AUCTION SALE

Introduction
Auction sale is a way of
marketing goods without the set
price
Bids are taken verbally on the
spot, by phone, by mail, by
telegram, etc
In other words an auction
sale is a public sale to any
 When goods are sold by auction, the
auctioneer gives wide publicity
regarding the time , date and place of
sale
The bidders are also given the
opportunity to inspect the goods
It should however be remembered
that advertisement to sell goods by
auction is not an offer but invitation
to offer
The auctioneer is not bound to sell on
date and time and place announced
earlier
He may postpone or even cancel the
same
 usual procedure in case of
auction auction sales is as follows :-
sales The proposed auction is duly
advertised and a printed
catalogue of the goods
together with the terms of sale
is circulated .
On the appointed day and
time, the intending buyers
assemble and the auctioneer
puts the different lots to
auction and invites bids from
the intending buyers .
Every bid is an offer. The
auction goes in favour of the
highest bidder. The highest bid
is excepted by the auctioneer
in a customary method, i.e., by
 The fall of the hammer constitutes
acceptance of the offer by the
auctioneer. At this stage, the contract of
sale is completed. Until acceptance, any
bidder may retract his bid
Quite often the auctioneer reserves a
right to refuse the highest bid, at his
discretion. Similarly before final
acceptance of the bid it is always open
to the bidder to withdraw his bid
Eg:, A sold a car by auction. It was
knocked down to X who was allowed to
take it away on (i) giving a cheque for
the price, and (ii) signing an agreement
that ownership should not pass to him
until the cheque was cleared. The
cheque was not cleared; but meanwhile
X had sold the car to Z. Held, the
property passed on the fall of the
hammer and Z had a good title
 Important Terms Used In Auction

Knockout agreement: It is sort of tacit

understanding among the intending bidders to
stifle competition by not bidding against each
other in an auction sale. Such agreements are
illegal and the seller can protect his interest
against such agreement by reserving his rights
to bid at the auction or by fixing a reserve price
Damping: Damping is an act to dissuade the
intending buyers from bidding or from raising the
price by pointing out defects in the goods or by
doing some other acts which prevents persons
from forming a fair estimate of the price of the
goods. Damping is illegal and the auctioneer can
 Puffers: Puffer is a person who is employed by
the seller to raise the price by fictitious bids.
Such a person is known as By-bidders or Decoy
Ducks
Implied Warranties In An Auction
Sale:
when an auctioneer sells goods, he impliedly
undertakes following obligations:
He warrants that he has authority to sell goods
He also warrants that he does not know of any
defects in the title of principle
He undertakes to give possession of goods
against price
He guarantees quiet possession of the goods
by the purchases
Rules Of
Auction Sale
The law on auction sale is contained in Sec.64 of the
sale of goods act. According to it, in the case of the
sale by auction following rules apply:
Goods put up for sale lots: where goods are put
up for sale in lots. Each lot in prima facie deemed to
be subject for separate contract of sale [Sec 64(1)]
Completion of sale: the sale is complete when the
auctioneer announce the completion by the fall of
the hammer. Until such announcement any bidder
may retract (withdraw) his bid [Sec 64(2)]. If before
the fall of the hammer any bidder retracts his bid
,the security amount may not be forfeited [zila
parishad v. uday veer singh 1989]
 Sec 64(2) has nothing to do with the effect of the
passing of the property at an auction sale and it
is by virtue of goods being specific in a
deliverable state under sec.20 the property in
such goods passes to the buyer at the completion
of the contract at the fall of the hammer at such
sale (consolidated coffee ltd v. coffee board
1980)where goods are destroyed before the
completion of sale , the loss will fall on the seller
Right of seller to bid: A right to bid maybe
reserved expressly by or on behalf of the seller.
Such right is expressly reserved, the seller or any
one person on his behalf may bid at the auction
[sec 64(3)].
 Sale not notified subject to a right to bid:
where a sale is not notified to be subject to a
right to bid on behalf of the seller is not lawful
(i) For the seller to bid himself or to employ any
person to bid at sale, or (ii) 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[64(4)]
Reserve price: the sale may be notified to be
subject to a reserve or. Upset price [sec 64(5)] It
is a price below which the auctioneer will not
sell. But where the sale is without reserve,
goods will be sold to the highest bidder whether
bid is equal to the real value or not
 Use if pretended bidding: if the seller
make use of pretended bidding to raise
the price, the sale is voidable at the
option of the buyer [sec 64(6)].
Knock out: where a group of person
form a combination to prevent
competition between themselves at an
auction and arrange that only one of
them will bid and that they will dispose of
anything so obtained privately among
themselves, such a combination is called
knock out and it is not illegal (jyoti v.
jhownmull). But if the intention of the
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