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Barry v. Heathcote Ball & Co (Commercial Auctions) Ltd  EG 178 CA
Every first-year law student learns the accepted basic principles of sale by auction: that the auctioneer's action in putting lots up for sale is an "invitation to treat" not an "offer" to sell the property, a bid constitutes an "offer" to purchase which the auctioneer "accepts" by bringing down the hammer at which point the contract is complete. Until the fall of the hammer the buyer is free to withdraw his "offer". (Payne v. Cave (1789) 3 Term Rep 148, Harris v. Nickerson (1873) 8 LRQB 286 CA, Warlow v. Harrison (1859) 1E & E 309). These basic principles are enshrined in the Sale of Goods Act 1979 s 57(2).
The important question raised in this appeal was the effect of a sale by auction that is expressed to be "without reserve". If the auctioneer refuses to bring down the hammer on the highest bid because he considers it too low does this mean that no contract can come into existence?
In this case the complainant, Barry, bid £200 each for two new electronic engine analysers with a manufacturer's list price of £14,000 each. The machines had been put up for sale without reserve through the appellant's auction house by HM Customs and Excise, who had seized them from the manufacturer in the course of a dispute over VAT. The claimant's bid was the only bid made for the machines despite the auctioneer's best efforts. The auctioneer announced that he was not prepared to sell at the price offered and withdrew the machines from sale. They were subsequently sold to another purchaser for £750 each through an advertisement in a magazine. The claimant brought an action against the auctioneers claiming £27,600, the difference between the market value of the machines and the amount of his bid.
The Court of Appeal acknowledged that this point was not explicitly dealt with in the Sale of Goods Act, which merely prohibits any bidding on behalf of the seller except where this right has been specifically reserved. The court held that withdrawing a lot because the auctioneer thought the highest bid was too low was conduct "tantamount to bidding on behalf of the seller". Their Lordships accepted the principle in Warlow v. Harrison that although no contract of sale comes into existence until the fall of the hammer, nevertheless a collateral contract between the auctioneer and the bidder may come into existence at an earlier stage; that is when the bidder "accepts" the auctioneer's "offer" to sell without reserve.
Their Lordships rejected counsel's argument to the contrary, holding that such an "offer" can be made by implication. Consideration for it is constituted by the act of bidding. The collateral contract is made personally by the auctioneer even though he is selling as agent for the owner of the goods and thus the ultimate contract of sale would be between the owner of the goods and the bidder. Their Lordships felt that this decision accords with "the general and reasonable expectations of persons attending at an auction sale without reserve".
The normal measure of damages is the difference between the current market price and the sale price. However, in this case, for tactical reasons, counsel for the auctioneer had refused to allow the claimant to put forward evidence as to what price he had actually had to pay for replacement machines. Thus in the absence of any evidence as to the current second hand value of such machines the court held that the manufacturer's list price could reasonably be adopted.
Jolley v. Carmel Ltd  43 EG 185 CA
This case illustrates the difficulty of drafting a conditional contract for the sale of land, or anything else for that matter. Since a conditional contract seeks to provide for conditions that may or may not be satisfied there is always an element of uncertainty as the parties may wish to retain a degree of flexibility and/or potential problems may not be recognised and provided for at the drafting stage. The end result may be uncertainty as to when or if the contract comes to an end.
In Jolley, the claimant owned a large property near Lytham St Annes that had remained unoccupied for 25 years. It was situated in a desirable location within the green belt and adjacent to sand dunes designated as a site of special scientific interest.
In 1998, the claimant agreed to sell the property to the defendant company but completion of the contract was conditional on the defendant obtaining planning permission for a minimum of 16 houses within the curtilage of the existing property. The contract required the defendant to apply for planning permission within three months of the date of the contract. The completion date was specified as 28 days after obtaining detailed planning consent. If no application for planning permission was lodged within three months completion would be within 17 weeks of the date of the contract or within 28 days of the buyer serving of notice of intention to complete.
The claimant applied for planning permission within the time limit but due to no fault of its own the scheme still had not been approved by the date of the Court of Appeal hearing. The local authority approved the scheme in February 2000 but this had been called in by the Secretary of State and the outcome of a public inquiry was pending. In late 1999 the vendor sought to rescind the contract and the question for the Court of Appeal was whether he was legally entitled to do so.
In the High Court the judge found the contract was poorly drafted in several respects:
there was no requirement for the buyer actually to pursue planning permission rather than simply lodge the application;
there was no requirement for the buyer to appeal against a refusal of planning permission;
there was no time limit within which planning permission must be obtained;
there was no long stop date by which either the contract must be completed or come to an end.
Thus in order to decide whether or not the vendor had a right to terminate the contract the judge had to decide what terms must be implied to give it "commercial efficacy". The judge held that the terms to be implied were:
that the buyer would use reasonable efforts to obtain planning permission within a reasonable time; and
that the vendor would do nothing to hinder this.
The buyer would not be in breach of the implied term so long as it had not acted unreasonably or negligently and delay in obtaining planning permission was due to causes beyond its control. As the buyer was not in breach of this condition the vendor was still bound by the contract. The vendor appealed.
The issue for the Court of Appeal was whether the judge had reached the right decision. The vendor argued that the judge was wrong in not following the decision in Re Langlands Farm  3 AllER 552. The two cases are very similar. The contract in Langlands Farm was to be complete within eight weeks of planning permission being obtained but no time limit for obtaining planning permission had been set. The court in that case held that there must be an implied condition that planning permission be obtained within a reasonable time. Since the buyer had failed to do this the condition was never achieved and the contract never became binding. The vendor was entitled to treat it as at an end.
The trial judge in the present case, with whom the Court of Appeal unanimously agreed, felt that Jolley was different. In Langlands Farm the question was simply what, if any, time limit should be imposed. In Jolley the question was what precisely was the buyer's obligation? This required an extensive examination of the context of the contract. The court held that it was to take reasonable steps to obtain planning permission. Thus as long as the buyer continued to perform that obligation time for satisfying the condition continued to run and the contract was not at an end.
Their Lordships took the opportunity to give a warning on the use of precedents in the construction of contract and implied terms:
… it is quite clear that a decision for the court on the meaning of the particular written contract creates no precedent unless, as very rarely happens, both the language of the contract and the relevant matrices of fact are identical. The fact that the decision of Cross J [in Re Langlands Farm] had been referred to with approval by the House of Lords … does not, therefore carry any particular binding force.