What is meant by the phrase “public auction” in the exceptions to section 2 LP(MP)A 1989?

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Anonymous
What is meant by the phrase “public auction” in the exceptions to section 2 LP(MP)A 1989?

What is meant by the phrase “public auction” in the exceptions to section 2 LP(MP)A 1989? Is an online property auction a public auction?

Alan_Riley
Public auctions

Section 2(5)(b) of the Law of Property (Miscellaneous Provisions) Act 1989 states that the formal requirements for contract creation under section 2 do not apply to “a contract made in the course of a public auction”. The contract is made, of course, at the fall of the hammer. A contract made at an auction that is not a public auction (e.g. where only certain persons, or a certain class of persons, are permitted to be present or to offer bids) must comply with the formalities of section 2. So too must a contract made outside of the public auction room.

However, the LP(MP)A 1989 does not define a public auction. Elsewhere, other regulations (e.g. The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (SI 2013/3134)) refer to a “public auction” as a method of sale where (a) goods or services are offered by a trader to consumers through a transparent, competitive bidding procedure run by an auctioneer, (b) the consumers attend or are given the possibility to attend in person, and (c) the successful bidder is bound to purchase the goods or services. But unconnected 2013 regulations are unlikely to be of much relevance to the interpretation of a 1989 Act.

Prior to the 1989 Act being passed, in discussing an exception for auctions, the Law Commission paper from 1987 said (at para 4.11, Law Com 164): “The present law and practice at auctions is that the vendor and purchaser become contractually bound at the fall of the hammer and that the auctioneer signs a memorandum of the terms of the sale as soon as possible after the sale takes place …[We] propose confining [the section 2] exception to public auctions since other forms of auction would still seem to call for the protective functions of formalities.” While the Law Commission could not have contemplated online property auctions, the principle suggested may still be apposite. The 1989 Act exception appeared to have in mind the traditional auction when an exception was being carved out. Without a modern judicial interpretation, a modern, online auction, although available to the public, would not appear to fall within the intended 1989 carve out.

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