We have all come across an auction at some time. Auctions have certain distinct characteristics like the bidding process, the hammer, the whole setting is quite interesting. Did you know that such auction sale is covered under the Sale of Goods Act? Let us have a look at the rules of an auction sale.
An auction sale is a public sale. The goods are sold to all members of the public at large who are assembled in one place for the auction. Such interested buyers are the bidders.
The price they are offering for the goods is the bid. And the goods will be sold to the bidder with the highest bid.
But if an auctioneer wishes to sell his own property as the principal he can do so. And he need not disclose this fact, it is not a requirement under the law.
Rules of an Auction Sale
As we saw previously, the rules regarding an auction sale are found in the Sale of Goods Act. Section 64 of the Act specifically deals with the rules governing an auction sale. Let us take a brief look.
1] Goods Sold in Lots
In an auction sale, there can be many goods up for sale of many kinds. If some particular goods are put up for sale in a lot, then each such lot will be considered a separate subject of a separate contract of sale. So each lot ill prima facie be the subject of its own contract of sale.
2] Completion of Sale
The sale is complete when the auctioneer says it is complete. This can be done by actions also – like the falling of the hammer, or any such customary action. Till the auctioneer does not announce the completion of the sale the prospective buyers can keep bidding.
3] Seller may Reserve Right to Bid
The seller may reserve his right to bid. To do so he must expressly reserve such right to bid. In this case, the seller on any person on his behalf can bid at the auction.
4] Sale Not Notified
If the seller has not notified of his right to bid he may not do so under any circumstances. Then neither the seller nor any person on his behalf can bid at the auction. If done then it will be unlawful.
The auctioneer also cannot accept such bids from the seller or any other person on his behalf. And any sale that contravenes this rule is to be treated as fraudulent by the buyer.
5] Reserve Price
An auction sale may be subject to a reserve price or an upset price. This means the auctioneer will not sell the goods for any price below the said reserve price.
6] Pretend Bidding
But if the seller or any other person appointed by him employs pretend bidding to raise the price of the goods, the sale is voidable at the option of the buyer. That means the buyer can choose to honor the contract or he can choose to void it.
7] No Credit
The auctioneer cannot sell the goods on credit as per his wishes. He cannot accept a bill of exchange either unless the seller is expressly fine with it.
Solved Question on Auction Sale
Q: A was the auctioneer at an auction sale. He had accepted the bid of B and slammed down his hammer. C then comes up with a higher bid and A refuses to accept the bid. Can the seller enforce the sale to C?
Ans: No the goods have already been sold to B. Once the hammer comes down the sale is complete and there are no more bids. Also, the seller cannot sell to C because he wishes so. The auctioneer is his agent and acts on his behalf. The seller is bound by the actions of A.