Payne v Cave [1789] 3 TR 148

📌 Facts

The claimant put goods up for sale at a public auction. Mr Cave made the highest bid for one of the lots. Before the auctioneer brought down the hammer, Cave changed his mind and withdrew his bid. The auctioneer nevertheless treated him as the successful purchaser.

The claimant argued that Cave was contractually bound to purchase the goods because he had made the highest bid. Cave argued that he had withdrawn his offer before it had been accepted.

📌 Issue

The issue was whether a bidder at an auction becomes contractually bound immediately upon making the highest bid. The court therefore had to determine whether Cave was entitled to withdraw his bid before the auctioneer brought down the hammer.

📌 Decision

The court held in favour of Cave. No binding contract had been formed because he withdrew his bid before the auctioneer accepted it. A request for bids at an auction is an invitation to treat. Each bid made by a bidder constitutes an offer, which may be withdrawn at any time before acceptance.

Lord Kenyon stated:

“The bidder is at liberty to retract his bidding any time before the hammer is down.”

📌 Analysis

The case is a leading authority on contract formation at auctions.

It established that:

• an auctioneer’s request for bids is normally an invitation to treat;

• each bid constitutes an offer made by the bidder;

• a bidder may withdraw the bid before it is accepted; and

• acceptance ordinarily occurs when the auctioneer brings down the hammer.

  
  

The decision applies the ordinary rules of offer and acceptance to auction sales. A bid does not immediately create a contract because the auctioneer has not yet accepted it.

Revocation Before Acceptance

A fundamental principle of contract law is that an offer may generally be withdrawn before it has been accepted. In an auction, the bidder’s offer remains open until the auctioneer accepts it by bringing down the hammer or announcing completion in another customary manner. Therefore, even where a person has made the highest bid, they may still withdraw it before acceptance occurs.

Commercial Practicality

The decision provides a clear and practical point at which an auction contract is formed. Before the hammer falls, bidders may raise, replace or withdraw their bids. Once the hammer falls, the highest outstanding bid is accepted and the parties become contractually bound. This provides certainty for bidders, sellers and auctioneers by identifying a clear moment of contractual acceptance.

Statutory Position

The principle is now reflected in section 57(2) of the Sale of Goods Act 1979. It provides that a sale by auction is complete when the auctioneer announces its completion by the fall of the hammer or in another customary manner. Until that announcement, any bidder may retract their bid.

Further Reading

• Offer and Acceptance Revision Sheet

• What Is an Offer and How Does it Differ from an Invitation to Treat?

• What is a Counter-Offer?