Rules of Auction Sales

Introduction: The law on auction sales is contained in Section 64 of the Sale of Goods Act, 1930.  According to it in case of a sale by auction the following rules apply-

• Goods put up for sale in lots:

In Section 64(1) of Sale of Goods Act, 1930 said that goods put up for sale in lots, each lot is prima facie deemed to be subject of a separate contract of sale.

• Completion of sale:

Section 64(1) of Sale of Goods Act, 1930 said that the sale is complete when the auctioneer announces its completion by the fall of the hammer or in some other customary manner like "one, two, and three" or "going, going, gone".  Until such announcement any bidder may retract, without revoke his bid. If before the fall of the hammer any bidder retracts his bid, the security amount may not be forfeited.

• Right of seller to bid:

Section 64(3) of Sale of Goods Act, 1930 said that a right to bid may be reserved expressly by or on behalf of the seller.  Where such right is expressly reserved, but not otherwise, the seller or any one person on his behalf may bid at the auction.  Secret employment of even one puffer, a person employed to bid at an auction to incite others and raise prices, is fraudulent unless a right to bid expressly reserved and even in that case, the employment of the second puffer is fraudulent.

• Sale not notified subject to a right to bid:

Section 64(4) of Sale of Goods Act, 1930 said that where a sale is not notified to be subject to a right to bid on behalf of the seller, it is not lawful

1. For the seller to bid himself or to employ any person to bid at such sale,
2. 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.

• Reserve Price:

Section 64(4) of Sale of Goods Act, 1930 said that the sale may be notified to be subject to a reserve or upset price.  It is a price below, such the auctioneer will not sell.  Where the sale is subject to a reserve price, every bid is accepted conditionally on the reserve price being reached.  But where the sale is without reserve, the goods will be sold to the highest bidder whether the sum bid is equal to the real value or not.

• Use of pretended bidding:

Section 64(4) of Sale of Goods Act, 1930 said that if the seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the buyer.