Chapter VI. Sale by Auction

AUCTION is a sale of property, whether real or personal, by which a person binds himself to transfer the ownership of the same to the highest bidder according to the conditions of sale. There are various methods in which the sale is conducted, and descriptions of the property to be sold and the conditions of sale are usually notified to the public by printed particulars of sale or by catalogues, and by the auctioneer himself. The bidding proceeds orderly, each bid being in the nature of an offer, which may be revoked until the auctioneer signifies his acceptance, usually by a stroke of his hammer, By this a contract is concluded with the last bidder, and the property becomes his. Ordinarily, however, the contract cannot be enforced by English law unless there is some memorandum of it in writing signed by the party to be charged therewith, or by his agent in that behalf.

Such a method of sale is, of course, honest and lawful if the conditions required either by the nature of the contract, or by law, or by special arrangement, be duly observed. The nature of the contract requires that, at any rate without notice, the owner himself should not bid, nor any other person on his behalf, and that the property should be knocked down to the highest bidder even if the price obtained be less than its value. The Sale of Goods Act, 1893, expressly provides that where a sale by auction is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person. Any sale contravening this rule may be treated as fraudulent by the buyer.¹

However, in the next subsection the same Act also provides that a sale by auction may be notified to be subject to a reserved or upset price, and a right to bid may also be reserved expressly by or on behalf of the seller, and where a right to bid is expressly reserved, but not otherwise, the seller, or any one person on his behalf, may bid at the auction.

Similarly, if all those who are present at an auction conspi re together not to bid against each other, or if means are used to hinder people from bidding, injustice is committed. An agreement, however, between two persons not to bid against each other, when there are other bidders present, is not unjust or illegal, and knockouts, as they are called, are common, by which persons agree that only one of them shall bid for any particular article, and after the sale put up privately among themselves the goods that each one has bought.

¹ Sale of Goods Act, 1893, sec. 58, subsec. (3).