CHAR_A01.PDF, page 1-18 @ Normalize ( CHAR_A01.QXD )

The principles of sale by auction were clearly stated by the court in Payne
v Cave (1789) and the case law principles were restated by statute in the
Sale of Goods Act 1979 s.57(2). The law of selling by auction is really an
application of the normal rules of offer and acceptance, in a shopping
situation. The following, then, are the rules:

• The display of goods and the auctioneer’s call for bids are an
  invitation to treat.


• The bids themselves are a series of offers, the eventual highest
  bona fide (genuine) bid forming the offer which stands.


• The fall of the auctioneer’s hammer (or some other customary
  sign) is the acceptance.


• The contract is between the highest bidder and the owner of the
  goods, the auctioneer acting on behalf of the seller.


• Until the fall of the hammer a bidder is free to withdraw a bid –
  this is really revocation of an offer before acceptance.

Auctions (and individual items) advertised ‘without reserve’

This is where there is no minimum (reserve) price on the articles for sale,
so the auctioneer will accept the highest bona fide (genuine) bid. There is
really a second, or collateral, contract between the auctioneer and the
bidders, that whoever becomes the highest bona fide bidder will be entitled
to the goods, whatever the highest bid may be. What if the auctioneer does
not accept this bid?

Offer and acceptance 33

Warlow v Harrison (1859)

In an auction without reserve the highest bidder for a horse turned out

to be its owner. He was not, therefore, the highest bona fide bidder as

the owner of goods is not allowed to bid unless this is declared at the

beginning of the sale. The case failed on a technicality, but the court

laid down (obiter) the principles of the separate, or collateral, contract.

Figure 2.5