Sale by Auction

Introduction: A sale by action is a public sale where different intending buyers try to outbid each other.  The goods are ultimately sold to the highest bidder.  The auctioneer who sells the goods by auction is an agent of the seller i.e. the owner. His relationship with the owner of the goods is governed by the general principles of the law relating to agency.

Procedure in Auction Sale:  The usual procedure in case of auction sales is as follows-

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.

The auctioneer in a customary methods the highest bid, i.e. by the fall of a hammer or by using the words "One, Two, Three" or "going, going, gone". The auctioneer thus "knocks down" the lot to the highest bidder.  The highest bid constitutes the offer by the auctioneer.  At this stage, the contract of sale is completed.  Until acceptance, any bidder may retract his bid.  Quit often the auctioneer reserves a right to refuse the highest bid, at his discretion.  Similarly before final acceptance of the bid or falling of the hammer, it is always open to the bidder to withdraw his bid.

Case Law:

Jai Bhavani Timber Vs. State of M.P[1]:            The terms and condition of the auction stipulated that signing of the bid sheet by the bidder was to be done only after auctioning authority accepts the bid.  Court held that the act of the auctioning authority in permitting the highest bidder to sign the bid sheets in respect of their concerned lots amounts to acceptance of their bids.

Conclusion:    The auction sale is considered as a sale for the purpose of Sale of Goods Act and hence falls in Section 4 of this Act.  Supreme Court in number of the cases held that the right of a party in auction sale is governed by Section 64 subject to an express contract or agreement between the parties.

[1] AIR 1992, M.P. 250.