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Contract | Formation

Offer: Auctions

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  • question of when a contract is concluded arises at auctions
  • an auctioneer will invite bids on an item (a lot) and people will bid
  • once the bidding ceases the auctioneer brings down his hammer and the highest bidder is sold the item


  • statute provides a definition of when a contract is formed at auction
    • S57(2): A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in other customary manner; and until the announcement is made any bidder may retract his bid.
  • the auctioneer's action accepts the bidder's offer
  • the original call for bids is an invitation to treat


  • a reserve price may be set by the seller and if bids do not meet the price the lot will be withdrawn and not sold
    • S57(3): A sale by auction may be notified to be subject to a reserve or upset price, and a right to bid may also be reserved expressly by or on behalf of the seller.
  • auctions may take place without reserve and the lot is sold to the highest bidder

    Warlow v Harrison (1859) 1 E & E 309


    • defendant (D), an auctioneer, advertised a public auction of a horse without reserve
    • plaintiff (P) bid 60 guineas and the owner of the horse bid 61 guineas and D put his hammer down on bid for 61 guineas
    • P claimed the horse should be his as he was the highest bona fide bidder


    • was there a contract for sale?


    • advertisement, as it included the words without reserve, was an offer to sell to highest bidder
    • D was in breach of that promise, a unilateral contract
    • P had performed the required act (made the highest bona fide bid)
    • however, the hammer had not been put down on the~P's bid so there was no contract of sale between P and D
    • P was only entitled to sue D for the loss of the opportunity to buy the horse

    Barry v Davies (Heathcote Ball & Co.) [2000] 1 WLR 1962


    • D, auctioneers, were instructed to sell two machines
    • claimant (C) was told the sale would be without reserve
    • C was the highest bidder, bidding £200 for each
    • D refused to sell to C, as the machines were worth £14000 each
    • C sought damages for breach of contract


    • was there an offer made by D?


    • followed Warlow v Harrison, finding there was an D made an offer (because the auction was without reserve) and C accepted by making the highest bid
    • D was in breach of contract
    • C awarded £27600 in damages to compensate his loss, the cost of buying machines (£28000) minus his bid (£400)
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