At a live auction, it happens.
Bill is the high bidder at $1,000 and the auctioneer is asking for a bid of $1,100.
The auctioneer sees Aaron wave, and takes that as a bid of $1,100.
The auctioneer then asks Bill for a bid of $1,200. Bill declines to bid $1,200 and no other bidders bid $1,200.
The auctioneer points to Aaron and says, “Sold!” for $1,100.
Aaron says, “I wasn’t bidding, I was waving at my brother … sorry!”
The auctioneer asks Bill, “Are you still good at $1,000?” and Bill says, “Nope.”
The auctioneer says, “Let’s start over … who’ll give me $500?”
Despite how common this might be, it may well be contrary to oral auction contract law.
When Bill is the high bidder at $1,000 there is a contract between the seller and Bill for $1,000. There are only two (three) ways in which this contract may be upset: A higher bid or bidder retraction (or seller withdrawal.)
Even though the auctioneer accepted Aaron’s wave as a bid for $1,100, it was in fact not a bid at all. Therefore, it would not qualify as a higher bid, upsetting the bid with Bill. So, at that moment Bill is still the high bidder at $1,000 even as the auctioneer asks him to bid $1,200.
Further, as the auctioneer says, “Sold!” thinking Aaron is the high bidder, the contract with Bill (and necessarily not Aaron) is firmed.
Generally, I hear one of four arguments against this theory:
Contracts must have mutual assent (a meeting of the minds.) Since the auctioneer thinks the property sold to Aaron for $1,100 when in fact Bill is the high bidder at $1,000 — there is no meeting of the minds.
However, the auctioneer is not a party to this contract. Bid calling contracts are formed between sellers and buyers.
Prior bids are not revived once a higher bid is accepted. Since a bid of $1,100 was accepted, the $1,000 bid is void, and is not revived once the $1,100 bid is deemed invalid.
However, the auctioneer didn’t receive a bid of $1,100 so there is no higher bid made.
The auctioneer is asking Bill to bid $1,200, suggesting that the auctioneer is telling Bill he is out. If Bill is on for $1,000, he can’t be out and required to bid $1,200 to be back in as the high bidder.
However, just because the auctioneer tells Bill he is out doesn’t make him out. Bill is in fact the high bidder at $1,000.
The auctioneer said, “Sold! for $1,100 to Aaron.” No way this is sold to Bill for $1,000.
However, it doesn’t matter what the auctioneer says after “Sold!” because the contract is already formed at that point; the auctioneer cannot unilaterally then change the amount and/or buyer.
Does bid calling form contracts? Certainly, as we discussed here: http://mikebrandlyauctioneer.wordpress.com/2009/11/21/does-bid-calling-form-contracts/
What if the auctioneer says, “Sold!” for the wrong amount (or the wrong bidder?) We discussed here: http://mikebrandlyauctioneer.wordpress.com/2010/12/25/auctioneer-says-sold-for-wrong-amount/
Lastly, what if the auctioneer didn’t say, “Sold!?” If Bill is on for $1,000 and Aaron’s wave is accepted as $1,100, and then the auctioneer asks Bill for $1,200 … what if Aaron at that moment, says, “I wasn’t bidding … I was waving?”
In this case Bill is still on at $1,000 since that contract is never voided with a higher bid. However, if Aaron did bid $1,100 and then retracted his bid, Bill would not be on at $1,000 as no prior bids are revived.
We wrote about high bidder retraction here: http://mikebrandlyauctioneer.wordpress.com/2009/12/04/can-the-auction-bidder-say-never-mind/
“Sold!” to the previous bidder? Not really; sold to the high bidder.
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 serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.
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