Personally, I find the statement, “The [auction] law has not quite caught up to technology” facinating and interesting. Yes, some laws need to catch up with society but not all. The aforementioned statement regarded bidders’ right to retract their bid before the auction closes and is our topic today.
Contract law has been around since the middle ages — meaning that contracts start with an offer and form with acceptance and in today’s environment, both parties are competent and there is good and/or valuable consideration.
Regarding auction contact law, Harvard Law Professor Samuel Williston wrote the Uniform Sales Act in 1906 which included this phrase:
A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in other customary manner. Until such announcement is made, any bidder may retract his bid; and the auctioneer may withdraw the goods from sale unless the auction has been announced to be without reserve.
We wrote about the Uniform Sales Act (1906) and the subsequent Uniform Commercial Code for auctions (§ 2-328. Sale by Auction) (1952) here: https://mikebrandlyauctioneer.wordpress.com/2012/10/03/uniform-sales-act-of-1906/. Since 1906 (over 113 years) bidders have had the right to retract their bid before, “Sold!”
The concept of bidder retraction comes from the often-forgotten ideas of equity and reasonableness. Simply put, when a bidder bids and the auctioneer accepts, that forms a contract where the auctioneer may accept a higher bid and void the contract — so is it reasonable the auctioneer/seller can void the contract but the bidder cannot? It’s not — and such defies basic contract construction.
Until any contract is completely firmed, either party can withdraw from such an arrangement. If I offer to buy your home, your car, mow your lawn or contribute to your campaign, until you accept [without any conditions and/or a counteroffer,] I can withdraw my offer — just like bidders can retract their bids at auction.
Online auctions don’t necessitate any change in auction law and cannot dictate any such modifications. On the contrary, online auction software must adapt to auction and contract law which it has for the most part.
In fact, this issue of the UCC § 2-328 (Sale by Auction) and online auctions has already been litigated as we wrote about here: https://mikebrandlyauctioneer.wordpress.com/2011/09/01/does-the-ucc-2-328-apply-to-an-online-auction/.
Of course, the somewhat infamous gap-filler crowd — however unsuccessful in avoiding actual auction litigation — cites UCC § 1-302. Variation by Agreement which indicates that the UCC § 2-328 can be modified to address this and other like issues.
However, the UCC § 1-302 also says that such modification cannot be “manifestly unreasonable.” Want to know what that means? We’ve offered that answer as a result of what we’ve seen in court numerous times as an expert witness: https://mikebrandlyauctioneer.wordpress.com/2017/03/01/auctions-that-are-manifestly-unreasonable/.
In regard to this specific issue, it would appear to us in light of over 1,000 years of contract law precedent of equity and reasonableness — that until a contract is firm, either side can withdraw their obligation to perform — that an auctioneer disallowing a bidder the right to retract a bid is clearly manifestly unreasonable.
Further, it matters not if you put in your terms and conditions (contract between auctioneer and bidder) that your bid-calling contracts contain no right of bidder retraction or if your bid-calling contracts don’t contain any right of bidder retraction …. as silly as that might sound. It’s all manifestly unreasonable.
I have jokingly offered auctioneers a possible solution. If when a bid is made, it cannot be retracted, then so long as the auctioneer doesn’t accept any higher bids either, then that’s obviously reasonable; instead of both having the right to void the contract, neither having that right to void is fair as well.
And I have not been joking at all when I say that staying out of court is better than winning (or losing) in court. It’s now being argued (and has for years) that one can modify the UCC § 2-328 by citing UCC § 1-302 to as well reopen so-called tie bids.
Interestingly such discussions omit the most material issue: that each of those “reopens” cited resulted in a lawsuit — a similar lawsuit you would be better to avoid: https://mikebrandlyauctioneer.wordpress.com/2018/07/26/auctioneers-you-want-win-in-court-or-stay-out-of-court/.
Lastly, and more generally, it’s certainly clear some of our laws (privacy, pharmaceuticals, health care, general liability) are far behind the current environment and may continue to be with the speed of innovation. Does auction law (specifically the UCC § 2-328) need to be updated due to technology? It does not.
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, RES Auction Services and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, an Instructor at the National Auctioneers Association’s Designation Academy and America’s Auction Academy. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by the The Supreme Court of Ohio for attorney education.