Syllabus Revision Program by Islami Jamiat Talba,

For Batch 19-24,

Punjab University Law College.

Subject: Sales of Goods Act (Contract Law - LL.B Part III)

AUCTION SALE

INTRODUCTION:

The exchange of commodity for money is called sale. Selling of goods to highest bidder in public
is called auction sale. There are two main terms involved i.e, auction sale and goods. Auction
sale involves the auctioneer and the bidder who bids higher than the other to buy property or
goods. Auction sale is nothing but selling of goods or property in public sale where buyers gather
in a particular area to buy goods or property. Goods mean anything of value which can be sold.

MEANING AND DERIVATION OF WORD “AUCTION”:

The word “auction” is derived from a Latin word “auctio” which means “to increase”.

DEFINITION OF AUCTION SALE

“Selling of goods or property in a public sale where buyers gather in particular area to buy goods
or property.”.

Page1|8
Session 2021 - 22
“Auction sale involves the auctioneer and bidder who bids higher than the other to buy property
or goods.”

“ An auction sale or a sale by auction is a public sale, where goods are offered to be taken by the
highest bidder. “

“ It is a proceeding at which people are invited to compete for the purchase of property by
successive offers of advancing sums.”

RELEVANT PROVISIONS :

Section 64 of the Sales of Goods Act, 1930.

HISTORY OF AUCTION SALE:

The process or the tradition of the auction is as old as 500 B.C. It can significantly be remarked
in Greece where the women were auctioned for marriage. Women were not allowed to marry if
they did not pass this step of the procedure so attractive maidens were offered there to determine
the price. As the highest bid was found equal or higher than the reserved price women were sold
to that buyer. Later, it brought many changes in the economy of the country and was named ‘Sale
of Goods Act,1930’. There are basically two types of property, movable property and immovable
property. Sale of Goods Act, 1930 specifically deals with movable properties only.

ILLUSTRATIONS :

~A held the auction of a House. B made the highest Bid. But before the hammer was slammed
down by the auctioneer the seller decides to withdraw the property. B cannot enforce the selling
of the property to him.

~ A was the auctioneer in the auction sale. A sold the property at the price below the reserve
price to B. The seller denied selling his property. B cannot claim the property from the seller.

THINGS INCLUDED IN WORD “GOODS” :

• Growing Crops :

Growing crops are the crops which are planted in bulk in the farms or in fields by the farmers.

Page2|8
Session 2021 - 22
• Standing Timber :

The timber trees in which the timber can be cut off and sold.

• Grass :

The thin, green and dense plant which covers most areas of the earth

•Old currency :

It is considered as movable property as it cannot be used to buy goods, it is treated as an antique

item.

•Water :

The water in its natural form in sea, rivers, water streams etc.

•Gas:

Gas is considered as movable property as it expands freely to anywhere and everywhere.

•Electricity:

The electricity power generated to run the day to day usage of it in various sectors and parts of
human life is considered as movable property.

•Trademark:

Unique symbol or sign used to signify a particular brand, company.

•Patent :

It can be described as a license issued by the Government.

•Copyright :

It is a legal right of an individual which is given to protect the unique piece of artwork.

•Share of the Company :

After allotment of the share of the company it is treated as the movable property.

Page3|8
Session 2021 - 22
•Goodwill of the Company :

A company’s reputation or image in the market is an added asset to the company which is also
included under a movable property.

•Stock :

Stock of company which can be divided into shares are considered as movable property.

THINGS EXCLUDED FROM THE WORD “GOODS” :

•Immovable property

•Actionable claim

•Money / Currency

WHO IS AN AUCTIONEER :

“An auctioneer is an agent who is employed to sell at a public auction.”

The auctioneer is an agent of the seller/vendor until the sale is complete by the acceptance of
highest bid. An auctioneer has the implied authority to sign a contract on behalf of both buyer
and seller. The auctioneer can be the seller or his agent. Auctioneer should always be an
authorised person and should act in the benefit of the seller with a bonafide intention.

POWERS OF AUCTIONEER :

•An auctioneer can sign a contract on behalf of both the seller and buyer.

•He is not bound to hold auction sale on the day advertise, as advertisement is an invitation to
offer.

•He is not bound to sell the articles to the highest bidder , except when the sale is without
reverse.

•He can refuse to sell goods on credit or accept payment by means of a negotiable instrument.

OBLIGATIONS OF AN AUCTIONEER :

Page4|8
Session 2021 - 22
When an auctioneer sells goods , he impliedly undertakes following obligations ;

•He warrants his authority to sell.

•He warrants that he knows no defect in his principal’s title.

•He undertakes to give possession against the price paid.

•He undertakes that such possession will not be disturbed by his principal or himself.

WHO IS AN AUCTIONEER PURCHASER :

“ An auction purchaser is the one who is declared to purchase at an auction sale”.

In private auction sale , when the highest bid is accepted and deposit is received by auctioneer ,
the bidder is deemed to be the purchaser and is an auction purchaser.

KINDS OF SALE BY AUCTION :

•Sale without reverse.

•Sale with a condition.

•Sale with a right expressly reserved.

PROCEDURE OF AUCTION SALE :

Section 64 of the Sale of Goods Act 1930, provides rules for the procedure of auction sale.
Where goods are put up for sale in lots , each lot is deemed to be the subject of a separate
contract of sale. The sale is complete when the auctioneer announces its completion by the fall of
the hammer and until such announcement , any bidder may retract his bid. A right to bid may be
reserved expressly by the seller , but it has to be notified. Any sale contravening rule may be
treated as fraudulent by the buyer. The sale may be notified to be subject to a reserved price.

RULES AND REGULATIONS FOR SALES OF GOODS ACT :

Under section 64 of the Sales of Goods Act 1930 , following are the rules for auction sale ;

Page5|8
Session 2021 - 22
•Where goods are put for sale in lots , each lot prime facie is the subject of separate contract of
sale.

•The sale is complete when auctioneer announces its competition by the fall of hammer or in
other customary manner.

•Neither the seller nor any person on his behalf can bid at an auction sale , unless such right is
reserved and notified.

•Sale may be notified to be subject to a reserved or upset price.

•if the seller makes use of pretended bidding to raise price , the sale is voidable at the option of
the buyer.

•Until completion of sale , a bidder is at liberty to withdraw his bid.

•Section 64 A provides that if any customs or excise duties or tax are imposed , increased or
decreased after making of a contract of sale , the seller is entitled to add to the price in case of
any increase in such duties and the buyer is entitled to deduct from the price in case of any
decrease in such duties.

KNOCK OUT AGREEMENTS :

A knock out is an agreement between a group of persons not to bid against each other. Such an
agreement is a valid agreement and is not illegal.

But when such an agreement is intended to cause harm or injury or is intended to defraud a third
person , then it would be void.

DAMPING :

It is an illegal act and entitles the auctioneer to withdraw the property from the auction. It is illicit
or over act of discouraging the would-be purchaser from bidding or from the raising of price by
pointing out defects or by doing some other acts which prevent persons from forming a proper
estimate of the price of the goods or scaring them away by some other devise.

CASE LAWS :

Page6|8
Session 2021 - 22
•COFFEE BOARD VS FAMIUS COFFEE AND TEA WORKS

•MCMANUS VS FORTES CUE

•BOMBAY SALT AND CHEMICAL VS JOHNSON AND ORS.

•BARRY VS DAVIS

•PAYNE VS CAVE

•HARRIS VS NICKERSON

CONCLUSION :

The auction sale is covered under Section 64 of ‘The Sales of Goods Act, 1930’. The Sales of
Goods Act specifically deals with a movable property only. Auction sale can be defined as a
public sale in which various prospective buyers are invited to a particular area where the auction
is to be conducted. There are two main parties involved ; one is the auctioneer who conducts the
auction of a property and the other is the buyer who will bid the highest than any other buyer in
the auction

References and further reading:

• https://www.toppr.com/guides/business-laws/the-sale-of-goods-act-1930/auction-sale/
• https://www.vedantu.com/commerce/auction-sale
• https://www.ma-law.org.pk/pdflaw/Contract%20Act,%201872.pdf (Contract Act)

Prepared by: Khadija Farooq

Team Head: Khadija tul Kubra

Project by Islami Jamiat Talaba, Punjab University Law College

Page7|8
Session 2021 - 22
 BEST OF LUCK … !!

Page8|8
Session 2021 - 22