Contracts underpin an auction process

1- Contract between bidders inter se. (Clark v Dunraven, The Satanita (1897)

If the yacht was damaged as a result of negligence the negligent party must pay all the damages. 

Held: By entering the race, the competitors entered into contract with each other on Yacht Racing Association terms. (All damages to be paid by the person disobeying the rules).

Note: When a bidder attends an auction and acquires and auction catalogue which contains the auction house terms and conditions, each bidders individually enter into contract with all the other bidders.       

2. Contract between the auction house and each bidder

In terms of consideration the auction house enters into a separate auction contract with each of its fellow bidder. 

When a bidder take part in auction he will provide a more competitive environment which helps force up the price and provides the auction house the opportunity to earn its commissions. 

3- seller/bidder sale contract


Contract between seller and the successful bidder.

4.Collateral contract between auctioneer and highest bidder

In an auction without reserve the auctioneer makes an offer to sell the lot and that offer is accepted by the bidder who makes a highest bid at the auction. 

In Warlow v Harrison (1859)

It has been held that obiter, no contract of sale can materialise between the owner and of the goods and the highest bidder where the auctioneer refuses the sale or for any reason fails to accept the bid of the highest bona fide bidder but a collateral contract is created between the highest bona fide bidder and the auctioneer himself.

Source: Brown, J. and PAWLOWSKI, M.  HOW MANY  CONTRACTS IN AN AUCTION SALE

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