· The sale contract is concluded between the buyer & the seller through the intermediary of the auction house [‘A’].
· The seller is the auctioneer’s consignor [‘C’].
· The seller and C are one person, irrespective of who might be the ultimate beneficiary of the transaction.
· A is the agent of C.
· Therefore, unlike a sale contract which has two parties, the contractual structure in an auction is tripartite.
· The appointment by C of A as agent takes the form of contractual agreement known as an ‘agency agreement’, between A & C.
· This agreement is known variously, as the ‘seller’s agreement’, the ‘consignment agreement’ or the ’agency agreement’.
· The principal purpose of the agreement is to set out what A is authorised by C to do and what the limits of that authorisation are.
· Each auctioneer will have a standard agreement which the seller will be asked to sign, appointing the auctioneer at the seller’s agent.
· So: (i) an artwork is said to be consigned when the seller commits to entrust it to an auction house; (ii) the terms on which he or she agrees to do this are contained in the auction house’s seller’s agreement; and (iii) the ‘seller’s agreement’, is the legal document through which the seller appoints the auction house as his or her agent to market and sell his or her artwork at auction.
· In addition to the express conditions of the agency agreement, conditions are implied by law and custom.
· An agent is the fiduciary of the principal.
· A as bailee, is under a duty to take all reasonable care of goods, and to handle them in accordance with any express instructions given by the bailor.
· Therefore, subject to the terms of the agency agreement, A will be liable for any damage to or loss of the property caused by a failure to take reasonable care of the property or by handling the property in a way which is not consistent with the instructions given to him or her by the bailor, i.e. C.
· The agency contract with A is a ‘contract for the supply of a service’ under section 12 of the Supply of Goods and Services Act 1982.
· It is the duty of A to ensure that a binding contract of sale is created between C and the purchaser.
· Where A carelessly fails to bring about such a contract he will be liable in negligence, e.g. by failing to notice or take a bid from a willing bidder, or where A conducts an auction in such a way that mistakes are made by the parties involved which allows them to avoid the agreement, Friedrich v A Monnickendam Ltd [1973].
· If A describes the goods inaccurately then C will be strictly liable under section 13 of the Sale of Goods Act 1979 [‘SGA 1979’], and insofar as the misdescription resulted from A’s negligence, A will be obliged to indemnify C against any loss.
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