RULES ON AUCTION SALES

1. Each lot is subject of a separate contract of sale

2. Auction sale is perfected when the auctioneer announces its perfection by the fall of
the hammer or in other customary manner.
* Pending announcement:
Any bidder may retract his bid
Auctioneer may withdraw the goods, unless auction is w/o reserve
3. A right to bid may be reserved expressly by or on behalf of the seller, unless
otherwise provided by law or stipulation
4. Notice is essential for the seller or his representative to be able to bid.
By-bidders or puffers: persons employed by auctioneer who will bid w/o being bound but
whose bids will have a tendency to induce or provoke higher bids from interested buyers, thus
misleading the latter because of the inflated bid price.
**It is the secrecy of the puffing and not the authorized bidding by the seller which makes it
fraudulent.

OPTION CONTRACT. A Privilege existing in one person, for which he had paid a consideration,
which gives him the right to buy, certain merchandise or property from another person at anytime
within the agreed period at a fixed price. In case of breach of promise to buy or to sell, injured party
can only seek damages. (See Art. 1479)

Test to Determine whether a Contract is A contract of Sale or An Option. Whether or not the
agreement could be specifically enforced. If such stipulation could be independently enforced
from the contract, then such stipulation is an option.

EARNEST MONEY vs. OPTION MONEY

Earnest Money
It is part of the purchase price
It is given only when there is already a
perfected sale
When it is given, the buyer is bound to pay the
balance of the agreed purchase price
If the sale does not materialize, the earnest
money paid must be returned, unless a
contrary agreement had been stipulated
Option Money
It is given as a distinct consideration for an
option contract which gives the buyer a specific
period within which to purchase the thing
It is given at a time when the sale had not yet
been perfected. What had been perfected only is
the option contract
Even if option money is paid by the would-be-
buyer he is not bound to buy the thing
If the buyer decides not to buy the thing, he
cannot recover the option money he paid as
consideration for the contract of option