Buying at auction - when is the contract binding?

[Brendan Burgess]

If the auctioneer knocks down a property to me in the room, is the contract then made between me and the seller?

Or is it when I go into the room at the back and sign the contracts?

Could I bid at an auction and have the property knocked down to me and then refuse to sign?


If the property is not knocked down to me but I am the highest bidder, then the rules of a private sale apply? In other words, if I go into the back room and both the vendor and I sign the contracts, then the contract has been formed. If I sign the contract, but the vendor doesn't, then the contract has not been formed?

Decko bought a house after auction, but only one of the vendors signed so they are denying that there is a contract.

This would be a very rare occurrence, but should a bidder bring a solicitor with them to make sure that, if they are successful, everything is done right?

 

[mf1]

The two most commonly used words in my office: "It depends"

It seems to me that, in practical terms, all of the old certainties have been thrown out the window. I find my office now dealing with people who give conflicting instructions on a daily basis to anyone they are in contact with - it is extremely tiresome. The reason why: a great deal of people in this country always want a way out -right to the end of the line. Now funnily enough, while they want a way out, they want the person on the other side to be bound in. It’s a very strange but increasingly common view of the world.

So, back to the auction/post auction situation. You would need to follow the line of steps from start to finish and have some better information on what happened. A few things that spring to mind :

1. Did the auctioneer have express instructions from both vendors to dispose of the property?
2. At auction, an auctioneer has implied authority to sell but that fails when it is no longer an auction situation. Interestingly, at auction, if a bidder bids and the property is knocked down to that bidder, the auctioneer has implied authority not only to sign on behalf of the vendor but also on behalf of the highest bidder.
3. The general rule is that a bid at an auction constitutes an offer to buy rather than an acceptance of an offer to sell. The bid is not accepted so as to create a binding contract until the property is knocked down to the bidder at the price bid.
4. In a private treaty sale, the general view is that the binding enforceable contract comes into existence when the contracts are signed by all necessary parties, exchanged and an agreed deposit is paid.

In Deckos case, it seems that only one co-owner signed the contract. In that case, a decree of specific performance won’t work as both owners would need to be a party to the contract.

So, what happened to make the situation go from an auction situation to a situation where one owner did not want to sell? Was it that the price was not what they wanted and they changed their mind about selling at a lower price after one of them only signed a contract and they were then looking for an excuse? Is it even conceivable that the non signing owner did not know the property was for sale?

And should his solicitor have grasped that only one of the owners was signing? Or was that question asked and brushed off?

Until you actually review a file like this it really is not possible to offer any real opinion on the situation.

mf

 

[Bronte]

1. Did the auctioneer have express instructions from both vendors to dispose of the property?

That's a very comprehensive and interesting reply which throws up a whole heap of more questions I'd always been under the impressiion that at auction it was legally binding when the auctioneer said sold. How wrong can you be.

In relation to the point above, I'd find it hard to believe that the auctioneers, who are well experienced in these matters, particularly Allsops would ensure that they had express instructions.

But that has me wondering what are express instructions to an auctionneer, is there a document the vendors sign for the auctioneers?

 

[Bronte]

This would be a very rare occurrence, but should a bidder bring a solicitor with them to make sure that, if they are successful, everything is done right?

Presumable in normal auction situations you have your solicitor check the title, he says it's ok and does searches. You go to the auction, but no one can force the second vendor to sign the contract if he doesn't want to so the issue becomes did the second vendor legally agree to sell via the auctioneers and is he bound by that even if he doesn't sign the contract.

Decko's case was not an auction and best advice one can conclude based on his experience is that he agrees a sale after auction, but goes though his solicitor as a normal sale so there are no doubts about anything. He didn't have to sign a contact there and then and probably ought not to have.

No wonder most of these auctions are cash buyers at knock down prices. It's all just one big gamble. Most of the buyers would be investors who know what they are at and are willing to take a risk because they can carry the price and even with a dodgy title it will be worth something, and certainly worth it to the investors.

 

[Brendan Burgess]

Hi MF1

Thanks for that comprehensive reply. I probably confused matters by referring to Decko.


Although "it depends", the general rule is

1) If the Auctioneer announces "sold", it is sold and both sides are bound to complete the contract.
2) If it is not announced "sold" at the auction, then it is a private treaty sale.

In relation to the point above, I'd find it hard to believe that the auctioneers, who are well experienced in these matters, particularly Allsops would ensure that they had express instructions.

Bronte, there is no mention of Allsops in this case?

 

[Vanilla]

See the following section of the Land and Conveyancing Act 2009 which reformed the Statute of Frauds 1695​

"Contracts relating to land​

Evidence in writing.
51.— (1) Subject to subsection (2), no action shall be brought to enforce any contract for the sale or other disposition of land unless the agreement on which such action is brought, or some memorandum or note of it, is in writing and signed by the person against whom the action is brought or that person’s authorised agent.
[SF 1695, s. 2]
(2) Subsection (1) does not affect the law relating to part performance or other equitable doctrines.
(3) For the avoidance of doubt, but subject to an express provision in the contract to the contrary, payment of a deposit in money or money’s worth is not necessary for an enforceable contract."

So- if a contract for the sale of land is to be enforceable- it must be in writing and signed by the parties or their agent.

 

[Bronte]

Although "it depends", the general rule is

1) If the Auctioneer announces "sold", it is sold and both sides are bound to complete the contract.
2) If it is not announced "sold" at the auction, then it is a private treaty sale.



Bronte, there is no mention of Allsops in this case?

Well now it is clear to me that 'sold' does not mean it is sold. It is only sold when all parties sign the contract as per the 2009 act.

My references were about auctions in general. But my comment in relation to Allsops (or any of the experienced auction auctioneers) was that I would be surprised that they advertised that properties had a guaranteed reserve price and that they believed they therefore had some legal right to sell come what may and the vendors could not back out. But now it seems to me the vendors after the 'sold' at auction can decline to sign the contract. Wonder what Allsops remedy would be against the vendor in that case.

Also MF1 mentioned that the auctioneer's had 'implied' authority to sell. That's doesn't sound very strong.

What it is is a right mess if you ask me. Buyer beware. It ain't over until you're in possession of the property, and you're only quite close to that when you have a legally binding contract,, auction or no auction.

In the case of Decko, not an auction, he can forget it.

 

[Brendan Burgess]

VAnilla

Thanks for that.

unless the agreement on which such action is brought,...is in writing and signed by the person against whom the action is brought or that person’s authorised agent.

MF1 said

at auction, if a bidder bids and the property is knocked down to that bidder, the auctioneer has implied authority not only to sign on behalf of the vendor but also on behalf of the highest bidder.

So from the buyer's perspective, once they bid they are capable of being bound to the contract.

But they should also ensure that either the vendors or the auctioneer properly signs the contract before they leave the building.

Brendan

 

[Bronte]

I've looked up a prominent Irish auctioneer and Allsops Irish website.

Both clearly state that property sold at auction is not subject to contract (or survey etc), a binding contract is formed on the fall of the gavel, on the fall of the hammer a legal and binding contract is formed etc.

In Allsops Dublin auction it seems you don't sign a contract after the auction but some kind of memorandum of sale and pay your 10% and complete within 5 weeks.

 

[Vanilla]

In Allsops Dublin auction it seems you don't sign a contract after the auction but some kind of memorandum of sale and pay your 10% and complete within 5 weeks.

That's all it takes to form a contract. Although you won't be covered then by the standard conditions in the Law Society Contract for Sale which is the norm.

An auction for realty is different from an auction for personalty. A contract for land must be in writing ( although there are unusual doctrines of equity which could be brought to bear to imply a contract).

In most auctions the highest bidder is immediately asked to sign a contract, the Vendor is usually also present ( or an agent on their behalf) and they then sign.