In an Auction Where Seller Reserves the Right to Accept or Reject Bid, a Contract to Sell is Formed Only After the Seller Accepts Bid

The Court of Appeal of Georgia in Moss v. Hudson & Marshall, Inc., 267 Ga. App. 322 (Ga. Ct. App. 2004) stated that, in an auction where the owner of property reserves right to accept or reject bid, a contract to sell is formed only after the owner of property accepts the bid. The court also found that in cases where a party witness’ affidavit and deposition testimony were contradictory and unexplained, the rule in Prophecy Corp. applied.  Consequently the favorable portion of the buyer's testimony in this case was construed against him. Accordingly, because the evidence showed only that the auction was conducted upon a reservation of right in the seller and the buyer's bid was not accepted by the seller, no contract to sell was formed. 

Moss involved an auction sale in which the Plaintiff Appellant Moss (“Appellant”), the highest bidder, filed a suit before the trial court for breach of auction sale contract.   Hudson & Marshall Inc. (“Appellee”), an auction company, was authorized by Shaw (“Owner”) to auction her property at a public auction Appellant was the high bidder on a portion of the real property owned by Shaw. However, after the bidding was closed by the fall of the auctioneer's hammer, Appellee told Appellant that the sale of the property could not be consummated because owner had declined to confirm the sale. Appellant sued Appellee and Owner for damages, averring breach of contract, breach of warranty of authority, fraud, unfair or deceptive business practices, and entitlement to the award of litigation expenses. Owner cross-claimed against Appelle for breach of duty as her agent, this subject to her liability in the trial  of the main case. Appellee filed its motion for summary judgment against Appelleant on the issue of liability. Appellent thereafter amended his complaint to add counts averring civil conspiracy and tortious interference with contractual relations. Bibb County Superior Court's grant of summary judgment for Appellee. Appellant appealed against this judgment.
 
Appellant contended that an irrevocable contract for the sale of the property was formed at the time the auctioneer's hammer fell and that Appellee is liable for breach thereof. Moss,267 Ga.App 323
The Court of Appeal noted that generally even if an auction is with reserve (and all auctions are presumed to be with reserve unless they are expressly stated to be without reserve), the seller must exercise his right to withdraw the property from sale before the auctioneer accepts the high bid by letting his hammer fall.  The court found that an irrevocable contract is formed immediately after the hammer falls,   The court also noted that seller may “condition” a sale by auction as he or she deems appropriate. However, “where the seller explicitly reserves the right to reject any bid made, the contract for sale is not formed until the seller actually accepts the bid.” Id.at 323-324. (quoting Rountree v. Todd, 210 Ga. 226 (78 S.E.2d 499) (1953)) In such a situation, the auctioneer is left without authority to accept for the seller. The fall of the hammer merely ends the bidding, and no contract is formed until the seller actually accepts the high bid. Id.(Internal citation omitted)

Appellant submitted his own affidavit in opposition to Appellee’s motion for summary judgment Therein, as a person who had been present at the  auction, he denied that Appellee auctioneer made an announcement at the auction to the effect that the owners had “reserved the right to ‘confirm’ or otherwise approve the sale of the property after the auction.” Rather than the foregoing reservation of right, Appellant stated that the auctioneer announced that the sale was subject to the approval of the Owner as to the amount of the winning bid. The court observed that records revealed that Appellant had earlier given deposition testimony wherein he maintained that the announcement of the auctioneer at the start of the auction was unqualified, i.e., that the sale of the property was subject to the approval of the sellers by the end of the auction, no other condition, inclusive of a need to realize a certain amount of money, as applicable. Id at 324

The court noted that Appellant's affidavit and deposition testimony are contradictory and unexplained.  Therefore, the rule in Prophecy Corp. v. Charles Rossignol, Inc., 256 Ga. 27, 30 (2) (343 S.E.2d 680) (1986): “party-witness' unexplained self-conflicting testimony construed against the party-witness” applies here. (quoting Prophecy Corp. v. Charles Rossignol, Inc., 256 Ga. 27, 30 (2) (343 S.E.2d 680) (1986)). Hence, construing the favorable portion of Appellant’s testimony against him, i.e., that Appelle auctioneer announced no reservation of right in owner as the seller to accept or reject any bid made, no issue of fact for jury determination is presented on the issue. Consequently, the court concluded that the evidence shows that the auction was conducted upon a reservation of right in the Owner and Appellant's bid was not accepted by Owner.  Hence no contract to sell was formed, and consequently no contract was breached. Id at 324-325

In view of above, the appellate court affirmed the trial court’s decision.