In the realm of buying and selling goods and services, various mechanisms are employed, depending on the circumstances and interests of buyers and sellers. One notable mechanism is Auction Sales, where goods are sold to the highest bidder through a competitive process.
This public sale is conducted transparently, providing a platform for individuals, businesses, and organizations to acquire goods at competitive prices. An auctioneer oversees the process, accepting bids and announcing the winning bid with the fall of the gavel or any other accepted mode.
Auction Sales in Ghana is primarily governed by the Auction Sales Act, 1989 (PNDCL 230). In this article, we will delve into the intricacies of auction sales, examining how the law regulates its dynamic process and protects all the parties involved.
A. The Auctioneer
An auctioneer is a licensed professional who conducts auctions and manages the process of selling goods or properties to the highest bidder. Their primary role is to facilitate a fair and transparent sale and exercise due care and diligence with the goods or property entrusted to them.
Often, auction sales are mandated by law or the courts when the property of a person needs to be sold to settle a debt owed by that person. For example, a borrower who defaults on their repayment obligation may have their goods sold to pay off the debt. This can be done by the lender suing the defaulting borrower and obtaining a court order for the sale of the borrower’s property. In such situations, the court will appoint an auctioneer to facilitate the sale of the goods.
Once appointed to sell any property by public auction, the auctioneer is deemed an agent of the owner of the goods and is required to act in line with the instructions and in the best interest of the seller.
B. How Public Auction is Conducted
i. Consent of Seller and Notice of Sale
Generally, an auctioneer can only offer goods for sale by auction with the consent of the owner. Before the commencement of any auction, the auctioneer has to display a notice in a conspicuous part of the auction venue containing their full name and residence written in large legible letters, along with a clear description detailing the quality and quantity of the items to be auctioned. This requirement must also be maintained throughout the sale, as outlined in the Auction Sales law.
In addition, the auctioneer is required to give not less than seven days’ notice of sale to the District Secretary of the District where the sale is to take place. Where a court orders the sale of an immovable property such as land to satisfy a judgment debt, at least twenty-one days’ public notice must be given before the sale takes place.
A notice of the sale is required to be given on the day of the sale through any appropriate communication medium in the area.
It is, however, noteworthy that a notice advertising an auction sale is merely a statement of an intention to sell and not a binding contract. Therefore, in the absence of fraud, an intending purchaser has no right to sue if the auction is put off and all the items are withdrawn.
ii. Sale With Reserved Price
As the facilitator of the sale and agent of the seller, the auctioneer is authorized to state the particulars or conditions of the sale by auction. This may be whether the sale is subject to a reserved price, and whether the seller reserves a right to bid.
An auction sale with a reserved price is a type of auction where the seller sets a minimum price, known as the reserve price, below which the item will not be sold. Also, where the court authorizes the sale in connection with the execution of a judgment debt, the determination of the reserved price is done by a valuer appointed by the court. The valuer appointed by the court is responsible for assessing the worth and determining the fair market value of the goods. If bidding does not meet or exceed the reserved price, the item will be withdrawn from the auction and remain unsold.
Auction sales with reserved prices are commonly used for high-value items like art, real estate, or collectibles. They are also used for unique or rare items, where the seller wants to ensure a minimum return. Additionally, items with a specific market value may be sold with a reserved price to protect the seller’s investment.
The auctioneer is not bound to sell the goods to the highest bidder if the bid is below the notified reserved price. The auctioneer may, however, charge fees or commissions, even if the item is withdrawn due to an unmet reserved price.
iii. Sale Without Reserved Price
For reasons such as to clear out the goods quickly, to raise funds for a cause or where the market demand is uncertain, the seller may decide to sell their goods absolutely without stating a minimum price below which the goods would not be sold at the auction.
Where the sale is advertised as a sale ‘without reserve price’, the law presumes that the seller is prepared to sell the goods at the highest price bid at the auction, no matter what the price may be. This is also referred to as absolute auction. Thus, in an absolute auction, the highest bidder would be entitled to buy the goods at the price bid, whether the auctioneer accepts his bid or not.
Additionally, section 17 of the law provides that where the auction sale is advertised as a sale without reserve, neither the owner nor his agent can bid at the auction and the auctioneer cannot knowingly accept such a bid.
In a court-authorized public auction, the sale becomes absolute unless the court receives an application within 21 days to set it aside. The application must show that a significant error occurred during the sale that caused harm to the applicant. If no application is made, the court has to make an order to confirm the sale, transferring ownership of the goods to the highest bidder.
Auction sales are one of the ways by which sellers and buyers engage in a transaction in a transparent and competitive manner. They provide a somewhat fair means of trading goods and services, promoting market-driven prices and efficient allocation of resources. The processes and requirements are clearly outlined, so as to ensure a level playing field for all participants.
The sale can be subject to a reserved price or maybe an absolute auction where no minimum price is stated, offering flexibility and options for sellers.
It is therefore important for both buyers and sellers to get themselves abreast with the processes and the types of auction sales, so as to determine whether and when to sell or purchase goods through public auctions. By doing so, they can make informed decisions and achieve their desired outcomes. Moreover, understanding auction sales can also help sellers optimize their pricing strategies.
Alhassan Aboagye on behalf of OSD & Partners
