Generally it is perfectly true that a contract is made once the hammer has fallen. However, this is subject to auctioneer terms and conditions.
The problem arises when, after the hammer has fallen, an under-bidder or potential bidder suddenly realises that he or she has lost his chance and asks for the bidding to be reopened. The auctioneer, for whatever reason, chooses to reopen the bidding. Under protest, the aggrieved purchaser, who thought he had the lot in the bag, re-enters the bidding in order not to lose the lot, and eventually secures the lot at a very much inflated price.
Afterwards, irate, the original bidder complains that the lot was originally knocked down to him at a much lower price, the auctioneer has made a mess of it and the original bidder should rightly have the lot at the original price. What is the position?
Auctioneers’ terms and conditions usually have a clause allowing the auctioneer absolute discretion to re-offer the lot in the event of a ‘dispute’. However, in a number of claims in which I have been involved, there has been a very real argument that there was no ‘dispute’ but that the auctioneer had unilaterally, and therefore wrongly, simply chosen to re-offer the lot.
None of the cases in question proceeded all the way to trial but were they to do so, then much would likely turn upon the judge’s adjudication as to the meaning of the word ‘dispute’ and its application to the facts of the case in hand.
In a famous case which went all the way to the House of Lords, concerning ‘the interpretation of words’, Lord Hoffmann gave a fascinating judgment in which he said:
“The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean…”
So how would the judge interpret the word ‘dispute’ in the context of an auctioneer’s terms and conditions? The debate could be endless on this one – maybe something for the dinner party when the conversation has dried up.
Cases like these emerge for a variety of reasons. One appears to be the idiosyncratic and over-subtle form of bidding by would-be buyers physically in the auction room.
For example, one dealer, anxious to conceal the fact that he was bidding on behalf of a well-known collector, arranged to contact another dealer, also in the room, by mobile phone whenever he wished to bid. The arrangement was that whenever the second dealer’s phone vibrated, he was to bid.
Another reason for disputes perhaps is the difficult position of the auctioneer. While on the face of it the auctioneer is the independent party conducting the sale, auction terms and conditions usually make clear that the auctioneer acts as agent for the seller and, of course, the seller wants the highest possible price. Equally, the highest possible price will benefit the auction house.
Occasionally, these issues do go all the way to trial. In just such a dispute about a bid for a theatre, which ended up in the Court of Appeal, the judge was very disparaging about the aggrieved bidder, accusing him of “rousing himself from his lethargy sufficiently to make some kind of motion with his sales card”. This ‘lazy’ bidder lost the case.
Clear and flamboyant bidding will help in avoiding these disputes.