We see auctioneers somewhat routinely noting that bidders’ bids once placed (accepted) can’t be revoked nor withdrawn — in other words, those bids are “irrevocable.” For instance, in an online auction, Emily bids $300,000 and then decides before the close of that auction that she’s changed her mind.
While the law provides that some offers can be deemed irrevocable, this amounts to a separate contract binding the offeror to keep her offer open. Since it’s a contract, and the offeror is providing consideration (something of value) to the auctioneer/seller, we ask what consideration the auctioneer/seller is providing the offeror?
Our question is somewhat rhetorical, as we don’t know any auctioneers paying these bidders anything so that they can’t revoke their bids. On the contrary, auctioneers are simply saying these bids can’t be withdrawn — with no consideration whatsoever and counting on those bidders knowing nothing about contract law.
There is also the issue of auction [bid calling] contracts having 2,000 years of history and considerable court support in that it’s state law [UCC § 2-328 (3)] all across the United States. In a without reserve auction, once a bid is made, that bidder may retract her bid and the auctioneer can accept a higher bid. In a with reserve auction, an additional contingency exists that allows the seller to withdraw the property.
The good news for auctioneers/sellers is once the “hammer falls” the bidder becomes the buyer (unless the bid is [mistakenly] reopened) and the bidder cannot revoke her offer, the auctioneer cannot accept a higher bid, nor can the seller withdraw the property. This is the moment when the contract is formed with no contingencies.
For those who advocate reopening the bid when a higher bid comes in as the hammer is falling in acceptance of a prior bid, besides the aggravation housed by the prior bidder, since the bidding is open now, that new higher bidder could retract her bid, leaving the auctioneer/seller no bids. Yes, state law and contract law say once a higher bid is made, all prior bids cease to exist, and aren’t revived.
Related to our topic today, we even are privy to auctioneers/sellers obligating backup bidders to perform if the high bidder breaches the contract. We ask again since this bidder has been outbid, where is her bid now? It doesn’t exist. So, if she’s agreed to have her bid revived (a separate contract) what consideration is she receiving?
For those arguing that this retraction issue is in the Uniform Commercial Code (UCC) and as such is subject to modification, we note the UCC can be modified as you’ve repeatedly been told [UCC § 1-302 (1)] so long as such modifications don’t amount to any manifestly unreasonable [UCC § 1-302 (2)] new terms as you are rarely told.
This is hardly the first (nor last) time we have had to address this quite simple issue. Citing only the first sentence of this statute ignores the latter requirement that any modifications cannot be manifestly unreasonable: https://mikebrandlyauctioneer.wordpress.com/2022/03/10/only-the-first-sentence-of-%c2%a7-1-302/.
I alluded earlier to bidders not understanding how contracts work, so maybe all this is essentially a “bluff” to try to convince them their bids can’t be revoked, and their prior bids are automatically revived? It would seem to me that all it will take is a material asset and an educated bidder to call this bluff.
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, Brandly Real Estate & Auction, and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, and an Instructor at the National Auctioneers Association’s Designation Academy and Western College of Auctioneering. He has served as faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.