• Auctions and the Consumer
  • November 26, 2012
  • Law Firm: Norton Rose Canada LLP - Montreal Office
  • The notorious Auction Alliance case has highlighted the hazards of selling or buying anything by auction. But there are good reasons for selling goods by auction, especially second-hand goods. A sale by auction to a consumer protected by the Consumer Protection Act, excludes the consumer’s statutory right to safe, good quality goods and to return substandard goods, if the auction complies with the requirements of the CPA. There is therefore no better way, for instance, to sell-off unwanted scrap vehicles or equipment belonging to a company. These goods can be sold as they stand without any warranties. How better to dispose of a vehicle that has been standing unused at the back of the yard for two years?

    For good reasons the Consumer Protection Act has strict requirements about the way an auction is conducted. There are no fewer than 15 elaborate regulations setting out the rules for the conduct of an auction. Although the rules prohibit some very old and bad practices they are completely up-to-date and will allow an auction to take place via the internet or other electronic means.

    The elaborate rules are hardly surprising because an unscrupulous auctioneer can distort the outcome of an auction sale. The auctioneer is the agent for the seller and has a personal interest in getting as high a price as possible. Cases in our law reports regarding unlawful practices by auctioneers are as old as the law reports themselves and go back to 1852. Practices include employing a puffer to run up the bids, accepting imaginary bids, knocking the bids down to the auctioneer or an associate, or falsely advertising the auction to push the price up or down to suit the auctioneer or seller. These practices and many more have now been prohibited by the Consumer Protection Act. If, therefore, you want to sell goods for which you do not want to give a warranty of quality you may sell them by auction as is. You may get a lower price because of the nature of an auction or the fact that you pay a commission to the auctioneer. Despite the cost you should employ a professional auctioneer. There is no law against auctioning your own property but don’t do so unless you have got the time and discipline to ensure that all the many restrictive requirements for auctions are complied with.

    If you are the buyer of goods you may be prepared to sacrifice the implied warranty of quality in favour of the chance of getting the goods at a bargain price at an auction. Whether you are a seller or a buyer, make sure the auctioneer is reputable and a person of substance. Auctioneers are personally responsible and liable for seeing that the auction rules are complied with but this will be of little help to the buyer or the seller if it is a straw auctioneer.

    Bear in mind that the exclusion of the warranty of quality does not apply to services sold by auction. But auctions are very seldom used to sell services. The law will not condone a sham auction where you put a few people together in a room and pretend the goods were sold by auction in order to escape warranties of quality. If you conduct an auction at all it has to comply with all the elaborate CPA rules about what happens before, during and after the sale.

    Auctions have their place, auctions have their rules and auctions have their hazards. Consider them all carefully when selling goods, particularly second-hand goods.