AMITY LAW SCHOOL

AMITY UNIVERSITY
LUCKNOW

SESSION: 2017-2022
Topic:- Auction- With Reserve and Without Reserve

SUBMITTED TO:- SUBMITTED BY:-

MS. Preeti Singh Nikhil Singh

B.A. LL.B(H)

A8111117071
 Acknowledgement
I would like to express my special thanks of gratitude to my teacher Ma’am Preeti Singh who
gave me the golden opportunity to do this wonderful project on the topic “Auction- With
Reserve And Without Reserve “ which also helped me in doing a lot of research and I came to
know about so many new things.
Secondly, I would also like to thanks my parents and friend who helped me a lot in finalizing
this project.
Table Of Content:
 Introduction
 History of auction
 Types of auction
o Without reserve auction
o With reserve auction
 Literature review
 Cases related to auction
o Payne v Cave
o Warlow v Harrison
o Harris v Nickerson
o SEBI V Sahara India Case
o Barry v Davies
o Heathcote Ball v Barry
 Bibliography
Introduction:
A sale by auction is a public sale where various intending buyers offer bids for the goods and
try to outbid each other. Ultimately, the goods are sold to the highest bidder. An auction sale
is complete when the auctioneer announces its completion by the fall of the hammer or in other
customary manner. The property in the goods thus passes on the fall of the hammer; until the
fall of the hammer the bidder has the right to revoke his/her bid. The auctioneer is, generally
not the seller but, the agent of the real owner of the goods. Auctioneer is engaged to conduct
the auction and his/her relationship with the seller is governed by the law of agency.
Auction is a common name for several types of sales where the price is neither set nor arrived
at by negotiation, but is discovered through the process of competitive and open bidding. An
auction is a process of buying and selling goods or services by offering them up for bid, taking
bids, and then selling the item to the highest bidder. The open ascending price auction is
arguably the most common form of auction in use today. Participants bid openly against one
another, with each subsequent bid required to be higher than the previous bid. An auctioneer
may announce prices, bidders may call out their bids themselves (or have a proxy call out a bid
on their behalf), or bids may be submitted electronically with the highest current bid publicly
displayed. While auctions are most associated in the public imagination with the sale of
antiques, paintings, rare collectibles and expensive wines, auctions are also used for
commodities, livestock, radio spectrum and used cars. In economic theory, an auction may
refer to any mechanism or set of trading rules for exchange.

History Of Auction:
The word "auction" is derived from the Latin augeō which means "I increase" or "I augment".
For most of history, auctions have been a relatively uncommon way to negotiate the exchange
of goods and commodities. In practice, both haggling and sale by set-price have been
significantly more common. Indeed, before the seventeenth century the few auctions that were
held were sporadic.
Nonetheless, auctions have a long history, having been recorded as early as 500 B.C. According
to Herodotus, in Babylon auctions of women for marriage were held annually. The auctions
began with the woman the auctioneer considered to be the most beautiful and progressed to the
least. It was considered illegal to allow a daughter to be sold outside of the auction method.
During the Roman Empire, following military victory, Roman soldiers would often drive a
spear into the ground around which the spoils of war were left, to be auctioned off. Later slaves,
often captured as the "spoils of war", were auctioned in the forum under the sign of the spear,
with the proceeds of sale going towards the war effort.
The Romans also used auctions to liquidate the assets of debtors whose property had been
confiscated. For example, Marcus Aurelius sold household furniture to pay off debts, the sales
lasting for months. One of the most significant historical auctions occurred in the year 193
A.D. when the entire Roman Empire was put on the auction block by the Praetorian Guard. On
March 23 The Praetorian Guard first killed emperor Pertinax, then offered the empire to the
highest bidder. Didius Julianus outbid everyone else for the price of 6,250 drachmas per guard,
an act that initiated a brief civil war. Didius was then beheaded two months later when
Septimius Severus conquered Rome.
From the end of the Roman Empire to the eighteenth century auctions lost favor in Europe,
while they had never been widespread in Asia.

Types Of Auction:
 Without Reserve Auction: An auction in which the goods may not be withdrawn
unless no bid is received within a reasonable time. These words are frequently used in
conditions of sale at public auction, that the property offered, or to be offered for sale,
will be sold without reserve. A term applied to a sale by auction, indicating that no price
is reserved. 2. When a property is advertised to be sold without reserve, if a puffer be
employed to bid, and actually bid at the sale, the courts will not enforce a contract
against a purchaser, into which he may have been drawn by the vendor’s want of faith.
This phrase, used in making a qualified indorsement of a negotiable instrument,
signifies that the Endorser means to save himself from liability to subsequent holders,
and is a notification that, if payment is refused by the parties primarily liable, recourse
cannot be had to him.
 With Reserve Auction: An auction in which the auctioneer may withdraw the goods
at any time before he announces the completion of the sale. Reserve auction is an
auction where the item for sale may not be sold if the final bid is not high enough to
satisfy the seller; that is, the seller reserves the right to accept or reject the highest bid.
In these cases a set 'reserve' price known to the auctioneer, but not necessarily to the
bidders, may have been set, below which the item may not be sold. The reserve price
may be fixed or discretionary. In the latter case, the decision to accept a bid is deferred
to the auctioneer, who may accept a bid that is marginally below it. A reserve auction
is safer for the seller than a no-reserve auction as they are not required to accept a low
bid, but this could result in a lower final price if less interest is generated in the sale.

LITERATURE REVIEW:
The concept of auctions has existed for many years, but the research literature on auction theory
expanded dramatically after the seminal paper by Vickrey (1961). Since then, a rich set of
related literature, both theoretical and empirical, has evolved. Auctions use the market
mechanism to solve the most difficult business problem, that of pricing the product. With an
auction, there is no guesswork for setting up a right price for the product or service, since the
price is set by the market.
Auction-based pricing is sometimes referred to as "dynamic" or "fluid" pricing, in contrast to
set or static pricing mechanisms.
In a traditional marketplace, auctions can be of the open-bid or closed-bid type. Classification
into open or closed auction bidding is determined by criteria such as specific allocation rules,
revealed number of bidders, commodities, payment options, and phases of delivery. In an open-
bid auction, the bids partially make public each bidder’s private information about the true
value of the contract. Each bidder is thus able to learn from the bidding process and adjust their
bid closer to the true value of the contract.
Cases Related To Auction:
Payne v Cave:
 Facts: Mr Cave made the highest bid for Mr Payne's goods at an auction. But then, Mr
Cave changed his mind and he withdrew his bid before the auctioneer brought down
his hammer.

It was held that Mr. Cave, the defendant, was not bound to purchase the goods. His bid
amounted to an offer which he was entitled to withdraw at any time before the
auctioneer signified acceptance by knocking down the hammer. Note: The common
law rule laid down in this case has now been codified in many countries in variations
of the Sale of Goods Act, e.g. UK 1979 s57(2).
 Judgement: The court held that Mr Cave was entitled to withdraw his offer at any time
before the auctioneer accepted it. The auctioneer's request for bids was an invitation to
treat, and each bid constituted an offer which could be withdrawn at any time until it's
accepted, and finally, the fall of the auctioneer's hammer constituted acceptance of the
highest bid.

Warlow v Harrison (1859) 1 E & E 309:

In this case, the Defendant, an auctioneer, advertised the sale without reserve of a horse by
public auction. The Plaintiff attended the sale and bid 60 guineas. The horse’s owner bid 61
guineas. The Plaintiff refused to make any further bid and the Defendant (who, it appears, did
not know that the bidder was the owner) knocked down the horse to the owner for 61 guineas.
The Plaintiff claimed that the horse was his since he was the highest bona fide purchaser at an
unreserved sale. In his pleadings the Plaintiff alleged that the Defendant was the Plaintiff’s
agent to complete this contract. Held: on the pleadings the Plaintiff had no claim since there
was no agency relationship between the Plaintiff and the Defendant. The pleadings required
amendment.
The sale was announced to be ‘without reserve.’ This, according to all the cases both at law
and equity, means that neither the vendor nor any person in his behalf shall bid at the auction,
and that the property shall be sold to the highest bidder, whether the sum bid be equivalent to
the real value or not. We cannot distinguish the case of an auctioneer putting up property for
sale upon such a condition from the case of the loser of property offering a reward
Upon the same principle, it seems to us that the highest bona fide bidder at an auction may sue
the auctioneer as upon a contract that the sale shall be without reserve. We think the auctioneer
who puts the property up for sale upon such a condition pledges himself that the sale shall be
without reserve; or, in other words, contracts that it shall be so; and that this contract is made
with the highest bona fide bidder; and, in case of a breach of it, that he has a right of action
against the auctioneer.

Harris v Nickerson (1873) LR 8 QB 286:

In this case, the Defendant placed an advertisement in London papers that certain items,
including brewing equipment and office furniture, would be placed up for auction over three
days in Bury St. Edmunds. The Plaintiff obtained a commission to buy the office furniture and
expended time and expense to travel to Bury St. Edmunds to bid for the office furniture. On
the third day, the lots for the office furniture were withdrawn. The Plaintiff sued for loss of
time and expense. The judge at first instance found in favor of the Plaintiff. Leave was given
to appeal to the High Court.
The Plaintiff submitted that the advertisement constituted a contract between themselves and
the Defendant that the latter would sell the furniture according to the conditions stated in the
advertisement, and that accordingly the withdrawal of the furniture was a breach of contract.
The Defendant submitted the advertisement of a sale did not constitute a contract that any
particular lot or class of lots would actually be put up for sale.
The court held unanimously that the advertisement did not constitute an offer, but rather was a
mere declaration of intent. Blackburn, J. founded his judgment on public policy grounds,
calling it a “startling proposition” that “any one who advertises a sale by publishing an
advertisement [would become] responsible to everybody who attends the sale for his cab hire
or traveling expenses”. Quain and Archibald, JJ. also drew public policy arguments,
emphasizing that there existed no authority on which to base a decision that the Defendant be
liable to indemnify all those who attended his auction. The court upheld the appeal.

SEBI V Sahara India Case:

On 26 February 2014, the Supreme Court of India ordered the arrest of Subrata Roy, chairman
and founder of Sahara India Pariwar, for failing to appear in court in connection with the Rs.
24,000 crore deposits his company failed to refund to its investors as per a Supreme Court
order, after a legal dispute with the Indian market regulator SEBI (Securities and Exchange
Board of India). He was eventually arrested on 28 February 2014 by Uttar Pradesh police on a
Supreme Court warrant. In a statement after the arrest, his lawyer said Subrata's 92-year-old
mother was in poor health and needed her eldest son by her side, and hence he failed to appear
at the court. He was granted interim bail by the Supreme Court on 26 March 2014 on the
condition that he would deposit Rs 10,000 crore with SEBI. Subrata was eventually taken into
judicial custody and sent to Tihar jail, along with two other Sahara directors, on 4 March 2014
for failing to deposit Rs 10,000 crore with SEBI. In Tihar jail, Subrata unsuccessfully tried to
sell some of his hotel properties to raise Rs 10,000 crore for his bail bond. He remained in Tihar
jail for more than two years, and was released on parole in May 2016 to attend the last rites of
his deceased mother. The Supreme Court bench of Justice Radhakrishnan and Justice Khehar
ruled in favor of Sebi and orders the two Sahara companies to return to its OFCD investors the
full outstanding amount of over Rs 20,000 crore, along with 15 percent interest, within three
months.
The Supreme Court has declined to stay the auction of Sahara's properties despite the group
claiming to have sold its two New York hotels and that it would generate $1.67 billion against
26% equity in its Aamby Valley property near Pune to pay its dues to Sebi.
The auction notices are to be published globally on August 14. A three-judge bench comprising
justices Dipak Misra, Ranjan Gogoi and AK Sikri rejected Sahara's plea. Senior advocate
Arvind P Datar appeared.
He also claimed the group was in the process of signing a temporary agreement infusing 26%
equity into Aamby Valley from Royal Partners Investment Fund.

Barry v Davies:
 Facts: The auctioneer withdrew goods from an auction (the goods had no reserve
price) when a bona fide bid of £200 was effective. The court held that an auctioneer is
bound to sell to the highest bidder where there is no reserve price, and can't withdraw
the sale simply because the price is too low. A bid in an auction, the possibility of
acceptance of the bid, unless the bid is withdrawn, and the benefit to the auctioneer of
driving up the price bid is sufficient consideration. The contract in an auction is between
the buyer and the seller, not the buyer and the auctioneer, although the buyer has a
collateral agreement with the auctioneer.
 Judgements: The remedy is the difference between the contract value, and the
current market value of the goods under the Sale of Goods Act 1979 s51(3). The value
in this case was £27,600

Heathcote Ball v Barry [2000] EWCA Civ 235:

The claimant had submitted the highest (and only) bids at an auction stated to be without
reserve. The items were two Alan Smart engine analysers which were worth £14,000. The
claimant had submitted bids of £200 each. The auctioneer refused to sell them at that price.
The claimant brought an action for breach of contract claiming damages of £27,600.
Held:
The claimant was entitled to damages. Where an auction takes place without reserve the
auctioneer makes a unilateral offer which is accepted by submitting the highest bid. There was
thus a binding contract and the claimant entitled to damages covering the loss of bargain.
Bibliography:

 Book- Avtar Singh

Bare Act

 Website: https://en.wikipedia.org/wiki/Auction
https://indiankanoon.org/search/?formInput=auction