Auctioneers have bid called for 1,000’s of years. In the United States, typically bid calling involves the rapid fire sounds of two numbers (the “have” and the “want”) and other filler words and sounds, denoting the amount and bidder that is on, and the amount desired to upset that relationship.
Certainly to the untrained ear, bid calling can sound like numbers just rolling through the air. Further, it can appear to many that this recital of numbers and sounds has no pattern, no meaning, no systematic design.
In fact, it’s quite systematic and is based on contract law in every regard.
We wrote about the essential ingredients to a contract some years ago: https://mikebrandlyauctioneer.wordpress.com/2009/12/01/the-essential-elements-of-any-contract/
Let’s start with this premise: If two competent parties have a meeting of the minds, providing consideration to each other — that’s a contract. It’s just about that simple.
When an auctioneer asks for an opening bid, such as “Who’ll start me out at $500?” that is an invitation for offers. The auctioneer is suggesting an amount, and a bidder makes the initial offer by agreeing to the invitation, or making their own unilateral offer.
Once the auctioneer accepts that initial offer (for example, $100,) he might say something like “I have $100 and who’ll give me $125?” This acceptance of the $100 bid constitutes the beginnings of a contract since we have offer and acceptance.
Yet, this is a contract already because it has the other two material ingredients: competent parties (at least 18 and not incompetent) and consideration (a promise to pay and take title — and a promise to accept payment and provide title.)
However, this contract is not perfected. It contains specific contingencies (or is subject-to,) depending upon the type of auction. In a without reserve auction, the auctioneer can take a higher bid and/or the bidder can retract his bid — and void this contract; additionally, in a with reserve auction the seller may withdraw the property and void the contract.
When the auctioneer says, “Sold!” or uses a like customary manner, these contingencies disappear. The high bidder and seller are in contract with no voidable terms such as a higher bid, bidder retraction nor seller withdrawal. If either refuses to perform, it constitutes breach of contract.
As such, “Sold!” doesn’t create a contract, but changes the existing contract with the high bidder.
Similarly in the United States, a buyer and seller are in contract to purchase/sell a home but contingent on, for example, the sale of another home — once the other home sells, we aren’t creating a new contact between these parties, but perfecting the existing contract.
Lastly it is important to note that numerous courts around the United States have affirmed that at a without reserve auction, the auctioneer enters into a collateral contract with all the bidders promising to sell the property to the highest bidder.
We discussed collateral contracts in more detail here: https://mikebrandlyauctioneer.wordpress.com/2015/06/03/changing-the-type-of-auction/
For those who believe bid calling doesn’t create contracts, let’s again consider that we have competent parties (if everyone’s at least 18 years old and not incompetent,) mutual assent (offer and acceptance,) and consideration (valuable promises.)
It’s much more than just numbers rolling through the air.
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. He serves as Adjunct Faculty at Columbus State Community College, Executive Director of The Ohio Auction School and Faculty at the Certified Auctioneers Institute held at Indiana University.