

1. Appeal dismissed. The auctioneer was obliged to sell the lots to the highest bona fide bidder. Sir Murray Stuart-Smith, with whom Pill LJ agreed, upheld the liability decision.
2. A sale by auction advertised as without reserve constitutes a collateral contract between the auctioneer and the highest bona fide bidder. The court adopted the reasoning of the majority in Warlow v Harrison [1859] 1 E & E 309. Although that decision was not strictly binding, its reasoned majority judgment was entitled to very great respect.
3. The obligation is consistent with section 57 of the Sale of Goods Act 1979. Under section 57(4), where the sale is not notified as allowing seller bidding, seller bidding is unlawful. Withdrawing a lot because the bid is insufficient is effectively bidding on behalf of the seller. The highest bid cannot therefore be rejected simply because it is not high enough.
4. There was sufficient consideration. The bidder suffered detriment because the bid could be accepted unless withdrawn, while the auctioneer obtained a benefit from the bidding being driven upwards. Attendance at the auction was also likely to increase because the sale was without reserve.
5. The auctioneer’s agency did not prevent liability. The completed sale would be between vendor and purchaser, but a separate collateral agreement could exist between auctioneer and bidder. The court declined to treat the disclosed-principal distinction in Mainprice v Westley (1865) 6 B&S 421 as excluding such liability.
6. Damages were properly assessed at £27,600. Section 51(3) of the Sale of Goods Act 1979 provides the prima facie market-price measure where a seller wrongfully refuses delivery. The claimant need not actually purchase replacements. On the evidence, the manufacturer’s price represented the relevant market price, although the court stressed that a manufacturer’s list price would not ordinarily be the market price for second-hand goods.

Costs followed the event, subject to detailed assessment.

• Court of Appeal (Civil Division): dismissed the appeal from the Northampton County Court judgment of His Honour Judge Harris dated 6 August 1999, with costs subject to detailed assessment.