Auction Sale Section 64 of Sales Of Goods Act 1930
What Is Auction Sale?
An auction sale is a public sale in which goods or property are sold to the highest bidder. The auctioneer conducts the sale, and potential buyers compete by placing bids. The item is sold to the person who offers the highest price, and this bid constitutes a legally binding agreement.
Rules Relating to Auction Sale of Sale of Goods Act, 1930
Rules of Auction Sale has been dealt in Section 64 of the Sale of Goods Act, 1930 as follows :
- Goods sold in lots - Where goods are put up for sale in lots, each lot is prima facie deemed to be the subject of a separate contract of sale.
- Completion of Sale – An auction sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner, and until then the bidder has the right to revoke or retract his bid.
The words ‘any other customary manner’, takes into account all the manners which may be prevalent to denote acceptance in an auction sale. It may be by shouting one, two, three; or shouting going, going, gone, etc.
A bidder can withdraw his bid before the acceptance of his bid is symbolized by fall of hammer. If he does so his security amount cannot be forfeited. But, if he does so after the fall of the hammer, that amounts to a breach of the contract and his security deposit will become open to forfeiture.
Fall of hammer does not mean property passess to the highest bidder - In Consolidated Coffee Ltd. V. Coffee Board, Bangalore (1980), the Supreme Court has pointed out that the function of the fall of hammer or of any other customary manner of acceptance is only this that a contract of sale comes into existence and the parties get into the relationship of promisor and promisee. Section 64(2) does not deal with the question of passing of property. It merely deals with the completion of the contract of sale.
If the conditions of sec. 20, namely, the goods should be specific and in a deliverable state, are satisfied, the property in such goods passes to the buyer at the completion of the contract by the fall of the hammer.
- Seller may reserve right to bid – The seller may explicitly reserve his bidding rights in the auction sale. He can do so by giving prior notification. If right to bid has been reserved by the seller, he or any person on his behalf can bid at the auction.
- When right to bid not reserved – When the seller does not notify the right to participate in the bid. Both the seller or his representative cannot take part in the bid.
In spite of the absence of any right, if the seller participates in the bid or the auctioneer takes the bid from the seller purposely, any sale of this kind made to any person shall enable the buyer to treat it as fraudulent.
- Reserved Price or upset price – The seller may notify that the auction will be subject to a reserve or upset price, that is, the price below which the auctioneer will not sell. In such a case the auctioneer is not bound to accept the highest bid unless it reaches the reserve price.
- Pretended bidding – Pretended bidding refers to a fraudulent practice in an auction where a person or a group of people makes false or sham bids with the intention of artificially inflating the price of the goods being auctioned. This is done to mislead other participants into believing that the goods are more valuable than they actually are, thereby encouraging them to place higher bids.
- If the seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the buyer.
Also Read - Transfer Of Title Sec 27 Under Sale Of Goods Act 1930
Knockout Agreement – Whether Lawful or Unlawful
An agreement among the intending buyers wherein they commit not to bid against each other is a knock-out agreement. It is also known as ring agreement, as the bidders may form a “ring” and refrain from bidding in competition with each other in order to depress the price.
In Jai Bhavani Timber v State of Madhya Pradesh (1992), SC held that knock out agreement is not illegal. It is a sort of a mutual agreement where one dealer agrees not to bid for one item and another for some other item.
Judex Tutorials
Judex Tutorials is a premier Judiciary coaching institute dedicated to prepare law students for judicial services exams. Whether you prefer online judicial classes, offline sessions, or need access to recorded lectures, we offer flexible preparation options. If you like our blog as class notes, follow and subscribe our social media platforms on Facebook, Instagram and YouTube as well.
