All NotesCivil LawSale of Goods Act

Sale of Goods Act

Auction Sale and Ordinary Sale Compared: Who Makes the Offer, When Acceptance Occurs, Retraction of Bids, Lots, and the Seller's Own Bidding

An auction is a contract of sale like any other, and everything in the Act applies to it. What differs is the mechanism of formation. In an ordinary sale either party may make the offer, and acceptance may take any form the offer or the law allows. At an auction the pattern is fixed: the auctioneer's call is an invitation, each bid is an offer, and the fall of the hammer is the acceptance. Because the process is a public competition, the Act also regulates the seller's own participation in it.

Five points of difference between an auction and an ordinary sale

1. Formation Compared

  1. The offer. In an ordinary sale either party may offer. At an auction the bidder offers, and the call for bids is an invitation to treat.
  2. The acceptance. In an ordinary sale, any mode the offer allows. At an auction, the announcement of completion by the fall of the hammer or other customary manner, under Section 64(2).
  3. Withdrawal. In both, an offer may be withdrawn before acceptance: a bidder may retract until the hammer falls.
  4. Several items. In an ordinary sale one contract covers the goods unless otherwise agreed. At an auction, each lot is prima facie a separate contract under Section 64(1).
  5. The seller's participation. An ordinary seller simply names his price. An auction seller may bid only if the right was expressly reserved, under Section 64(3) and (4).

📖 Warlow v. Harrison, (1859) 1 E & E 309

Facts: A horse was advertised for sale by auction without reserve. The highest bona fide bidder was outbid by the owner himself, bidding through the auction, and the horse was knocked down to the owner. The disappointed bidder sued the auctioneer.

Held: The court held, in the judgments that have since been treated as authoritative, that an auctioneer who advertises a sale without reserve undertakes that the sale will be without reserve, and is liable to the highest bona fide bidder if the goods are sold to the owner instead. The undertaking is a collateral contract, separate from the sale itself.

Ratio: An advertisement of a sale without reserve may create a collateral obligation to the highest genuine bidder, though the main contract of sale is formed only on the fall of the hammer.

2. What Is the Same

  • The implied conditions apply. Title, description, quality and fitness and sample operate at an auction as elsewhere, subject to any exclusion under Section 62, which auction conditions commonly contain.
  • Property and risk pass under Sections 18 to 26, usually on the fall of the hammer for specific goods.
  • The unpaid seller's rights apply, and auction conditions usually reinforce them with express terms about payment and removal.
  • The general law of contract applies through Section 3, including capacity, free consent and mistake.

3. The Position Stated Shortly

  1. An auction is an ordinary contract of sale with a fixed mechanism of formation.
  2. The call for bids is an invitation, the bid is the offer, and the hammer is the acceptance.
  3. A bid may be retracted at any time before completion is announced.
  4. Each lot is prima facie a separate contract.
  5. The seller may bid only if the right was expressly reserved.
  6. Warlow v. Harrison: advertising a sale without reserve may create a collateral obligation to the highest genuine bidder.
  7. Everything else in the Act, including the implied conditions and the passing of property, applies as usual.