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CMA Foundation · Fundamentals of Business Laws and Business Communication · Sale of Goods Act, 1930

Sharma Traders puts up 10 lots of old furniture for auction without notifying any reserved right to bid. The seller secretly arranges a friend to bid in order to push up prices on Lot 4. The buyer of Lot 4 learns of it later. What is the position under the Sale of Goods Act, 1930?

The sale is voidable at the buyer's option. When a seller uses pretended bidding to raise the price, the law lets the buyer avoid the sale. The sale is not automatically void, and the buyer may choose whether to affirm or reject it.

  1. AThe sale is void for all lots and no one is bound
  2. BThe sale is valid because the buyer's bid was the highest
  3. CThe sale is voidable at the option of the buyer because of pretended bidding by the sellerCorrect
  4. DThe sale is valid, but the buyer can claim only a refund of the auctioneer's commission

Explanation

Section 64(6) states that if the seller uses pretended bidding to raise the price, the sale is voidable at the buyer's option. Also, under 64(4), where no right to bid was reserved, the seller bidding is unlawful and the sale may be treated as fraudulent by the buyer. It is not void for all lots, since each lot is prima facie a separate contract under 64(1).

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