Contracts, Agency, and Bidder-Auctioneer Relationships
What the exam tests
Contracts, Agency, and Bidder-Auctioneer Relationships tests contract formation, agency authority, and the duties auctioneers owe sellers and bidders. The key question is who is the agent, what was authorized, and when the contract became binding.
Core rules
- The auctioneer is ordinarily the seller's agent. Agency authority comes from the listing or consignment contract; the auctioneer cannot change reserve, terms, or collateral without authority.
- A bid is an offer. A sale is complete when the auctioneer announces completion by fall of the hammer or another customary manner.
- A bidder may retract a bid until completion is announced; retraction does not revive an earlier bid. A bid made while the hammer is falling may lead the auctioneer to reopen bidding or declare the sale.
- The auctioneer must disclose material conflicts, including dual agency, and must account for deposits and proceeds.
- Seller bidding is permitted only if notice is given; undisclosed seller bidding lets the buyer avoid the sale or take the goods at the last good-faith bid.
Worked example
A bidder raises a paddle at $2,000. Before the auctioneer says 'sold,' the bidder shouts 'withdraw.' The retraction is timely; the auctioneer should reopen or pass. If the bidder waits until after 'sold,' the contract has formed and the bidder is bound, subject to the terms and any reserve. If the auctioneer had been secretly bidding for the seller without notice, the buyer could avoid the sale.
Traps
Do not treat the auctioneer as the buyer's agent by default. Do not assume a paddle raise is a binding contract before completion. Do not let a seller revoke authority after the auctioneer has made a binding sale within authority. Do not ignore dual-agency disclosure.