Source: RTP,Sept2025, 5)a)i)4m,MDTP4, 5)a)i)4m,MTP3,June2024, RTP,Dec2021, ICAI Module, 2)a)ii)3m,MTP1,Sept2025, 5)a)ii)3m,May20254 Marks
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Question Scenario

Rachit arranges an auction to sale an antic wall clock. Megha, being one of the bidders, gives highest bid. For announcing the completion of sale, the auctioneer fall the hammer on table but suddenly hammer brakes and damages the watch. Megha wants to avoid the contract. Can she do so under the provisions of the Sale of Goods Act, 1930?\nOR\nAn auction takes place in Delhi for antique items. It is notified to the bidders that the sale will be completed, only when the hammer of the auctioneer hits the table and he announces "you are the highest bidder". During the auction, L bids for an antique sculpture, worth ` 8 lakhs. The hammer falls, but announcement cannot be made as the auction suddenly stops before the auctioneer can utter any words. It is notified to everyone that there has been an unexpected rise in the market price for that particular sculpture, and therefore, it will not be sold on that particular day. L contends that the auctioneer is bound to sell the sculpture to him at the price he bid because once he bid at the highest price in the auction and the hammer fell, the auction sale was completed and therefore, the auctioneer is under a contractual obligation to sell the sculpture. The auctioneer disagrees. Discuss the validity of L's claim in reference to the provisions of the Sale of Goods Act, 1930.

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Suggested Answer

By virtue of provisions of Section 64 of the Sale of Goods Act, 1930, in case of auction sale, the sale is complete when the auctioneer announces its completion by the fall of the hammer or in some other customary manner. Until such announcement is made, any bidder may retract from his bid.\nIn the instant case, Megha gives the highest bid in the auction for the sale of antic wall clock arranged by Rachit. While announcing the completion of sale by fall of hammer on the table, hammer brakes and damages the clock. \nOn the basis of above provisions, it can be concluded that the sale by auction cannot be completed until hammer comes in its normal position after falling on table. Hence, in the given problem, sale is not completed. Megha will not be liable for loss and can avoid the contract.\nOR\nIn the instant case, the sale of sculpture to L is not complete as only hammer falls but the auctioneer did not announce “you are the highest bidder”. \nTherefore, L’s claim contending that the auctioneer is bound to sell the sculpture to him at the price he bid is not valid as the auction sale was not complete.

Exam Strategy Tip

When answering law questions in the CA Foundation exam, follow the "Provision -> Facts -> Conclusion" structure for maximum marks. Ensure to state the relevant sections where applicable to earn bonus marks from the evaluator.

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