AUCTIONS

In contract law the calling out for bids by an auctioneer at a auctions amounts to an invitation to treat. Anyone who makes a bid is making offer. The auctioneer has the discretion to accept or reject these offers.

The Law on Auctions

What the Law Says: S.57(2) of the Sale of Goods Act 1979 reinforces the case law rule that a potential buyer makes an offer through bidding, which the auctioneer then accepts at the drop of his hammer. Therefore, anyone looking to buy can withdraw his/her bid right up until the moment that the hammer comes down. Additionally, any item can be withdrawn from sale even after bidding has begun. There are specific rules for auction, however, which mean that the item cannot be sold legally at an auction to anybody other than the person who lodges the highest bid.

Analysis:

Dannii runs a garage business selling and repairing cars. Dannii buys a used car at an auction held by Cheryl. Over the years, Dannii has bought dozens of cars from Cheryl’s auctions. Dannii likes to buy cars from Cheryl as all cars are put up for sale without any reserve price, and Dannii has made many profitable purchases. The first legal issue worth noting here is if Dannii bids on a car and wins there is a binding contract. The reason for this is when Danni bids she is making the offer. In auction sales, s.57(2) of the Sale of Goods Act 1979 ratifys the common law position, that Dannii as prospective buyer is making the offer by bidding, which Cheryl the auctioneer accepts when she drops his hammer.

A non contentious issue worth pointing out is if the car is sold at an undervalue and do not meet their expected price Cheryl is bound to sell the car to Dannii once the hammer goes down and her bid accepted. The case which demonstrates this is Barry v Davies. This case conserved the sale of two machines that were advertised as being “without reserve”. These two machines were worth considerably more than they were sold for at the auction. The auctioneer refused to accept the bid and withdrew the items from sale. The judge in this case awarded the buyer with the full value of the machines and this was affirmed on appeal. Although there had been no contract between vendor and purchaser, the court stated there was a collateral contract between auctioneer and bidder. The same can be argued here.