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Title of the project

AUCTION SALES
Submitted by

SAGAR GUPTA Division A Roll NO 07. Class BBA.LL.B OF

Symbiosis Law School, NOIDA Symbiosis International University, PUNE In NOVEMBER, 2011 Under the guidance of Amit Kumar Mishra Designation and official address of research guide Symbiosis Law School (Off Campus Centre of Symbiosis International University) Sector- 62, Block-A, Plot No-47/48, Noida-201301 U.P.-India Ph: +91 (0) 120 2405061,63. Fax: 0120- 2405064, Website: www.symlaw.edu.in

CERTIFICATE

The project entitled AUCTION SALES submitted to the Symbiosis Law School, NOIDA for SPECIAL Law of Contract as part of internal assessment is based on my original work carried out under the guidance of Mr. Amit Kumar Mishra from August to November. The research work has not been submitted elsewhere for award of any degree. The material borrowed from other sources and incorporated in the thesis has been duly acknowledged. I understand that I myself could be held responsible and accountable for plagiarism, if any, detected later on.

Signature of the candidate Date: 16-11-2011

ACKNOWLEDGEMENT It is a great pleasure for us to put on records our appreciation and gratitude towards Dr. C.J. Rawandale, Director for his immense support and encouragement all through the preparation of this report. We would like to thank my faculty Mr. Amit Kumar Mishra(Project Guide) for his valuable support and suggestions for the improvement and editing of this project report. Last but not the least, we would like to thank all the friends and others who directly or indirectly helped me in completing our project report.

SAGAR GUPTA (B.B.A.LL.B,)

INDEX
The first few pages of the areas under: Page 1 Page 2 Page 3 Page 4 Page 5-10 Title page Certificate signed by candidate Acknowledgement Index INTRODUCTION

Page 10- BIBLIOGRAPHY

SALE BY AUCTION:
What is Auction Sale?
An auction is a sale by competitive bidding normally held in public at which prospective bidders (purchasers) are invited to make successively increasing bids for the property which is then sold to the highest bidder. An auction Sale is different from a sale by fixed bidding i.e. where offers are made by sealed tenders where each bidder must specify a fixed amount and has no opportunity to adjust his bid by reference to rival bids. Section 57of the Sale of Goods Act, 1979 lays down some of the special rules to govern auction sales.

CONDITIONAL AND UNCONDITIONAL AUCTION SALES:

Auction sales may be conditional as well as unconditional i.e. auctioneer may prescribe his own terms and conditions on the basis of which the property is exposed to sale by auction. The acceptance of any bid as well as the passing of property in the goods sold would be governed by those terms and conditions. This is known as conditional auction sale. On the other hand in the case of auction of chattels the auction is unconditional as in respect of specific ascertained goods and nothing remains to be done to the goods for putting them in a condition ready for delivery, the property in such case is transferred to the purchaser upon the acceptance of the bid.

COMPLETION OF AUCTION SALE:

Where goods are put up for sale by auction in lots, each lot is prima facie deemed to be the subject of a separate contract of sale. An auction is sale is completed when the auctioneer announces its completion by the fall of a hammer or in some other customary manner and until then any bidder may retract his bid. At the announcement of closure of bid a contract of sale comes into existence and the parties are assumed to be in a relationship of a promisor and promisee in an executory contract. However if the bidder retracts his bid after the hammer is fallen then the security amount is liable to be forfeited1 1. It also follows that neither any display of lot nor any request made by the auctioneers feeds as an offer which is capable of being accepted even by the highest bidder, but mounts only
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Zila Parishad Muzaffarnagar v Udai Veer Singh AIR 1989 ALL 64,( 1989) 15 LR 42 (1989)

to an invitation to treat. Each bid is expected to be an offer which the auctioneer acting as an agent is of the seller is free to accept or reject. In a contract of auction sale the signature of competent authorities on the bid sheet is not essential because the auction may be concluded by the competent authorities by allowing the highest bidder to sign the bid sheet22. In case where auction is not sought from an authorized person the validity of auction will be cancelled as the contract is not assumed to be complete in the absence of proper sanction33. In case of unconditional contract for sale of specific goods in a deliverable state the property in the goods passes to the buyer as soon as the contract is made and it is immaterial whether the time of payment of the price or the time of delivery of goods or both are postponed (Sec 20 of Sale of Goods act, 1930). In case of sale of chattels the property passes to the buyer upon the acceptance of his bid4 4.

RESERVE PRICE IN CASE OF AUCTION SALE:

An auction may be notified as subject to a reserve or upset price, and a right to bid by or on behalf of the seller may also be reserved as per Sec 57(3) of Sales Of good Act, 1979. If an auction is expressed to be the subject to a reserve but the auctioneer knocks down a lot unmindful of the fact that it is below the reserve price the auctioneer has the right to withdraw his acceptance of the bid. Where a sale is advertised of being without the reserve price the auctioneer and the seller as principal is regarded as having undertaken to sell the goods to the highest bidder55.This does not mean that putting up of the goods is an offer capable of being accepted by the making of highest bid. Section 57(2) states that even in sale without reserve each bid is merely an offer. If the goods are withdrawn before the auction is complete then
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the auctioneer who withdraws the goods in these circumstances is

Jai Bhawani Timber v State Of Madhya Pradesh AIR 1992 MP 250 (State Of Madhya Pradesh v GL Patel AIR 1997 MP 74)

Agricultural Market Committee v Shalimar Chemical Works ltd (1997) 5 SCC 516.

Warlow v Hurrison (1859) 1 E & E 309

likely to be liable under collateral contract with the highest bidder that the sale will be without reserve or of a warranty by the auctioneer that he has the authority to sell without reserve and may be required to pay damages to that bidder calculated according to the market value of the goods 6. Where a right to bid by or on behalf of the seller has been reserved; if that right is not notified then it is not lawful for the seller or his agent to bid or for the auctioneer knowingly to accept such a bid as stated under Sale of Goods Act, 1979 Sec 57(4). A sale in breach of these rules may be treated as fraudulent by the buyer under section 57(5).7

PASSING OF PROPERTY AT AUCTIONS:

Once the property has been passed in an auction sale, no right of disposal over the goods may be reserved68. The place of passing of property will be the place where the purchase money is paid and delivery notes are obtained. The goods may actually have been kept at another place and so the actual physical delivery may take place at some other place7 9. The statutory rights regarding auction sales are subjects to the contrary. In case of counter and auction sales the agreement to sell and passing of property take place simultaneously.

HIGHEST BID FALLING SHORT OF RESERVED PRICE:

In case where some reserved price has been fixed notwithstanding the fact that the highest bid has been accepted by the auctioneer and that the sale relates to specific or identifiable goods no contract comes into existence if the highest bid so accepted falls

In case of BARRY V HEATHCOTEBALL & CO LTD {2001} 1 ALL ER 944 it was held that an

advertisement will take place is merely an invitation to treat and the auctioneer will not be liable in contract if it does not take place.

In case of THORNETT V HAINES (1846) 15 M & W 367 it was held that the contract would

appear to be voidable for fraud and void for illegality.

(Consolidated Coffee Ltd v Coffee Board Bangalore, AIR 1980 SC 1468). (A V Thomas v Deputy Commissioner of Agricultural Income tax and Sales Tax Trivandrum AIR 1964 SC 569)
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short of the reserved price and the property in the goods will not pass. (Consolidated Coffee Ltd v Coffee Board Bangalore, AIR 1980 SC 1468).)

MODE OF PAYMENT:
In case of auction sale depositing certain amount with the auctioneer by the highest bidder under the terms of sale, partly in cash and partly by issuing a cheque is as good as payment in cash. The seller can accept cheque if he is satisfied about solvency of the bidder8.10

SELLERS RIGHTS IN AUCTION SALES

Sellers Right to Bid: A right to bid may be reserved expressly by or on behalf of the seller and where such right is expressly so reserved the seller or any one person on his behalf may bid at the auction Sec 64(3). However if the sale is not notified to be subject to a right to bid on behalf of the seller, it will be unlawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person and any sale contravening this rule may be treated as fraudulent by the buyer (Sec 64(4)). The sale may be notified to be a subject to a reserved or upset price. A sale without reserve is one which is made to the highest bidder.11 Sellers Right to Accept Lower Bid: A seller has the liberty of choosing the bids as in case of sale by tender.12A seller is not bound to accept the higher bid or any bid at all. A lower bid may be accepted where the conditions may provide so. However, an offer of some amount or percentage over and above the highest offer is untenable13

(Mohideen Bi v Khatoon Bi AIR 1996 Mad 435). (Horden House Pty Ltd v Arnold [1989] VR 402 at 404 J.Gobbo stated if the purchaser was not the highest bidder this does not avoid the sale) 12 (The Coffee Board, Bangalore v Famous Coffee and Tea Works, Coimbatore AIR 1965 Mad 14) 13 (Amco Traders v West Bengal State Electricity Board AIR 1990 CAL 18)
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ROLE OF AUCTIONEER
At the conclusion of bidding at a genuine auction there may be a dispute as to who was the highest bidder. To deal with this it is customary to include in auction particulars a clause giving the auctioneer an absolute discretion to settle the dispute or re-offer the lot. The auctioneer is the agent of the seller and against the latter has a lien over the goods for his commission and expenses and can sue the buyer in his own name for the price. It has been held that the auctioneer undertakes that he has authority to sell the goods, that he knows no defect in the title of his principal, that he will deliver the goods to the buyer in return for the price and that the buyers possession will not be disturbed either by his principal or himself. An auctioneer has no usual authority to give a warranty, to negotiate, to sell by private treaty even at a price higher than the reserve or to rescind a sale. Bidders are bound by the terms and conditions of the particulars, in the absence of misleading ambiguities, but exclusion clauses in the particulars may be neglected by oral assurances given by the auctioneer at the sale. If the auctioneer is instrumental in selling goods to which his principal does not have title the auctioneer is liable in conversion to the true owner.

LEGISLATIONS CONCERNING THE OPERATION OF AUCTIONS:

An auction sale is not a consumer sale for the purpose of controls on exemption clauses. Where exemption clauses operate the seller may recover the goods or the loss he has suffered. Further the Parliament has acted to prevent anti competitive and deceptive practices which interfere with honest competitive bidding at auctions. The most serious practice takes the form of the operation of Auction Ring. The practice involves a group of bidders agreeing prior to an auction to caste their bid in a particular way. As a result of this arrangement the property is knocked down to the member of the ring at undervalue. In case where an auction has been tainted by the operation of an auction ring the seller may recover the goods or the loss he has suffered.

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BIBLIOGRAPHY
A) Books Referred: 1) Halsburys laws of India Chapter No.8 (Miscellaneous) Page no: 510-515 Paragraph No.255.269 2) Benjamins Law related to Sale of Goods Act,1979 Page no 98, 99,100,101 Paragraph no.2-003--2-011 3) Encyclopedia of Forms And Precedents Vol.34 of Sale of Goods Page no 53-56 Paragraph No 251-257 B) Citation Of Case Law: 1) ALL INDIA REPORTER a) Zila Parishad Muzzafarnagar v Udai Veer Singh AIR 1989 ALL 64 b) Jai Bhawani Timber v State Of Madhya Pradesh AIR 1992 MP 250 c) State Of Madhya Pradesh v GL Patel AIR 1997 MP 74) d) Consolidated Coffee Ltd v Coffee Board Bangalore, AIR 1980 SC 1468) e) A V Thomas v Deputy Commissioner of Agricultural Income tax and Sales Tax Trivandrum AIR 1964 SC 569). f) Mohideen Bi v Khatoon Bi AIR 1996 Mad 435). g) The Coffee Board, Bangalore v Famous Coffee and Tea Works, Coimbatore AIR 1965 Mad 14)

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h) Amco Traders v West Bengal State Electricity Board AIR 1990 CAL 18) C) SUPREME COURT CASES a) Agricultural Market Committee v Shalimar Chemical Works ltd (1997) 5 SCC 516 b) Consolidated Coffee Ltd v Coffee Board Bangalore, AIR 1980 SC 1468 (1980) 3 SCC 358. [1980] 3 SCR 625 D) ALL ENGLAND REPORTS 1) BARRY V HEATHCOTEBALL & CO LTD {2001} 1 ALL ER 944 2) ( Horden House Pty Ltd v Arnold [1989] VR 402) 3) Warlow v Hurrison (1859). E) ACTS 1) SALE OF GOODS ACT,1979 2) SALE OF GOODS ACT,1930 14 3) INDIAN CONTRACT ACT, 1872

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