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Corbin on Contracts

Copyright 2007, Matthew Bender & Company, Inc., a member of the LexisNexis Group.

PART I FORMATION OF CONTRACTS

TOPIC A OFFER AND ACCEPTANCE

Supp. To CHAPTER 4 INDEFINITENESS AND MISTAKE IN EXPRESSION

1-4 Corbin on Contracts Supp. to § 4.14

Supp. to § 4.14 Auction Sales-Offers to Sell and to Buy

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(A) The following cases cite this section:

(1) Pyles v. Goller, 109 Md. App. 71, 674 A.2d 35 (Md. App. 1996) (a thorough and concise review of the legal principles governing auctions, the court holds that the rule prohibiting a seller in a without-reserve auction to bid applies equally to sellers holding property as tenants in common even if they seek to bid in their individual capacities).

(2) J&L Investment Co. v. Department of Natural Resources, 593 N.W.2d 196 (Mich. App. 1999) . A case of first impression in Michigan, holding that auctions are presumed to be held ''with reserve,'' i.e., the owner reserves the right not to sell, unless otherwise specified, and an owner may withdraw the property at any time before the auctioneer signals the acceptance of the highest bid.

(3) In re Grant, 303 B.R. 205 (Bankr. D. Nev. 2003) . In this bankruptcy case, Woolman purchased the debtor's real estate at a foreclosure sale in accordance with Nevada law. The following day, the debtor filed a chapter 13 bankruptcy petition and eight days later the foreclosure sale deed was recorded. Woolman filed a motion for relief from the stay in bankruptcy for the purpose of evicting the debtor from the property. The debtor argued that the post-petition recordation of the deed violated the automatic stay, rendering the foreclosure sale void. The court had to determine whether the debtor had any legal or equitable interest in the property at the time the bankruptcy petition was filed. This issue depended upon the effect of a foreclosure sale. Quoting Corbin to the effect that an auction sale is completed upon the fall of the auctioneer's hammer or when the auctioneer declares the property as ''sold,'' the court held that a foreclosure sale is completed when the property is announced as sold and the bidder has paid the purchase price. There was no allegation that Woolman paid the purchase price after the petition was filed. There was no requirement that a deed must be filed to complete the sale. Holding that the debtor had no legal or equitable interest in the property when the bankruptcy petition was filed, the court granted Woolman's motion to lift the stay.

(4) Udall v. T.D. Escrow Services, Inc., 159 Wn. 2d 903, 154 P.3d 882 (Wash. 2007) . The court cited Corbin's explanation of settled auction law where asking for bids is asking for offers which the seller remains free to reject prior to acceptance. Acceptance at auction is commonly signified by the fall of the hammer after which the sale is consummated. Only by express reservation announced prior to the sale can seller reserve the right to review and reject bids after the auctioneer closes the sale.

Supplement to Notes in Main Volume

6. Cal.- Je Ho Lim v. TV Corp. Int'l, 99 Cal. App. 4th 684 (Ct. App. 2002) . The plaintiff, a resident of South Korea doing business as Future Computing Solutions, discovered the defendant's advertisement concerning the registration of an Internet domain name, ''Golf.tv.'' The defendant (''dotTV''), a Delaware corporation with principal offices in California, had acquired the ''top-level'' domain name, ''tv,'' through an agreement with the island of Tuvalu. The defendant posted the name ''Golf.tv'' on its website for auction to the highest bidder. The plaintiff bid $1,010, authorizing payment by his credit card. The defendant charged the plaintiff's credit card and sent an e-mail confirming that the plaintiff had won the bid for the use of Golf.tv. The defendant then informed the plaintiff that he was being ''released'' from his bid and that the original e-mail was mistaken. In response to the plaintiff's claim that a contract was formed, the defendant argued that a website posting is not an offer but, like a general advertisement, an invitation or solicitation for an offer. The court was not convinced since an advertisement can constitute an offer under certain circumstances. The defense claimed that, unless expressly announced otherwise, the typical auction is ''with reserve,'' i.e., that the auctioneer solicits offers and may reject all bids. Reviewing the illustrations in Restatement (Second) of Contracts, § 28, the court recognized that the typical auction is one in which the advertiser is merely soliciting bids (offers) and need not accept any offer. However, a third Restatement illustration depicted a party advertising that he would sell his farm to the highest bidder and this constituted an offer. The court found that the defendant's promise to sell the Golf.tv name to the highest bidder was an offer that was accepted by the plaintiff's highest bid. In effect, the court held that the defendant had advertised a ''without reserve'' auction.