Payne v Cave [1789]: A Quick Summary

Case name & citation: Payne v Cave [1789] 100 ER 502; [1789] 3 TR 148

Year of the case: 1789

Jurisdiction: High Court, England and Wales

Area of law: Offer and invitation to treat

What is the case about?

This is an old English contract law case that deals with the provisions of offer and acceptance in an auction-for-sale situation. What constitutes an offer and what constitutes its acceptance? Until what time can an offer be revoked in auctions? The case answers these questions.

Facts of the case (Payne v Cave)

In this case, the defendant, Mr. Cave was the buyer and he placed the highest bid for an item at an auction sale. But Mr. Cave afterward changed his mind. He decided not to purchase the item and he withdrew his bid before the auctioneer put down the hammer.

It was argued that there was a completed contract and that the defendant had to pay for the goods.

Issue raised

Was a contract formed when the defendant placed the highest bid?

Was Mr. Cave liable to purchase the item/goods?

Judgment of the Court

The Court decided in favor of the defendant. He was not bound the purchase the goods.

In light of the fact that Mr. Cave withdrew his bid before the auction was deemed to be over and that he had every right to do so at any time before then (i.e., before the hammer falls), it was decided that his withdrawal was valid. He was exempted from being obligated to purchase the items.

Governing rule behind the decision

An auctioneer’s request for bids/tenders is not an offer but an invitation to treat. Rather offers are made by bidders in response, which may or may not be accepted by the auctioneer.

Thus, in a sale by auction, bids are treated as offers. And the bidder is entitled to withdraw a bid at any time before its acceptance is signified by the auctioneer by the fall of the hammer.

The following points may be important here:

1. Every bid in an auction is nothing more than an offer.

2. Acceptance takes place when the hammer falls.

3. Thus, any bid (including the highest bid) can be withdrawn by the bidder before the hammer is put down.

Key Note: It may be noted that the common law rule laid down in the given case has been codified under Section 57(2) of the Sale of Goods Act, 1979 (UK).

Since, in the given case, Mr. Cave withdrew his offer before the auctioneer accepted it by putting down the hammer, he was not liable to purchase the goods. And there was no contract.

The legal point emerging from “Payne v Cave”

Both parties are free to withdraw from negotiations at any point before there is acceptance because there is no legal obligation until a contract has been formed.

List of references:

You might also like:

M	T	W	T	F	S	S
			1	2	3	4
5	6	7	8	9	10	11
12	13	14	15	16	17	18
19	20	21	22	23	24	25
26	27	28	29	30