Explain auction sales and the rules regarding sale by auction

by • 24/06/2013 • GeneralComments (0)1032

Q.10    Explain auction sales and the rules regarding sale by auction.


Auction sale means a public sale where intending buyer assemble at one place and offer the price at which they are ready to buy the goods. The offer of the price is known as ‘bid’ and the making the bid is known as the ‘bidder’. The owner of the goods may himself sell them by auction or appoint a person to sell the goods by auction on his behalf. The person so appointed is known as ‘auctioneer is that of the principal and agent. In an auction the goods are sold to the highest bidder. It may note that an advertisement to sell the goods by auction is simply an invitation to the public to make offers and not an offer to sell. That is why the intending buyer has no right to sue the auctioneer if auctioneer cancels or postpones the sale by auction.


The various rules regarding sale by auction are given as follows.

(a)        Where goods are put up for sale in lots, each lot is prima pacie deemed to be the subject of a separate contract of sale [Section 64(1)]

(b)        A sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner. For example, by saying one, two and three, or by shouting going, going, gone etc. [Section 64(2)]

(c)        Until the announcement of completion of sale is made, any bidder may withdraw his bid [Section 64(2)]

(d)        A right to bid may be reserved expressly by or on behalf of the seller and where such right is expressly so reserved, the seller or anyone person on his behalf may bid at the auction [Section 64(3)]

(e)        Where is sale 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, and any sale contravening the rule may be treated as fraudulent by the buyer [Section 64(4)]

(f)        A sale may be notified to be subject to a reserve or upset price [Section 64(5)]. The term ‘reserve’ or ‘upset’ price may be defined as the minimum price below which the auctioneer will not sell the goods put up for auction sale.

(g)        If a seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the buyer [Section 64(6)]


(i)         An auctioneer can refuse to accept even the highest bid because ‘bid’ is only an offer, which may not be accepted by the auctioneer.

(ii)        An agreement between the bidders not to bid against each other is called the knockout agreement. Under such agreement, it is agreed that only one person will bid and anything obtained by him shall be shared by all privately. Such agreements are lawful unless the intention of the parties to the agreement is to defraud a third party.

(iii)       Damping, which is intended to discourage the bidders from bidding, is an unlawful act.

(iv)       Puffers (also known as By-bidders or White Bonnets or Decoy Ducks) are persons who are appointed by the seller for the purpose of raising the price. The seller can appoint only one puffer.

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