In 1671, a court case in England involving the oral promise to sell a fighting cock named “Fiste” resulted in the creation of the “Statute of Frauds” in 1677.
In this case, the plaintiff won on the testimony of an associate who “overheard” the deals details, while the defendant was prohibited to testify to the contrary. As a result, many types of contracts must be in writing, or be in writing to be enforceable in court.
How does this involve auctioneers? It involves nearly all of them, any time they are transferring property on behalf of their clients. Let’s see how …
The adoption of Article 2 of the UCC by all states in the United States (except Louisiana, although possibly applicable there too) then requires auctioneers in those jurisdictions to protect their clients by getting the contract for sale of certain items of personal and real property in writing to avoid voidability by either party.
Most notably, there are two such instances most material for auctioneers:
Real property
Personal property ($500 or more in value)
So, how does this work? Auctioneers typically say, “Sold!” at the conclusion of the bidding on any item selling at auction. If that item is a personal property item $500 or more in sale price, or any real property interest, this mere “Sold!” announcement is not sufficient to bind the parties — buyer and seller.
In these instances, it is important to note that it is not imperative to reduce these particular contracts to writing, as they can continue to be executed and closed without such; however, if the seller or buyer has second thoughts, they have good cause to be relieved of their obligations per the oral contract due to there not being a written contract in place.
Most of us have seen at large scale auctions for collector cars, race horses, artwork, and certainly real estate, after the auctioneer says, “Sold!” there is typically a person who quickly approaches the buyer to have them sign documents, therefore firming the contract to purchase in writing. Then, if the buyer or seller has those aforementioned second thoughts, it is much more difficult to get out of the contract because it now satisfies the Statute of Frauds.
Are there instances where courts will likely rule that even in the absence of a written contract, the parties are bound? Yes, there are basically two such instances in some limited applicability:
Partial Performance
Promissory Estoppel
Without overburdening this post with an excess of legal definitions, basically a court could rule that an oral contract is enforceable in the case of real property, or personal property $500 or more in value, if the parties have partially performed the contract already and/or the voiding of the contract by one party would create a hardship and unfair balance of equity for the other party. We note here that neither of these defenses are terribly common in auction-related cases.
All auctioneers have heard their attorney say, at one time or another, “Get everything in writing.” Well, maybe not everything, but the Statute of Frauds gives us two very good reasons to do so.
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He is Executive Director of The Ohio Auction School.
Comments