There are few things more thrilling than bidding at an auction, but raising your paddle has very real legal consequences. A case on point concerned a businessman who mistakenly believed that he was acting solely on behalf of a company when he bought two foals at a bloodstock auction for over £320,000.
The businessman was a director of a newly incorporated bloodstock company that he hoped would make a healthy return for investors under an Enterprise Investment Scheme (EIS). He successfully bid for the colts at auction before the company had obtained its EIS advance assurance approval. In the event, that approval was never forthcoming and the company attracted no investors.
After the company failed to pay for the colts, the auction house took back possession of them and incurred a loss when it re-sold them at a substantially lower price than the businessman had agreed to pay. The auction house launched proceedings against him to recover that loss.
Upholding the claim, the High Court expressed some sympathy for the businessman, who believed that he was bidding solely as the company's agent. That, however, did not afford him any defence to the claim. His purchase of the colts was subject to the auction house's conditions of sale, which had the effect of rendering him and the company jointly and severally liable to pay for them.