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Auctions are generally invitations to treat.

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Auctions are generally invitations to treat. In an auction the auctioneer acts as an agent for the owner of the lot and when the winning bid is accepted, a collateral contract is formed between the auctioneer and the winning bidder. (McKendrick 2013:75)

In regards to the 1990 Vauxhall, the advertisement of the auction is considered as an invitation to treat. The effect is that by advertising at auction he is inviting potential buyers to make offers and he will signal his acceptance of the highest bid by fall of the hammer (British Car Auctions v Wright 1972).

The rights of consumers are also protected under common law. The rules in relation to auctions are set out clearly in Section 57(2) Sale of Goods Act 1979. The exception to this is found in S.57 (3) Sale of Goods Act 1979 where it states that a condition for sale may be subject to  “a reserve or upset price, and a right to bid may also be reserved expressly by or on behalf of the seller.” (Legislation.gov 2013)

Furthermore, it is illustrated in (Warlow v Harrison 1859) that auctions without reserve are freely offered on the simple criteria that the highest bidder will be the winning bidder and the auctioneer will be bound by the agreement to complete the contract with this person. (McKendrick 2013:76)

The circumstances are similar to the case Barry v Davies (trading as Heathcote Ball & co) (2000). In this case, Barry sought damages from Davies for refusing to accept his bid for two analysing machines in a “no reserve” auction. It was held that the auctioneer had made a collateral contract with the highest bidder which he had then breached by refusing the sale. The auctioneer as an agent has no implied right to incorporate terms into the sale. Also Sir Murray Stuart –Smith also held that the auctioneer, by refusing the highest bid in a no reserve auction is the same effect as breaching Section 57 (4) Sale of Goods Act 1979 where it says inter alia “It is not lawful for the seller to bid himself or to employ any person to bid at the sale, or for the auctioneer knowingly to take any bid from the seller or any such person”. Therefore the auctioneer in the action for the Vauxhall acted against this rule. (McKendrick 2013:76).

One exception where auctioneers can refuse the highest bids is shown in (Warlow v Harrison 1859), “should a dispute arise between two or more bidders the sale shall be determined by the auctioneers who shall have the right of withdrawing lots”. (McKendrick 2013:76)

Paul is likely to be successful in seeking damages for the market value of the Vauxhall.

Advertisements are generally classified as invitations to treat, they cannot lead to a contract alone. And are usually proceeded by further negotiations, offers and acceptance (Gibson v Manchester City Council 1979).  Even when there is a price advertised within the advert, it is still considered to be an invitation to treat and not an offer (Partridge v Crittenden 1968). This general rule protects the offeror in bilateral contracts from breach of contract where they are unable to honour the contract e.g. where they do not have the stock resources to offer the terms to vast amounts of offorees. The exception to this rule is within unilateral contracts, where one party makes a promise to another so long as they complete a specific performance (Carlill v Carbolic Smoke ball co 1893).

The advert that Paul placed in the local newspaper was an invitation to treat, inviting people who are interested in forming a contract to make offers to purchase the car from him. This invitation was first taken up by Alan, who in turn phoned Paul expressing his first offer of £1,250. Then Paul, by then making a counter offer expressing his willingness to accept a bid if it were increased to £1350 terminated the original offer (Hyde v Wrench 1840)

Paul, as the Offeror is entitled to specify the manner in which the Offeree is to expres their acceptance of the offer (Manchester Diocesan Council for Education v Commercial & General Investments ltd 1970). However it does appear as though no method was prescribed in the terms of acceptance. The general rule is that acceptance must be communicated (Entores v MilesFar East Corp 1955) and the contract is formed when acceptance is received.

This is in contrast to the postal rule. With the postal rule, acceptance is expressed when the correspondence is posted rather than when it is received (Adams v Lindell 1818). For the postal rule to apply, the post must go through the postal service and not simply just posted through the letterbox by hand. There is no indication that the letter was posted using the postal service. However if the postal service was used, Paul is bound to the contract with Alan.

In the letter itself, acceptance was expressed unconditionally, and then the acceptance was followed up by the mere enquiry as to whether Paul would be willing to include a tankful of petrol with the price (Stevenson v Mclean 1880)

In addition to this, if Alan did not use the postal service, having not been able to contact Paul over the phone, it could be argued that this amounts to him accepting through silence, which cannot be accepted as a legitimate method for expressing acceptance (Felthouse v Binley 1862)

In regards to Boris, he appears to have completed the bilateral contract sufficiently. After seeing the invitation to treat, he had communicated his offer orally over the telephone which was immediately accepted by Paul.

Offers can be revoked any time before acceptance (Routledge v Grant 1828) although the criteria for this rule also included the communication of the revocation to the offeree. The exception to this rule is where the parties enter into an agreement to keep the offer open (Mountford v Scott 1975). There was no such agreement so the voicemail that Paul left for Alan, notifying him that the offer had been revoked was sufficient.













McKendrick, E. (2013) Contract law – text, cases and materials. 6th edn. Oxford University Press

Legislation (2013) Sale of Goods Act 1979 [online] available from [20 July 2005]


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