Auction Law

Question 1

Agency

Answer 1

Fiduciary relationship where agent authorised to act on principal’s behalf, by words/actions

Question 2

Who is principal in auction consignment

Answer 2

The consignor ( collector/estate/family) who appoints the auction house.

Question 3

Who is agent in auction consignment

Answer 3

The auction house / sometimes specialist acting on consignor’s behalf

Question 4

What does fiduciary mean in this context

Answer 4

A trust based relationship requiring good loyalty, good faith to avoid conflict of interest.

Question 5

What is conflict of interest?

Answer 5

A real or apparent clash bw an agent’s private interests and their fiduciary duties

Question 6

What is actual authority

Answer 6

authority the principal gives to agent - express or implied.
expressed - written / verbal permission
Implied - authority necessary to carry out the job

Question 7

What is apparent / ostensible authority?

Answer 7

Authority that appears to exist bc the principal’s conduct makes a third party reasonably believe it.
Requirements:
- principal makes a representation about agent’s powers
-Third party relies on it
-Third party changes position ( acts to their detriment)
EG. Auction house gives someone ‘specialist’ status – buyer relies – buyer transacts – house may be bound

Question 7

Ratification

Answer 7

Principal approves an unauthorised act, making it binding as if authorised from the start.

Question 8

Scope of Agency - range of powers of agent under agency agreement

Answer 8

?: Can the agent contract, sell/buy, store/ship, loan property? how long? termination terms?

Question 9

Del Credere Agency

Answer 9

Agent guarantees the third party’s performance ( eg payment) in return for extra commission

Question 10

Core general duties of agent

Answer 10

Care & Skill
Obey lawful instruction
loyalty / avoid conflicts
confidentiality, account for profits

Question 11

What does ‘account for secret profits’ mean

Answer 11

Agent must NOT take undisclosed commission/benefits; must disclose and account to the principal.

Question 12

Why are secret commission serious?

Answer 12

Bc they breach fiduciary loyalty and may trigger repayment, rescission or forfeiture.

Question 13

What is a bailee

Answer 13

Someone with posession of another’s goods and must tae reasonable care of them

Question 14

Why is auction house a bailee

Answer 14

Bc it hold the consigned goods for sale and must safely custody them

Question 15

When is auction house liable for loss/damage

Answer 15

If due to negligence by the house/employees/agents

Question 16

When is it not liable

Answer 16

For misfortune/unavoidable accidents

Question 17

What did Thomson v Christie Manson & Woods show?

Answer 17

A reasonable attribution opinion by a reputable auctioneer may not breach duty of care, even if wrong.

Question 18

What is the duty to obtain the best price?

Answer 18

Auctioneer must use best efforts to promote and sell to maximise outcome for consignor.

Question 19

What must be disclosed to consignor under this duty?What must the auction house warn the consignor about?

Answer 19

Internal disagreements about auctionability/appeal/strategy (e.g., “this won’t perform at auction”).+ Risk of loss of value if the work fails at auction / is impracticable to auction.

Question 20

Cristallina v Christie’s — key breach?

Answer 20

Failure to properly advise + failure to disclose internal doubts; misleading estimates/reserves. - Bad Facts (Non-disclosure of internal disagreement, mismatch between public estimates and private assurances, reserve policy violations, alleged reserve manipulation.)

Question 21

Key commercial rights of an agent?

Answer 21

Right to be paid, reimbursed expenses, indemnified for authorised acts.

Question 22

What is the agent’s “right to retain goods”?

Answer 22

If not paid, agent may keep the principal’s goods until paid (depends on terms/jurisdiction).

Question 23

Can agency be terminated at any time?

Answer 23

Generally yes unless irrevocable—but termination may still be a breach of contract.

Question 24

Valid termination events (lecture list)?

Answer 24

Frustration, death/dissolution, insanity, principal’s bankruptcy.

Question 25

What can continue even after termination?

Answer 25

Apparent authority (third parties may still believe the agent has authority).

Question 26

Agent has authority + discloses they act as agent → who is bound? Agent has authority but does NOT disclose agency → who is bound? Agent has NO authority but claims they do → liability?

Answer 26

Principal + third party are bound; agent usually not personally liable. Agent is bound (principal not liable to third party). Third party can sue agent for deceit or implied warranty of authority; principal not bound.

Question 27

Key clauses in a consignment agreement?

Answer 27

Title warranty - Seller’s promise they own the work and it is free from undisclosed claims/liens., buyer’s premium, fees/expenses, settlement-How/when net sale proceeds are paid to the consignor after fees/expenses., reserves, treatment of unsold property.

Question 28

Basic flow of funds?

Answer 28

Buyer pays auction house → house deducts commissions/fees → pays balance to consignor (+ others if agreed).

Question 29

Why do consignors accept guarantees?

Answer 29

To trade some upside for certainty of sale/price.

Question 30

What is a third-party guarantee?

Answer 30

Third party commits to a minimum price; shares upside if sold; buys if unsold (often pays buyer’s premium).

Question 31

What is an irrevocable bid?

Answer 31

A binding commitment to bid/buy—often part of guarantee arrangements (double horseshoe symbol).

Question 32

What is “caveat emptor”?

Answer 32

“Buyer beware” — buyer must do own inspection/due diligence.

Question 33

Typical buyer obligations in conditions of business?

Answer 33

Own investigation; export/permit compliance; genuine bids; clean funds (AML).