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Midsummer Night's Dream

Q&A Auctions in the Marketplace (general legal advice for buyers and sellers)

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DISCLAIMER. This is general legal information. The law of contracts and other areas that are related to auctions is in its infancy and largely underdeveloped in San Andreas. You may rely on the information to decide whether to seek specific legal advice from a bar practitioner; but you must not rely on this general advice otherwise. Your situation must be examined independently and for that you are encouraged to seek legal advice specific to your situation. This advice is general and not suitable for use in court. You have been warned. If you proceed further, you agree to release the Foundation for Law and Government (FLAG) and its contributors from any liability arising from the use of this general advice.





"Auction" = a sale by competitive bidding. 
"Auctioneer" = someone who sells something on behalf of another (the seller) by competitive bidding.
"Agent" = same as auctioneer, but it can also be a representative who makes a purchase on behalf of a buyer.
"Principal" = the seller who retained the auctioneer, or the buyer who appointed a representative.






How does an auction work legally?

In an auction, like all contracts, the transaction happens like so: offer + acceptance + consideration + performance. An offer is made and communicated; the acceptance is then communicated as well. Once accepted, in the context of an auction, the accepted offer creates a binding contract and there is performance by deliverance of the property. The consideration, in the context of an auction, is the payment of an agreed amount in exchange for the property; this is typically paid out before delivery. 


What is an offer in the context of auctions?


In answering this question, it is helpful to remind that a seller’s (or auctioneer’s) advertisement of a starting bid is not an offer. It is only an invitation. It is, thus, not amenable to be accepted. The offer is the buyer’s bid, which the auctioneer or seller accepts by communicating the acceptance (as seen below)


When is a contract formed?


In basic terms, the contract is formed once the seller (or the auctioneer acting on behalf of a seller) accepts a buyer’s offer. In a formal auction, this is occurs when the hammer falls. However, on the online marketplace, it is when the seller or auctioneer communicates the acceptance to you -- it can be online or by any other reasonable means. There are rules for communication of the acceptance.


Can the seller or auctioneer use friends or associates to prop-up the price? 


No. Again, because San Andrean law is underdeveloped, the “no” is actually less definitive than it sounds. Generally, however, the law will only give effect to legitimate bids. So, neither the seller nor the auctioneer may invite illegitimate bidders to boost the price. 


This is complicated and tends to be difficult to prove. A seller may, according to the law of restitution, may be liable to a reversal of his/her gain even if he or she is unaware of the auctioneer’s misconduct in injecting illegitimate bidders. The standard which the court will try to arrive at is ‘fair market price;’ this will be used to calculate the amount of the restitution to be paid. Because this is a complex area of law, you are encouraged to seek legal advice if you suspect it applies to your situation.


Can the seller or auctioneer withdraw from the sale after he or she has accepted? What happens if it is withdrawn?


No. The seller’s advertised sale can only be withdrawn before the communication of the acceptance of your offer; once it is accepted, it cannot be withdrawn. Similarly, you (as the buyer) can withdraw your offer at any time before the auctioneer or seller accepts it.


If it is withdrawn after acceptance, you may have a claim for breach of contract. You can, among other things, ask the court to order the auctioneer to perform the sale. If it would be impossible to perform the sale at no fault of either party, the seller or auctioneer may have a defence called “frustration;” in which case the court would resolve that the contract is frustrated and release both sides from it. Failing to meet an expected number of bidders will probably not suffice to frustrate the contract. If performance is impossible at the fault of the seller or auctioneer, then a breach is likely and the court will consider other damages, such as loss of chance. Damages is a significant area of law. For this reason, you are encouraged to seek legal advice on damages.


If the sale is withdrawn before the acceptance, then nothing of legal significance occurs because there is no contract without communication of the acceptance. So, the seller or auctioneer can withdraw the sale so that he/she may arrange for another auction or to sell an individual who is not a participant in the auction, but only if your offer was not 


What happens if someone tries to auction something which he or she does not own, and I paid only to find out that it was not his/hers or that he/she was not authorized to sell by the owner?


The actual owner may bring a complaint for what is called “conversion”; as for you, you may bring a complaint against the auctioneer/agent under contract law for misrepresentation; i.e. that the auctioneer misrepresented either having good title, ownership or authority to sell. This type of misrepresentation is consent-vitiating; this means it is capable of “erasing” your consent to the trade.


What if the seller or auctioneer has sold me something not as advertised?


This is, generally, a misrepresentation. If the seller misrepresented the nature of the thing which he puts for sale or authorizes an auctioneer to put for sale, then you may have a claim against the seller; but if the auctioneer mistakenly misrepresents what the seller has told him, it is unclear if the seller is also liable for misrepresentation. In any event, you may have a claim for negligent misstatement against the auctioneer.


The negligence claim, however, is under the law of torts and not contracts, so the court won’t void the transaction; for this, you would need to claim consent-vitiating misrepresentation against the auctioneer if the seller is unknown, or against the seller if known. For the
negligence claim, the question of what damages (or relief) is available to you can be complicated. You are encouraged to seek legal advice regarding damages for a claim in negligence against the auctioneer.


Can a seller or auctioneer sue me (a buyer)? 


Of course. They can, among other things, sue if you make an offer, which they accept, and then you refuse to follow through. Only submit a bid if you are prepared to follow through with it after you receive communication of the acceptance.


Can an auctioneer act for a seller who remains anonymous, and not tell me who the seller is? What if I want to sue?


Yes. As with every other question, there is no law in San Andreas on this question, but the general position across Anglo-American jurisdictions is that the seller need not be disclosed. However, if the auctioneer does not disclose who the seller is, he/she is personally liable even for breaches which are typically attributed to the seller. The reason is that it is assumed that a buyer will not contract with someone who is unknown (or anonymous) unless the auctioneer acting on behalf of that unknown seller makes himself or herself personally liable. 


So, for example, if an anonymous seller makes a misrepresentation and conveys this to an oblivious auctioneer, normally you would have a claim against the seller; but if the auctioneer does not disclose the seller’s identity, your complaint is against the auctioneer who must accept being liable. If a seller insists on being an anonymous and the auctioneer does not want to accept the legal consequence of the seller’s anonymity, the auctioneer can refuse to provide his service to the seller. Any auctioneer who gives effect to anonymity must be prepared to accept liability for a seller in breach of contract.


Can an auctioneer charge the buyer extra to make a profit from the sale?


No, but as a buyer, it is unclear whether you can recover. Typically, this is an issue affecting the principal (the seller) who hired or retained the auctioneer. Under the law of fiduciaries (trust), because an agent (auctioneer) holds the property of the seller in trust, any money which he/she generates is also held in trust and must be given to the seller/principal; so even if the auctioneer were able to generate five times over the starting bid on the sale, no amount of that can be withheld by the auctioneer as commission or a profit. Only where the principal (seller) has consented to paying a commission can the auctioneer make a profit. 


An auctioneer should not be charging you (the buyer) a fee as commission on top of the agreed price.





Do I have to use an agent/auctioneer?


No. You can sell your own property by auctioning it yourself. You are not required to hire or retain an auctioneer. However, all the usual formalities of contract still apply even where you sell directly instead of through an agent or auctioneer.


If I use an auctioneer, how do I guarantee that they will act in good faith and not rip me off?


First, auctioneers owe you what are called fiduciaries duties. They include a duty to account (account for any money they receive and produce it at your request); duty to avoid a conflict of interest created by bidding for a buyer; and duty to avoid a conflict of interest created by purchasing the property for himself or herself. If these duties are breached, you may have grounds to bring a complaint. You are encouraged to seek legal advice if you suspect an auctioneer was in breach of any of those duties.


Second, find an auctioneer you can trust. Also, if he/she causes a loss from the sale owing to some lack of competency and/or knowledge, or if she/she makes a misstatement as to the condition of the property put for sale, you may be able to recover. You should seek legal advice if you suspect an auctioneer’s performance fell below the standard of the ordinary competency of an auctioneer.


How do I make sure the auctioneer does not sell below the amount for which I’m willing to sell?


Use a reserve price (this is not the same as a “starting bid;” a starting bid is the minimum bidders must offer, but a reserve price is the minimum which you as a seller are willing to accept). While an auctioneer whom you have authorized has implied authority to accept offers and take payments on your behalf, they do not have the authority to sell below a reserve price. 


Are there any special rules for authorizing an auctioneer when I hire/retain one?


No. A lot of the authority of an auctioneer is implied, but if there are particular things unique to your arrangement, such as paying a percentage of the proceeds as profit or commission, those should be documented in writing. You should also document if there is a reserve price. 






The seller and I did not agree on a commission before undertaking the sale, but I spent my own money to make the sale happen (e.g. purchased upgrades, or another e.g., incurred expenses such as gas); is there anything I can do?


Yes. You should first try to resolve this without a complaint; ask if the seller is willing to pay you. However, you may have a claim in restitution by way of unjust enrichment. This is a complicated area and you are encouraged to seek legal advice in this area before pursuing a complaint.


The seller and I agreed on a commission or remuneration, but the seller has not yet paid me; what can I do other than go to court?


If you have not been paid, you may withhold any property or payments in your possession until the seller has paid you. This is called a lien and is permissible at law. A lien attaches to the money you receive from a buyer; you are entitled to withhold it until you are paid. If you have already given the seller their money generated from the sale, of course this becomes difficult if not impossible; but if you did not make an agreement to be paid, you do not have a lien and withholding the seller's money puts you in breach of a fiduciary duty (a civil issue) and could see you with a charge for theft (criminal issue). You can always consult a lawyer before withholding money to make sure you have a lien.


A prospective buyer made an offer by e-mail and sent me the terms of their purchase; I subsequently replied to accept and asked the buyer / offeror if they had someone to draft a document. They relied “No need; our e-mail is proof of the existence of an agreement.” Is this true?


Yes.  A written agreement is one which has permanency.  Permanency is what distinguishes an oral agreement from a written agreement.  Because an e-mail has permanency, unlike a verbal exchange, it is binding as long as there was an objective intention to enter into legal relations / create enforceable obligations.  

Agreements can even be written on napkins and greeting cards!  A more common example is a receipt slip for proof of purchase;  these receipts are proof of an agreement (an agreement for the sale of goods or a service).  You do not need a specially-formatted document — a receipt printed in any format, or e-mail containing terms laid out in any manner, will be binding if there was an intention to enter into legal relations. 

For this reason, if you seriously intend to make a property sale, make sure you do not communicate anything by e-mail which you don’t intend to be binding. 



This general legal information will periodically change. There will be updates to this after the enactment of new formalities or after relevant judicial rulings. Reforms should be expected soon, but not often.  









Edited by Midsummer Night's Dream
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