Consumers are faced with very unfair contract terms in the Condition of Sale when they take part in auctions.
These terms are one-sided and put the bidder/purchaser in an extremely disadvantaged position at auctions.
Under Section 24 of the Consumer Protection Act 1999, unfair contract terms are illegal and therefore unenforceable.
These unfair terms found in the Condition of Sale at auctions should be withdrawn or amended to strike a fair balance between the bidder/purchaser and the assignee/banker.
Though Condition of Sale in auctions is not standardised, the terms and conditions tend to be similar.
Below are examples of unfair contract terms found in the Condition of Sale:
The right to refuse any bid
The auctioneer may refuse any bid or bids without giving any reason.
CAP: A reason must be given if any bid is to be refused. It should also be clearly spelt out the conditions under which a bid may be rejected.
Freedom to change the Condition of Sale any time
The bank has the absolute right at any time to change, alter or add to the Condition of Sale prior to the auction.
CAP: There should be a cut-off period (for example 72 hours before the auction date) whereby the bank cannot make any changes to the Condition of Sale.
Banks not responsible for misstatement
The bank does not guarantee the accuracy of the information in either the Proclamation of Sale or Condition of Sale. Any error or misstatement in the Condition of Sale shall not annul the sale and neither can the purchaser seek compensation for any error, misstatement or misdescription. The purchaser shall be deemed to have full knowledge of the state and condition of the property.
CAP: If the manufacturer can be charged under the Trade Descriptions Act for any inaccurate statement on its product label, why should the bank be treated differently? As a seller, the bank has no excuse in giving wrong information, especially that which may affect the potential purchaser’s decision as whether to bid for the property. The bank should not escape liability for inaccurate statements made in the Proclamation of Sale or Condition of Sale.
No obligation to inform on liabilities
Neither the bank nor the auctioneer is required to inform the purchaser about the property’s liabilities. The purchaser is deemed to be responsible for making enquires on the liabilities affecting the property.
CAP: Once again the bank is in a better position than the purchaser to know about the liabilities incurred on the property. The bank should reveal what it knows to the potential purchaser.
Bank can terminate sale any time
Apart from the sale being terminated because the purchaser was unable to obtain consent from the developer or state authorities, the bank can also set aside the sale for any reason whatsoever, by giving the purchaser written notice. The bank then refunds the deposit interest-free.
CAP: The sale should not be terminated solely because the bank wishes to do so. It can only be terminated if the purchaser is unable to fulfil his part of the contract.
Risk is purchaser’s responsibility
Once the hammer falls, all risks of the property shall pass to the purchaser.
CAP: Risks from damage of property (for example, fire) should still be the responsibility of the bank until the purchaser has taken possession of the property.
Auctioneer, bank or lawyer cannot be held to their words
All statements made by the auctioneer, bank or lawyer are statements of opinion and cannot be taken as statement of fact by the purchaser.
CAP: It is not fair to say that the purchaser cannot rely on the words of the very people who are supposed to know about the property for auction.
As is where is basis
Intending purchasers are not allowed to inspect the interior condition of the property. They may only view it from the outside.
CAP: Purchasers should be allowed to inspect the product that they are buying - what more when it is probably one of the most expensive purchases of their life.
CAP urges the Ministry of Domestic Trade, Cooperatives and Consumerism to act immediately on unfair contract terms in the Condition of Sale in auctions or that in any other contracts.
Press Statement, 31st March 2016