MEANING AND RULES OF AUCTION SALE
An auction sale is a public sale. The goods are sold to all members of the public at large who are assembled in one place for the auction. Such interested buyers are the bidders. The price they are offering for the goods is the bid. And the goods will be sold to the bidder with the highest bid.
An auction sale is the sale of goods through a bidding process and is covered under the Sale of Goods Act, 1930. The process of sale by auction involves the selling of any goods and property of value, in a public gathering where buyers make a bid for the purchase and the sale is made to the highest bidder. Let us understand in detail an auction sale, parties involved, and their rights and obligations.
Auction of goods to the highest bidder among all buyers present at the time. Auction Sale is an economic system where sellers offer goods for sale, and bidders compete with one another, based on the price or quality of the item being offered. Auction Sales can be conducted either through oral or written bidding methods like Dutch Auction (where bids are sealed), English Auction (traditional ), and Online Auction (in which bidders bid via the internet).
Different Types of Auction Sales
- Private Auction: This is an auction sale where the seller and buyers are known to each other.
- Advertisement Auction: In this type of auction, the seller publishes a notice in newspapers or online about the product he wishes to sell through auction.
- Sealed Bid Auction: In this type of auction, potential buyers send their bids to the seller in sealed envelopes. The highest bidder wins the product at the end of the bidding process.
- Live Auction: This is an auction sale where bidders participate live either by attending physically or participating through phone or the internet.
- Sale in lots: Auction Sale where the items are sold in lots or batches.
- First Lot Auction: In this type of auction, each lot is sold to the highest bidder at a time.
- Second Lot Auction: This type of Auction allows for batching of goods into two parts and then offering these as individual lots to potential buyers interested in acquiring them during an auction sale process.
- Auction Sale of Unsold Lots: In this kind of Auction, the seller offers only those lots that he has not been able to sell in first or second lot auctions to interested bidders during an auction sale process.
Rules of Auction Sales:
- Sale Completion: The sale is complete when the auctioneer says it is complete. This can be done by actions also – like the falling of the hammer, or any such customary action. It is one of the most important Auction Sale rules that the seller must complete the sale once a bid has been accepted. In case, he is unable to do so for any reason, he must inform all potential buyers of this before the Auction commences and also refund their money
- Auctioneer: The Auctioneer conducts the Auction Sale by announcing each product being put up for bidding and calling for bids from interested buyers.
- Reserve Price: An auction sale may be subject to a reserve price or an upset price. This means the auctioneer will not sell the goods for any price below the said reserve price. This is the minimum price at which the seller is willing to sell a particular item in an auction sale. If no bidder meets or exceeds this price, then the item goes unsold.
- Bidding Increments: In most auctions, there are predetermined bidding increments that determine how much a can increase her/his bid amount.
- Auction Closing Time: The Auction Sale must have a definite ending time so that all interested buyers are aware of when the bidding process will end.