Barry v Davies  1 WLR 1962
FORMATION OF CONTRACT
Two brand new engine analyser machines owned by Customs and Exise were put up for auction by the defendant auctioneer. Each could be procured from the manufacturer for £14,521 but despite this were listed without a reserve price. The auctioneer failed to obtain bids of £5000 and £3000, upon which the claimant bid £200 for each machine, but the auctioneer refused to accept these bids and withdrew the machines from auction. A few days later the machines were sold for £750 each through an advert in a magazine.
The claimant brought proceedings against the defendant, contending that in an auction without a reserve price the auctioneer was bound to deliver the goods to the highest bidder.
The issue was whether the holding of an auction without a reserve price amounted to a contractually binding offer to sell the property to the highest bidder.
The Court held that the holding of an auction for sale without reserve is an offer by the auctioneer to sell to the highest bidder, so the defendant was contractually obliged to sell to the claimant. The reasoning behind this was that the auctioneer acted as agent of the owner in the formation of the contract with the highest bidder, and this gave rise to a collateral contract with the auctioneer himself. There was consideration in the form of detriment to the bidder, as his bid could be accepted unless and until it was withdrawn, and benefit to the auctioneer as the price was driven up (and also that attendance at the auction is likely to increase if it is said that there is no reserve).
The claimant was awarded damages reflecting the difference between the value of the machines and the price he had bid.