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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.
Bibliography
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]
