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Law Offices of Ronald W. Rutz
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August 24, 1999: Auction Protocol

Q: I work nights and to relax I like to watch the old sitcoms when I get home. Recently a number of them had the same premise plot attending an auction and then getting stuck with an item because of inadvertent bids. I have never gone to an auction, so is that stuff of T.V. for real?

A: Unfortunately what makes great T.V. and movie material usually has little to do with the real legal world. As general background, before an item is presented for sale, the owner must decide if there will be a minimum bid requirement and whether an object is sold "with or without recourse" (must the owner accept the bid that was accepted by the auctioneer). Additionally, there may be requirements imposed on the potential participants such as pre- registration and perhaps even financial pre-qualification.

The auctioneer really is soliciting offers on the object being presented. As each offer is made and acknowledged, the auctioneer will seek higher offers. Normally, unless house rules specify otherwise, an offer can be withdrawn (waived off) "before the gavel falls" (the act that signifies final acceptance of the offer thereby making a binding contract).

I have been at auctions, especially art auctions, where multi-million dollar "offers" were rescinded with no one batting an eye and with no raised eyebrows.

Even after acceptance (and contrary to the house rules), I have seen "buyers remorse" set in and bidding reopened. In fact, a person who was the next highest bidder or even lower, could very well be contacted after the auction to see if he or she was still interested because the higher bidder or bidders refused to go through with the purchase.

But what about damages? As with all binding contracts, if the seller suffers a loss (e.g., getting less than the highest offer), the bidder could be held liable. However, often the practical, not the legal, considerations prevail to avoid a lot of expense, energy, and time from being expended.

But the bottom line is that although there is much case law and statutory authority in this area, the rules of the house govern. Thus, any of the foregoing general points could be altered if the "house" publishes different rules.

I have a very, very rich acquaintance (old inherited money) whose only passion and interest in life is to go and actively participate in the excitement of the auction. He studies the house rules, knows the auctioneers like a sports fan knows the players, and psychologically is in tune to know "when to fold." I have never heard of him being trapped into a forced purchase and he is used to million dollar plus bids.

Thus, relax and enjoy the T.V. moment after a long night at work, knowing that if I were there I would be raising everyone's blood pressure by stating very firmly but forcefully in the direction of the T.V. to just withdraw "the dumb bid." (I would never have a very long career as a technical advisor on one of these shows.)

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