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Auction Terms and Conditions
Question: What are the general terms and conditions of an auction? How are they established? Who determines them? What is the effect of failing to address them properly?
The owner of the property sold at auction generally has the right to determine the manner, condition, and terms of the sale. The auctioneer should discuss these decisions with the owner and advise him or her of the options. Once these decisions are made, the auctioneer is responsible for ensuring the public knows the terms and conditions. This can be accomplished by an advertisement including, announcement of, and / or the posting of the terms and conditions, as well as the implementation of a bidder's registration agreement.
The announcement of the terms and conditions of an auction is not considered an “offer” by the seller to sell the goods or property. Instead, the announcement is generally considered an invitation for offers or some type of proposal. When the terms and conditions are announced, these terms are generally deemed to supersede all others and will typically bind the bidders and purchasers. The terms and conditions announced will generally be binding even if the bidder or purchaser did not hear or understand the announcement, was not present at the time of the announcement, or did not sign anything acknowledging the terms and conditions.
The terms and conditions of the auction generally may be altered before bidding begins as long as the auctioneer announces the modification in good faith when the property is put up for bid. The modification could be a correction to a description, a disclaimer of any express or implied warranties, or other matters. However, auctioneers should generally refrain from making significant changes to the terms and conditions at the time of the sale. For example, if a sale has been advertised as an absolute auction, the auctioneer generally should not seek to change it to a reserve auction on the day of the sale when the auction is about to begin. Doing so could be considered by a court to be a “bait and switch” or outright fraud.
Auctions are intended to be public, and everyone should have an equal opportunity. Auctions should allow for fair and open competition. Therefore, the
announced terms and conditions of the sale may not be varied as to the actual purchaser by a prior agreement with him or her. The general principle is that all bidders must stand on an equal footing.
The auctioneer should consider recording the announcements and the auction to provide evidence of the terms and conditions announced.
This can be an audio recording, a video recording, or both. In addition, the auctioneer should even print and post the terms and conditions of the auction. This allows individuals who missed the announcements to still see, read, and understand the terms and conditions.
The best practice is to have a formal bidder's registration process and a registration agreement. The bidder's registration agreement would specify the terms and conditions of the sale.
During the registration process, each bidder should provide authentic identification and register for the sale.
Each bidder should be given a copy of the registration agreement containing the terms and conditions of the sale. In addition, each bidder should be required to sign a document acknowledging receipt of the terms and conditions and stating that he or she agrees to be bound by the auction terms and conditions. This document can be acknowledged by written print or an electronic digital click-wrap format, depending on the nature of the sale and the bidder's remoteness. This process and the registration agreement support enforcing the terms and conditions of the sale in the event of any type of litigation, including demands for damages for any alleged breach of the agreement.
Finally, after the seller and auctioneer (as the seller's agent) establishes the terms and conditions for an auction in an advertisement, by announcement, by publication, and/or with a bidder's registration agreement, those terms and conditions are thereafter binding upon both the seller and any bidder. Any bid placed at the auction is deemed to incorporate those terms and conditions unless otherwise stated. (A bidder could make an offer on terms different from those announced, but bidders generally do not do so, and an auctioneer is not required to accept a bid with different terms.) After the sale, the seller may waive some of the requirements of strict compliance with the terms and conditions by the buyer.
The seller, and auctioneer as the seller's agent, establish the terms and conditions of the auction. The terms and conditions should be carefully selected, and everyone who attends the auction should be advised of them.
The best approach for advising each bidder of the terms and conditions is to have a robust registration process, a detailed registration agreement, and day-of-sale announcements and/or postings consistent with it. It is critical that the auctioneer ensure that the terms in the registration agreement and the announcements and/or postings are consistent. Any inconsistency is likely to invite costly litigation.