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Judgment
Coutts Trotter, J.—This case gives rise to a point of law which has been considered from various aspects both in England and in this
country. The facts are these: The appellant in this Court went to an auction and made a bid of Rs. 29,200 which turned out to be the highest bid
that was made, but before the property was knocked down he seems to have discovered that there was a mortgage on the property subject to
which the sale was being conducted. It is not suggested that there had been a concealment about this, but merely that in point of fact it did come to
the knowledge of the appellant only a few minutes after he made this bid and before the hammer fell. As soon as it did come to his knowledge he
attempted - I say attempted because it was not given effect to - to retract his bid, but the auctioneer would not have it and knocked the property
down to him for the figure that he had bid, and it is now sought, on behalf of the owner of the property, to enforce that against him, and the learned
judge has found in favour of that contention.
There is a good deal of authority on this matter and there is authority which, on the face of it, appears to be quite clear. The first case I propose
to refer to is the case of Payne v. Cave (1789) 3 Term. Rep. 148 where the auction was one with the usual condition that the highest bidder should
be the purchaser. There exactly the same thing happened; a bid was made but before the hammer fell it was retracted, and the Court in giving
judgment expressed itself as follows: ""The auctioneer is the agent of the vendor, and the assent of both parties is necessary to make the contract
binding; that is signified on the part of the seller by knocking down the hammer which was not done here till the defendant had retracted. An
auction is not unaptly called locus penitentiac. Every bidding is nothing more than an offer on one side, which is not binding on either side till it is
assented to. But according to what is now contended for one party would be bound by the offer, and the other not, which can never be allowed.
After that was decided Lord St. Leonards in his treatise on Vendors and Purchasers writing in the light of that case says this: ""A condition that no
person shall retract his bidding was originally suggested to me by the case of Payne v. Cave (1789) 3 Term. Rep. and it has now become a
common condition. But I always thought it one that could not be enforced."" Of course Lord St. Leonards at the time he wrote these words was
not Lord St. Leonards but Sir Edward Sugden and I have no doubt that great quantities of particulars and conditions of sale were settled by him,
and what he says amounts to this, - when I have put in a condition against a bidder being allowed to withdraw his bid, I have always been of
opinion myself that it was waste paper.
The next case in which the matter is referred to is the case of Jones v. Nanney (1824) 13 PriRep. 76 There is very little to say about the actual
decision, but it is being relied upon by the respondent in this case because of a certain interpolation on page 99 of some observations made by Mr.
Baron Wood on the first argument; he threw out the suggestion that the solution of the whole matter might be sought not in the ordinary rules as to
offer and acceptance but in the doctrine embodied in Section 17 of the Statute of Frauds.
The next case which I wish to refer to is the case of Freer v. Rimner (1844) 14 Sim. 391 which was before Shadwell V.C. There an estate was
put up for sale under a decree and the estate was subject to a mortgage and the mortgagee through his solicitor consented to the sale. When the
sale took place the solicitor of that very mortgagee attended the sale and made what once more turned out to be the highest bid. He then
purported to withdraw it before the hammer fell but it was sought to hold him on behalf of his client to the contract. The report is very meagre and
it is very difficult to make out exactly on what grounds the case proceeded. There was a condition there that no bidding should be retracted, so
that the very situation Sir Edward Sugden had sought to emphasise had arisen. But all that we are told is this: ""The Vice-Chancellor refused the
motion with costs,"" - that was a motion to declare that the sale was not binding on the mortgagee. - ""on the ground that, as the estate had been
sold with the mortgagee''s consent, his solicitor ought not be allowed to defeat the sale."" I feel very great difficulty in grasping what precisely was
the conception that was intended to base upon it. I do not for a moment say that it is wrong, but it seems to me that it hinted at some kind of
doctrine, whether of estoppel or refusing a person approbation and reprobation in the same breath I do not know, and I see that most of the
judges who dealt with this case have felt a difficulty about it. In no event can it be, as appears to be suggested-by the learned trial Judge, an
authority for the proposition in such a matter as this that there is a difference between a Court sale and a private sale. Apparently in one passage in
the middle of page 23 the learned Judge seems to think that this case establishes such a distinction. The matter is a question of the law of contract
and nothing else, and it cannot matter whether the sale is by a court or by a private auctioneer.
I now come to the case which, if I may say so, has given rise to all these difficulties and that is the very well-known and admittedly very
unsatisfactory case of Warlow v. Harrison (1858) 1 El. & El. 259 It was unsatisfactory for many reasons. In the first place, it ended in nothing,
because the plaintiff was given an opportunity to amend his plaint which he in the end never did, and the three learned Judges, Martin B., Byles J
and Watson B., gave a decision based on one ground, whereas Willes, J. and Bramwell, B., two of the greatest masters of the Common Law who
have ever lived, preferred to rest their judgment on a totally different ground, although they did not go the length of dissenting from the ground
taken by the other learned Judges. The facts in that case were these: A mare was put up for sale and advertised to be sold ""without reserve"". The
plaintiff bid for the horse and was the highest bidder of the lay public as I may call it. But the owner of the horse, to save the horse from going at
that price, made a bid and the horse was knocked down to him for 61 guineas which was one guinea more than the plaintiff''s bid, and thereupon
the latter brought his action against the auctioneer. The three learned Judges I have referred to, Martin B, Byles, J and Watson B., came to the
conclusion that they could found themselves upon what they supposed to have been decided in the case of Denton v. Great Northern Railway
(1859) 5 E. & B. 860. It is to be observed that, whether Denlon''s case was rightly decided or not - and a very great number of eminent members
of the profession have held very strong opinions that it was not - even taking it as it is, it turned out in the end to be a decision founded by the
learned fudges not on contract but on tort. The Court in Warlow v. Harrison (1858) 1 El.& El. 259basing itself on that, found this, that owing to
the contract that the horse should be sold ""without reserve"", there was a binding contract when the last open bid was given, that is to say, they held
that a bid at an auction is not a mere offer which can be revoked before acceptance but really clinched the bargain owing to the clause that the
highest bidder should get the property. That, of course, is only as it were a converse of this case, but the other two learned Judges preferred to put
it on a much narrower ground - one which we are not concerned with in this case at all - namely, that by putting up the horse ""without reserve"", the
defendant, auctioneer, held himself out as having authority to conduct the sale on those terms, namely, ""without reserve"". That obviously he had
failed to do and if was a matter which might well sound in damages to the plaintiff, but it would not make him as upon the other view the actual
purchaser and owner of the horse.
After Warlow v. Harrison (1858) 1 El. And El. 295 there us a series of cases which discuss the problem raised by it. In Harris v. Nickerson
(1873) 8 Q.B. C 286 a gentleman went off to Bury St. Edmunds to attend a sale of certain brewing materials, plant and office furniture, He went
to buy the furniture if he could buy it and when he got to the auction things he wanted to buy were not put up to auction at all but were withdrawn,
and he brought a suit to recover damages for his loss of time and his travelling expenses. The Court held - one is not surprised to learn that no such
action would lie because the suit was such as might lie in the case of everybody who attended the sale for cart hire and travelling expenses and
Lord Blackburn - and that is the real interest in the case - says this: ""As to the case cited: In the case of Warlow v. Harrison the opinion of the
judges in the Exchequer Chamber appears to have been that an action would lie for not knocking down the lot to the highest bona fide bidder
when the sale was advertised as without reserve; in such a case it may be that there is a contract to sell to the highest bidder, and that if the owner
bids there is a breach of the contract; there is very plausible ground at all events for saying, as the majority of the Court thought, that the auctioneer
warrants that he has power to sell without reserve. In the present Case unless every declaration of intention to do a thing creates a binding contract
with those who act upon it, and in all cases after advertising a sale the auctioneer must give notice of any articles that are withdrawn or be liable to
an action, we cannot hold the defendant liable."" I feel the interest of that passage is as being a very clear indication that that very learned and
eminent Judge Lord Blackburn was not by any means satisfied that the first ground of decision in Warlow v. Harrison (1858) 1 El.& El. 295 was
rightly decided but preferred to rest himself on the ground taken by Bramwell, B and Willes, J.
I now come to more recent cases and the first I propose to refer to is the case of Johnston v. Boyes (1893) 1 Q.B. 256 a decision of Mr.
justice Cozens Hardy sitting alone. That was a case which came to nothing so to speak, because the plaintiff''s case failed on the ground that he
was not a bona fide bidder at all as he was a pauper from whom no auctioneer would accept a cheque in payment of the deposit. But the learned
Judge was prepared to deal with the case on the footing that if the property is to be sold on the terms contained. In a printed form then the person
who makes a bid may be taken to have accepted the offer in terms of those conditions, and in coming to that conclusion he based himself on
Warlow v. Harrison (1858) 1 El.& El. 295 and also on Carlill v. Carbolic Smoke Ball Co. (1899) 2 Ch. 73. With the greatest respect to so
eminent a fudge I do not think that Carill''s case has really any bearing on a matter of this kind because, notwithstanding that there was an offer on
the part of the defendant company, the only matter under discussion was whether what the plaintiff in that case, Mr. Carlill did, amounted or did
not amount to an acceptance of that offer, and there was no question as to which was offer and which acceptance, which is the whole point in this
case. The point is, is the person who bids at such an auction making an offer or is he accepting an offer which is outstanding before him?.
The next case is Mcmanus v. Fortescue (1907) 2 K.B. 1 decided by Collins M.R. Cosens-Hardy L.J., who had been a party to the judgment in
Johnston v. Bcyes (1893) 1 Q.B. 256 which I have just referred to, and Fletcher Moulton, L.J. That was a case of sale by auction subject to
reserve and by a slip the auctioneer knocked down the property to the plaintiff at a figure lower than the reserve price. The Court held that
everything that happened was subject to the condition that the reserve price should be reached and that as the purported sale took place before
the reserve price was reached it conferred no rights upon the purchaser; and the Master of the Rolls alluded to an earlier case, Rainbow v.
Howkins (1904) 2 K.B. 322.That was another case of slip by an auctioneer putting up a pony on which a reserve price had been put stating by
mistake that the sale was without reserve; and a suit was brought for delivery of the pony or for damages for breach of warranty of authority to sell
without reserve. The learned Judges held that no case could possibly lie on the sale because there was no memorandum of the purchase that would
satisfy the requirements of the Statute of Frauds. As regards the claim for damages for breach of warranty, they held that there was no breach of
warranty because the principal would have been bound by the action of his agent the auctioneer in knocking down the hammer; and that even had
the principal been sued, the same difficulty would have arisen, natnely, the mistake of the agent, but as the principal would have been bound there
was no breach of warranty of authority. But with regard to that case Collins M.R. says this: ""With regard to the case of Rainbow v. Hawkins
(1904) 2 K.B. which has been cited in support of the plaintiff''s case, in my opinion it does not conflict with anything that I have said. I do not think
the decision is an authority in support of the plaintiff''s case, but if it could be so treated I should desire to consider further whether it can be
supported. In the view I take of this matter the decision of the learned judge was right and the appeal should be dismissed."" Cozens-Hardy L.J.
points out the distinction between Warlow v. Harrison on the lines of which Mcmanus v. Fortescue was launched and the case directly decided
before them and says that in the latter case the contract was subject to the reserve and that contract had never been broken and that consequently
the plaintiff could have no cause of action.
I now desire to refer to two decisions of this Court. One of them is the case of Agra Bank v. Hamlin (1890) 14 Mad. 235. That was again a
case of a withdrawn bid and the learned Judges decided that the buyer had a locus penitentiae until the actual fall of the hammer. It is quite true that
Muttuswami Aiyar, J. alluded to this fact that there was no condition provided in the conditions of sale, that the bidders should not withdraw their
bids, but the other learned Judge Mr. Justice Best has not preferred to put it on that ground; and the decision proceeded on the broad principle
that a bidding at an auction is merely an offer which can be retracted until it is accepted. Then finally there is a recent decision Raja of Bobbili v.
Suryanarayana Rao 37 M.L.J. 274 a decision of Oldfield and Seshagiri Aiyar, JJ. which emphatically repeats the proposition derivable from the
earlier cases that a bid at an auction is merely a proposal which is not binding until it is accepted. In that case the auction was adjourned and the
person who made the bid died before the auction was resumed; and it was held that the last bid he had made was not one which was binding upon
his estate because it had not been accepted.
Mr. A. Krishnaswami Aiyar in the course of his interesting argument craved in aid the cases which relate to the exercise of options, of which
the really direct and the most familiar are Denton v. G.N. Ry. (1854) 5 E. & B. 860 and Burton v. G.N. Ry. (1854) 23 L.J. Ex. 184. But we do
not think that the analogy is sufficiently close to give us very much assistance. What was really decided in those cases is this, that a person who
undertakes to supply a railway with goods as ordered during a certain period is really making a continuous offer; the moment the railway gives an
order for the supply of goods at the specified rate, protanto there is a fixed and definite enforceable contract, but until such a specification is made
the thing merely remains an offer which can be withdrawn by the person who makes it. In any event, the railway company could always write and
say, ""We do not intend to give any further order sunder this document,"" and against such action there could be no remedy at all. It appears to us
that it only introduces confusion into matters of this kind to talk about a unilateral contract. Take the option cases. They do not mean that one
person is bound and not the other and that consideration has only passed I from one side or is expected to pass to the other. That would be like
the case of Cooke v. Oxley (1790) 3 Term. Rep. 653. It is perfectly true that if a person agrees to keep an offer open and is paid for doing so it is
a perfectly valid agreement to keep the offer open. On the other hand, in the option cases, there is no consideration to prevent the person who
made the offer from withdrawing it. In such cases there are really two contracts: There is the main contract if it comes to birth and there is the
preliminary collateral contract to ensure, in return for additional consideration, that the offer to enter into the main contract shall remain open and
that the door shall not be closed for the time delimited in the agreement. In the case of Cooke v. Oxley (1790) 3 Term Rep. 653 there was no
consideration. The contract was proposed; the person to whom it was proposed promised that he would keep his offer open to a certain hour of
the day, and before that it was sold to somebody else; there was no independent consideration whatever which could be referred to a promise to
keep the contract open. In the case of such options it will be seen that part of the consideration for the option must be supposed to be the entry
into the original contract. It is very clearly put by the House of Lords in the well-known case of Welby v. Matthews (1895) A.C. 417. That was a
case of a hire purchase agreement. The point on which the case turned was the applicability of Section 9 of the Factories Act, 1889, which gave
the power of conferring title into the hands of a person who satisfied the definition of the Act of being ""a person having agreed to buy goods"". The
person in question, one Brewster, took up a piano on the hire purchase agreement, which has become so familar since that date, on the terms that
he paid so much a month, that he could terminate the hiring by delivering up the piano at any time, but that when and if he had paid a specified
number of instalments within a certain period of time, as from that date it would become his absolute property. What happened was that before he
became the owner he pledged it with a pawnbroker as security for an advance. The question was whether the hirers were entitled to take the piano
away from the pawnbroker or the pawnbroker could set up a right to be protected u/s 9 of the Factories Act. It was held that the pawnbroker
was not protected because the pledger was not a person who had ""agreed to buy goods."" All he had done was to enter into a contract whereby it
was within his power to'' buy the piano if he liked to buy it but which did not bind him to do so. Lord Hershchell says this: I cannot think that an
agreement to buy. ""If he does not change his mind,"" is any agreement to buy at all in the eye of the law. If it rests with me to do or not to do a
certain thing at a future time according to the then state of my mind, I cannot be said to have contracted to do it. It appears to me that the contract
in question was in reality a contract of hiring, and not in name or pretence only."" But I think the analogy as I say of the option cases is very faint and
its only value is as showing this, that you can have the legal right to get something done for you, or given to you, or handed over to you, at your
option, at a future date, and that such an agreement can be so drawn up as to be perfectly valid and binding. All we are concerned with in this case
is to determine whether the bid in auction is to be regarded as the acceptance of the general offer made by the auctioneer as Mr. Krishnaswami
Aiyar would have it, or whether it is merely an offer which is for the auctioneer, as the agent of the vendor, to accept by knocking the property
down. It seems to me that the very word ""bid"" or ""bidder"" is indicative of a person who is making an offer rather than concluding an arrangement.
But apart from that, we think it is quite clear that to take any other view leads to such a complexity of artificial reasoning that it is clearly indicative
that the conclusion is not sound. Mr. Krishnaswami Aiyar was faced with this difficulty that if I bid Rs. 20 and that is called an acceptance and a
contract and if another man bids Rs, 25 the next moment it is another acceptance and another contract and he had to admit that on this tortuous
reasoning it is a contract subject to the condition that what is a good contract at one moment becomes entirely void immediately after. By taking
what is, to my mind, the plain common-sense view, a person who bids at an auction, thereby does not conclude a contract but states an offer by
which, until he withdraws it himself, he becomes legally liable for the amount of his bid. But on the other hand, we think that like all other offers it is
subject to the ordinary incidents of law that, until it is accepted; it is open to the offerer to withdraw it and make it as if it had not been made.
We think that the conclusion come to by the learned Judge is not warranted by the authorities or on principle, and we must allow the appeal
with taxed costs throughout.
Ramesam, J.
I agree.