Advertised Terms of an Auction can be Orally Modified if the Auctioneer Announces the Changes in the Form of a Public Statement

The Court of Special Appeals of Maryland in Pyles v. Goller, 109 Md. App. 71, 674 A.2d 35 stated that the published terms of an auction can be orally modified if the changes are announced by the auctioneer in the form of a public statement so that all the bidders are aware of the changes.  

This case involved an auction sale of 11 lots of properties.  Mr. Norris Pyles and Mr. Charles Dudley Reed (“Sellers”) entered into a contract with W.J. Fitzgerald Auctioneers & Co. (“Auctioneer”) to sell their lots at public auction.  Prior to the auction, Dr. Herbert Goller (“Buyer”) received a pamphlet from the Auctioneer stating that the auction would be an "Absolute Auction and there would be "No Minimums and it would be held on October 27, 1990. The pamphlet also included property description and the terms of the sale. On the auction day, only two people had registered for the auction.  Before the start of auction, the sellers told the Auctioneer that they were considering bidding on the lots.  And the Auctioneer told the buyer: “that I think that the owners are going to bid on it [the property]."” Id. at 79.  The Sellers subsequently bid on the property and refused to convey the lot in which the Buyer was the highest successful bidder.  The Buyer sued seller for specific performance. The circuit court granted in favor of Buyer and directed sellers to convey the property to buyer. This appeal followed.

In an auction held "without reserve" the seller of a piece of property could not bid on that piece of property when it is subject to sale. Id. at 83. The court found that pursuant to Md. Code Ann, Com. Law § 2-238, the Seller could not bid upon the property at an auction without reserve, and that the joint ownership by the sellers did not change the rule. Id. 

The Sellers argued that they were allowed to participate in the auction because buyer had notice that they were going to bid. Id. at 85. The Buyer countered that he did not have sufficient notice of seller's interest in bidding at the auction. Id.

The Court noted that the terms of an auction can be established by the advertisements or other publications released by the sellers. Id. (Internal citations omitted).  These terms are binding unless modified or changed before the commencement of the auction. Id. Restatement (Second) § 28 (1); 7 Am. Jur. 2d § 14; see Sullivan v. Mosner, 266 Md. 479, 491, 295 A.2d 482 (1972) (a written agreement may be modified by a subsequent oral modification.)

The Court found that, the Auctioneer’s pre-auction announcement was consistent with the printed terms of the pamphlet and the advertisements. Id.  In Lewis v. Schlichter Co., 137 Md. 217, 112 A. 282 (1920), the Court of Appeals held that an auctioneer's public statement before the start of the auction was binding on the parties because it clarified the terms of the advertisement. Pyles at 86. The Court of Appeals discussed the rule against orally modifying the terms of an auction, but it avoided deciding whether it applied in Maryland by holding that the auctioneer's statement supplemented the printed materials. Lewis at 225. 

The advertised terms of an auction can be orally modified; provided the change in terms are announced by the auctioneer in the form of a public statement so that all the bidders know of, or should have known of, the changes in the auction. Id. at 86. Restatement (Second) § 28 (2); 7 Am. Jur. 2d § 14; see Nicholson v. Clark, 802 S.W.2d 934, 938 (Ky. Ct. App. 1990), cert. denied 802 S.W.2d 934 (Ky. 1991) (noting that at an auction held "without reserve," a seller was not allowed to bid because there was no public announcement to that effect). 

In the instant case, the Court found that there was no announcement that could constitute a modification of the published terms of the auction. Id. The testimony of the Auctioneer shows that there was no public announcement indicating that Sellers were going to bid on the property. Id. The Auctioneer had only informed the Buyer via a private conversation that the Sellers were also intending to bid. Id.   A public announcement requirement helps ensure that all bidders "stand on equal footing" with respect to the auction. 7 Am. Jur. 2d § 19, at 374.   In this case, the fact that the Sellers were intending to bid was conveyed to the Buyer only through a private conversation, it is clear that there was no public announcement.  

Therefore, based on the foregoing, the Court found that vague private conversation between the Buyer and Auctioneer was not sufficient notice as to constitute an oral modification of the printed advertised terms of the auction. Id. at 86-87.  The Court affirmed the circuit court’s decision.