You and Your Rights

An auction is normally a sale at which goods are sold to the highest bidder. It is governed by the same basic principles relating to the formation of contracts that apply to any other sale, in that there must be an offer to sell and an acceptance of that offer. (See buying and selling.)

Auctions without reserve

If the auction is without reserve, every bid made is regarded as an acceptance of the seller's offer to sell. This means that an agreement of sale is reached every time a bid is made, but this agreement is subject to the condition that if anyone makes a higher bid while the auction of the item in question (the 'lot') is in progress, the prior agreement will fall away and be replaced by a contract to sell to the higher bidder.

If there is no higher price, the knocking down or tapping of the hammer by the auctioneer, who acts as agent of the seller (see representative), indicates that the auction of the lot in question is over and that a contract to sell it to the highest bidder has come about for the price bid.

Once a bid has been made, it cannot be withdrawn without the consent of the auctioneer. If no higher bid is made, the person making the highest bid becomes the purchaser. Likewise, once the auction of the lot has begun, the auctioneer (or seller) may not withdraw it, and even if he or she does, the highest bidder has a right to be regarded as the purchaser.

Auctions with reserve

The situation is different when the sale is with reserve - in other words, when a minimum price is placed on the lot.

When the auctioneer or seller does not disclose the reserve, the lot is put up merely as an invitation to negotiate; each bid is then regarded as an offer by the bidder to buy, which may be accepted or rejected by the auctioneer. Until it is accepted there is no contract. Each offer lapses when a higher offer is made, and acceptance takes place when the article is knocked down to the highest bidder.

Thus the would-be buyer may withdraw a bid at any time before it is accepted, and the seller may decline to accept any bid up to the amount of the uncommunicated reserve, or even withdraw the lot from sale altogether before the amount of the reserve has been reached. It is uncertain whether the auctioneer is obliged to sell to a person who makes a higher bid than an undisclosed reserve amount, but it is arguable that the auctioneer must do so.

When the amount of the reserve is disclosed, the first bid equal to or greater than that amount constitutes an acceptance of the offer to sell.

Conditions of sale

Auctions are usually governed by conditions of sale drawn up by the auctioneer or seller and primarily in his or her interests, not those of the buyer.

The terms on which the auctioneer offers items for sale are usually read out immediately before bidding starts and the potential buyers are then bound by them. It is the duty of bidders to find out the conditions of sale if they were not present at the start of the auction. Thus, a successful bidder for a house who arrived late and did not hear the terms is not permitted to withdraw from the sale because he or she did not know, say, that occupation could be given only after six months.

If there is a catalogue, the conditions are usually printed inside it, but they may sometimes be posted up in the salesroom in the form of a placard or simply read out by the auctioneer, who is legally obliged to draw them to the customers' attention before the sale. After announcing the conditions orally at the beginning of the sale, the auctioneer is not required to repeat them every time another person enters the room. Latecomers, however, will be bound by these conditions, whether they knew of them or not.

Sometimes the sale catalogue states that the sale is subject to the auctioneer's usual conditions, displayed on a notice in the salesroom.

Bargains at auctions are rarer than many people think. Anyone who plans to make a bid should examine the goods carefully beforehand. The guiding principle is caveat emptor - let the buyer beware. Goods sold at auctions are normally second-hand and the conditions of sale usually state that items are sold voetstoots or 'as is'. This means that a buyer who later finds that the goods are defective will have no redress, unless the seller behaved fraudulently, for example, in concealing the defect instead of disclosing it. Even when new goods are sold, the printed conditions of sale normally exclude liability for any defects.

If, however, a warranty has been given that goods have no defects, a buyer who later finds that they are defective, may sue for a reduction in price or cancellation of the sale and compensation.

If there are conditions of sale, the seller is not bound by any warranty or representation made by the auctioneer if that warranty or representation differs from the conditions of sale. The auctioneer may, however, be liable to the buyer for his or her statements.

When an advertisement precedes the sale, the seller is usually bound both by the advertisement and by the conditions of sale, although, if they differ, the conditions will normally prevail.

Bidding at auctions

The bids at an auction can be made verbally or by pre-arranged signs. For example, a buyer who wishes to remain anonymous may have an arrangement with the auctioneer to bid by nodding, by rubbing an eye or by tapping an ear with a rolled-up newspaper.

It is most unlikely that a spectator could, by moving suddenly at the wrong moment, become the owner of a painting or piece of furniture worth thousands of rands. The story of a man who bought a Rembrandt by waving to a friend across the auction-room is apocryphal.

As it is part of an auctioneer's skill to know who is bidding at a given moment, disputes are unlikely to arise over who actually made the final bid for a lot. If, however, there are two bidders of the same amount and it cannot be ascertained who bid first, the auctioneer would be obliged to put the lot up again.

The auctioneer may lay down the condition of starting at a certain level and insist that bids are made in specific amounts. For instance, to save time and to help the bidding reach a reserve price in the sale of a house, the auctioneer may accept bids only in multiples of a thousand rands. As the bids rise, the auctioneer may cut the size of the bid units.

Bidding by a seller

In a sale without reserve, the seller or the seller's agent (see representative) may not bid (that is to say, attempt to push up the price), and if either does so and if the buyer discovers this, the buyer is normally entitled to regard the sale as not legally binding.

Although the auctioneer's duty is to obtain the best price for the seller, this may be done only in legitimate ways. The auctioneer may not employ a 'puffer' - a person who bids to increase the price on a secret understanding arrived at beforehand not to be bound by any bid made for this purpose.

The auctioneer may also not increase the price by means of imaginary bids, nor may a clerk, a crier or any company or partnership of which the auctioneer is a member bid or buy either personally or through another party. If this happens, the buyer can refuse to be bound by the sale.

Bidding by buyers

A buyer who does anything to prevent or deter others from bidding or to induce them to bid lower than they would otherwise have done - for instance, by forming a dealers' ring - commits a fraud upon the seller. A seller who finds out that this has happened is entitled to regard the sale as null and void.When collusion of this kind between buyers takes place publicly, the auctioneer may stop the sale. Indeed, any 'fixing' of an auction by either the bidders or the auctioneer will amount, in most circumstances, to at least attempted fraud, which is a serious criminal offence (see attempted crime; fraud).

Advertising an auction

If an ordinary sale by auction is advertised, it need nevertheless not be held. The advertisement is merely a statement of intent and is not binding on the seller or the auctioneer. Thus, no potential buyer can bring a court action to compel the seller to hold the auction, and a potential buyer's action for wasted travelling expenses when an auction is cancelled would fail.

It is therefore always advisable, to check on the day of the auction whether in fact it is being held.

Selling your home by auction

If you decide to dispose of your home by public auction, you should first consult an auctioneer to find out how much the auction will cost.

In a sale by private treaty you pay noth- ing to an estate agent who does not sell your house, but an auction sale will involve advertising and possibly other costs even if the property is not sold.

If your property has been on the market for a considerable time without attracting a buyer, the price may be too high, but an auction may assist you to obtain an offer, since an auction suggests urgency and is likely to attract attention.

Before the auction you will probably agree with the auctioneer on a reserve price - that is, a minimum price below which the house will not be sold.

Property sold at an auction is usually sold subject to the seller's approval, for which a period of 24 or 48 hours is normally allowed. You therefore have time to consider whether to accept the highest bid made and, if necessary, to consult your attorney about it.

If, however, you do not accept the highest offer, you will still be liable for the auctioneer's fees if the top bid exceeds the reserve price.

There is one exception to the rule that contracts for the sale of land have to be in writing: when land is sold by public auction, the sale agreement is finalised when the auctioneer accepts the highest bid. If, however, the price of land sold by public auction must be paid in more than two instalments over a period exceeding a year, a written contract for the sale of that land must be drawn up, the conditions on which the land is sold must be read out in public just before the auction and the buyer must be given a copy of the contract as soon as the auction is concluded.

The auctioneer cannot rescind or alter the terms of the sale and is not liable for at- tending to the transfer of the property.