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In my post: http://mikebrandlyauctioneer.wordpress.com/2009/12/01/the-essential-elements-of-any-contract/ I mentioned that auctioneers enter into contracts throughout their careers. Here, we explore the three basic types of auction contracts.

I’ll talk about these three contracts in the sequence in which they normally occur. These three contracts always involve two of the four parties: auctioneer, seller, bidder and buyer.

  1. The “Right to sell at auction” or “Consignment” Contract: This contract is between the auctioneer and seller. It is normally in writing (should always be in writing). This contract engages the auctioneer to provide certain services, typically including marketing, advertising, inventory, arrangement, bid calling and settlement. It requires the seller to provide certain promises as well, including allowing the property to be sold, providing clear title, etc.
  2. The “Registration” Contract: This contract is between the auctioneer and the bidders. It typically involves allowing the bidders to participate, and confirming that they agree to the terms and conditions, such as necessary deposits, time of removal, closing date, etc. if they become a buyer. The auctioneer (on behalf of the seller) agrees to allow the bidders to participate and provide the property to the winning bidders on behalf of the seller. These types of contracts are often times only oral, but can be in writing.
  3. The “Bid calling” Contract: I discussed bid calling contracts in depth in my post: http://mikebrandlyauctioneer.wordpress.com/2009/11/21/does-bid-calling-form-contracts/. When auctioneers bid call, they enter into, typically, oral contracts with the high bidder(s) and then, finally upon “Sold!” they enter into a different contract with the ultimate high bidder — the buyer. These contracts are actually between the seller and the high bidder, and then seller and buyer; the auctioneer acts as an agent for the seller. Most often, bid calling contracts are oral, but then can be reduced to writing following, “Sold!”
      * It is important to note that at an absolute auction, the seller, upon the opening of the auction, enters into a collateral contract with all the bidders, agreeing to sell to the highest bidder.

In regard to enforceability, oral contracts (not in writing) are almost always fully enforceable in court, although they lack the written documentation to make enforceability easier. The one exception is contracts for the purchase of real estate, which must be in writing to be enforceable per the Statute of Frauds. So, following, “Sold!” at a real estate auction, there is a contract between the buyer and seller, but not an enforceable one — that is, not until it is reduced to writing.

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.face book.com/mbauctioneer. He is Executive Director of The Ohio Auction School.