Academic journal article Nottingham Law Journal

How Many Contracts in an Auction Sale?

Academic journal article Nottingham Law Journal

How Many Contracts in an Auction Sale?

Article excerpt

INTRODUCTION

Making sense of auction sales, in terms of English contract law, is no easy task. Despite the common perception of hammers hitting blocks, signifying the creation of the basic sale contract, (1) a typical auction sale necessarily involves the making of several forms of contract other than the obvious primary sale agreement. The purpose of this article, therefore, is threefold, namely, to (1) examine these various forms of contractual relationship (2) which may come into existence as a result of a traditional (face to face) auction sale; (2) consider specifically the selling of land at public auction with a view to advocating a change in the law requiring the formality of writing for sales contracts of land for both private and public auctions, and (3) compare briefly the contractual elements of an online ascending model of auction sale typified by the eBay phenomenon.

NATURE OF AUCTION SALES

Despite the lack of any formal statutory definition of an auction sale, Halsbury's Laws of England states that "[an] auction is a manner of selling or letting property by bids, usually to the highest bidder by public competition". (3) This is the so-called "ascending bid" form of auction, and this article is concerned predominantly with this type of auction where the same is attended by a group of potential bidders/purchasers.

Auction sales have been around for a long time. (4) Perhaps the most direct historical comparison to current practice of the ascending auction can be traced back to the Roman auction, indeed the word "auction" is derived from the latin augere and auctum, meaning "to increase". (5) In England, according to Harvey and Meisel, chattel auctioning can be traced back to just after the Restoration period. (6) Land auctions in the UK, on the other hand, seem to have become established by the mid-18th century, with the first reported case involving a purported land auction appearing at this time. (7) It is to this period that the first major British auction houses can trace their origins. For example, the first recorded auction at Sotheby's took place in 1744 and Christies was founded not long after in 1766.8 Today, the auction sale is routinely employed in the sale of commodities, plant and industrial equipment, land, artwork, antiques and other personal property. Undoubtedly, this form of sale has become an important aspect of English mercantile practice.

ECONOMIC BENEFITS OF AUCTION SALES

Selling land or chattels by way of auction sale is arguably a more economically efficient way of selling property than by the normal route of private treaty where goods are offered for sale at a fixed price and presented for sale on a "take it or leave it" basis. An auction sale positively encourages a healthy system of barter. Further, because auction sales occur only at a specific time and place, buyers in attendance will be focused on achieving a fair price for the property in question. The atmosphere of competitive bidding can generate potentially a better price than an ordinary open market sale. The auction environment, therefore, creates a window of opportunity for the microeconomic factors of supply and demand to play themselves out in a more intensive way. The presence of two (or more) eager potential buyers can force up the price of the property in question to a figure way above its normal market value.

THE ROLE OF THE AUCTIONEER

An auctioneer acts as an agent of the vendor of the goods or land to be sold at the auction. His role, however, extends beyond simply conducting the auction. In the case of a sale of land, he will act on behalf of the vendor in a similar way to an estate agent involving himself in each step of selling the property from pre-inspection to final contract signing. He may also be a valuer or surveyor. In particular, the auctioneer will normally evaluate the property for sale by auction, gathering and compiling the necessary information for the auction catalogue featuring relevant photographs, descriptions and guide prices. …

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