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  • Writer's pictureMike Brandly, Auctioneer

Auction bid calling creates contracts

Yes, absolutely, live bid calling (and even online auctions) create contracts. One such contract is when the auctioneer (or software) completes the sale. That is a non-contingent contract between the seller and the high bidder.

But before this non-contingent contact is formed, the very first bid (offer) and acceptance — and all those thereafter — create contingent contracts. When there are competent parties, offer, acceptance (mutual assent,) consideration, and a legal purpose, there is a contract formed.

In a with reserve auction, this contingent contract has three contingencies — (1) a higher bid, (2) bidder retraction, and (3) seller withdrawal. In a without reserve (absolute) auction, this contingent contract only contains two contingencies — (1) a higher bid, and (2) bidder retraction.

Relatedly, the auctioneer or software is merely inviting offers, and not offering anything for sale. However, in an absolute auction, the auctioneer extends (promises) to sell to the highest bidder so long as a bid is made within a reasonable time; this is known as a collateral contract.

We mentioned “legal purpose” here noting that any such contract would have to be not only legal to perform but possible to perform. Certainly buying and selling at auction is both legal and possible, as is exemplified every day of the year. As such, fraud, misrepresentation, or fictitious bidding (for example) could cause this type of contract to be voidable.

We suggested prior that “Sold!” and the like create noncontingent contacts, but these contracts can be contingent otherwise if the terms allow — such as financing, inspection, providing clear title, etc. “Sold!” creates an executory contract, and then when all duties are completed, it becomes an executed contract.

We have written about this concept before, most notably in 2014: https://mikebrandlyauctioneer.wordpress.com/2014/08/11/bid-calling-is-just-numbers/. In 2009, we introduced this concept on this platform in writing about the three types of auctioneer-related contracts: https://mikebrandlyauctioneer.wordpress.com/2009/12/29/the-three-3-types-of-auction-contracts/.

It would seem to us that bid calling — or online bid accepting (management) — creates bilateral contingent contracts in that the seller/auctioneer has a right to the consideration and a duty to provide title, and the bidder (as buyer) has the duty to pay the money and a right to title.

Importantly, oral contracts are generally enforceable for personal property auction transactions, but real property purchase/sale contracts usually have to be in writing to be enforceable (Statute of Frauds.)

However, a few courts have upheld real property auctions with merely oral contracts. The Statute of Frauds is rarely strictly applied to personal property auctions independent of the dollar amounts involved. Nonetheless, it never hurts to get everything in writing.

Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at Mike Brandly, Auctioneer, Brandly Real Estate & Auction, and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, and an Instructor at the National Auctioneers Association’s Designation Academy and Western College of Auctioneering. He has served as faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.

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