A Few Thoughts on Bidder Terms and Conditions, Consideration, and
Bid Retraction
A Few Thoughts on Bidder Terms and Conditions, Consideration, and
Bid Retraction
by
George A. Michak, Esq.
Bidding at auction is a privilege not a right – even if the auction is advertised as a public auction. Auctioneers (and sellers) have the right to establish the Bidder Terms and Conditions for their auctions, including the terms and conditions pursuant to which a bidder may be granted the privilege of bidding, may retain the privilege of bidding, may exercise the privilege of bidding, and may forfeit or lose the privilege of bidding. The courts have long held that by participating in an auction each bidder agrees to be bound by the Bidder Terms and Conditions (whether or not they read them, heard them, or understood them). The courts have also recognized that if a potential bidder doesn’t like the Bidder Terms and Condition for a particular auction, that potential bidder has the option to refrain from bidding, and should exercise that option. A bidder shouldn’t get to tell an auctioneer that I want the privilege of bidding at your auction, but I will only honor the terms and conditions that I like or that I think are reasonable. For example, if the Bidder Terms and Conditions provide that only individuals wearing a pink tutu and a tiara may bid at the auction and that they must do it by waiving a wand, then potential bidders can bid by waiving a wand while wearing a pink tutu and a tiara or they can refrain from participating in the auction – simple choice.
Bidder Terms and Conditions for an auction constitute a separate and unique contract between the auctioneer and each bidder, not a single contract between the auctioneer and all bidders (which is why an auctioneer ought to be able to waive or modify terms and conditions on a case-by-case contract-by-contract basis). One of the elements of a valid, binding, and enforceable contract is the exchange of consideration. Consideration is something of value promised or received. In a bilateral contract (and most contracts in the auction context are bilateral contracts) consideration is given in the form of a promise, and fulfilling or delivering on the promise is performance not consideration. In other words the exchange of consideration in a bilateral contract is the exchange of one or more promises from one party and one or more promises from the other party. Among other things, consideration from the auctioneer to the bidder under the Bidder Terms and Conditions might include the auctioneer’s promise to grant bidding privileges and the promise to deliver the right to purchase a lot on payment of the hammer price and buyer’s premium by the winning bidder. So, what consideration does a bidder give to the auctioneer? In exchange for the privilege of bidding at the auction, a bidder can be required to make a number of promises, including the promise not to disrupt the auction and the promise to pay the hammer price and the buyer’s premium if the bidder is the winning bidder on a lot. In consideration for the privilege of bidding at the auction, a bidder might also be required to promise, among other things, not to retract a tendered bid (and this can be particularly important in online auction). That promise might look something like this:
No Bid Retraction; Irrevocable Offer. Without AUCTIONEER’s consent (which consent may be granted or withheld in AUCTIONEER's sole and absolute discretion), YOU may not retract or revoke a bid that has been acknowledged by AUCTIONEER or that YOU have submitted online. YOU acknowledge and agree that AUCTIONEER is acting in reliance on tendered bids in the conduct of the Auction, and that bid retraction: (i) is disruptive and interferes with the Auction; (ii) may cause other Bidders to question the integrity of the Auction (among other things, affecting AUCTIONEER’s reputation); (iii) may reduce Bidder confidence in the Auction process; and (iv) may have a negative effect on the Hammer Price, thereby harming the SELLER. As an inducement for AUCTIONEER to accept YOUR Bidder Registration and to grant YOU the privilege of bidding at the Auction, and in consideration of the ability to bid at the Auction, YOU acknowledge and agree that, without AUCTIONEER’s prior consent, YOU will not withdraw or to attempt to withdraw any bid tendered by YOU or on YOUR behalf. YOU, further, acknowledge and agree that YOUR bid constitutes an irrevocable offer that will not be terminated by AUCTIONEER’s solicitation and/or acknowledgment of advancing bids, neither of which constitutes a rejection of YOUR bid until the Fall of the Hammer.
So there you have it, mutual consideration, a promise in exchange for a promise, quid pro quo, this for than, tit for tat. That’s how contracts are made. And, if a potential bidder is unwilling to promise not to retract a bid in exchange for the auctioneer’s promise to grant the privilege of bidding, then the potential bidder can choose not to participate in the auction. Even though an offer (and a bid is an offer) can ordinarily be revoked anytime before it is accepted (and acceptance at auction only occurs with the fall of the hammer), a bidder can – by contract – agree to give up the right of revocation. There’s nothing unreasonable or unconscionable about that, particularly given the potentially disruptive nature of bid retraction.
THIS ARTICLE IS FOR INFORMATION AND DISCUSSION PURPOSES ONLY, AND IS NOT INTENDED AS, AND CANNOT BE RELIED ON AS, LEGAL ADVICE. NO ATTORNEY-CLIENT RELATIONSHIP IS INTENDED OR ESTABLISHED. SPECIFIC QUESTIONS SHOULD BE ADDRESSED TO AN ATTORNEY OF YOUR OWN CHOOSING. YOU SHOULD HAVE YOUR ATTORNEY REVIEW ANY SAMPLE LANGUAGE BEFORE USING IT.