In an Absolute Auction, Once a Final Mutual Assent is Achieved, the Statute of Frauds Merely Requires That the Parties Sign a Memorandum Encompassing all the Elements of a Contract

The Court of Special Appeals of Maryland in Pyles v. Goller, 109 Md. App. 71, 674 A.2d 35 (1996 Maryland) held that a suit for specific performance related to an absolute auction sale is not barred by the statutes of fraud where the buyer did not have a chance to memorialize the contract in writing because the bid was unlawfully rejected by the seller.  This case involved a 'with reserve auction' sales where the contractual principles differed.  The Court stated that, although a written agreement was not present in this case, there was no violation of statute of frauds because the buyer was denied the opportunity to reduce the contract into writing by rejecting his bid.  Also, the court discussed the contractual significance of an absolute or without reverse auction.  The court stated that, in such cases, a final enforceable contract comes into existence when the last high bid is made. 

 In this case, the Plaintiff buyer, Goller ("Buyer") brought an action against defendant sellers for specific performance and damages for fraud because the sellers refused to convey to the buyer land he had bought from them at auction. Pyles and Reed ("Sellers") owned a farm as tenants in common, and conducted an auction of several plots of their land that was advertised as an "absolute auction" where the successful bidder had the choice of properties.  On the auction day, only two persons registered for the auction.  Before the start of auction, the Sellers told the auctioneer was that they would bid for some lots themselves. This was not communicated to the bidders.  However, the auctioneer via a private conversation indicated to the successful bidder on lot 7 (Buyer) that the Sellers were intending to bid on the lots. The Buyer placed a high bid during the first round, which was rejected by the sellers finding that it was less than what they owed on the plot. 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. The Circuit Court ordered the Sellers to convey the land to the Buyer at the bid price pursuant to Md. Code Ann, Com. Law § 2-238.  The Sellers appealed.

The Sellers in this case argued that the sale violated the statute of frauds and hence barred the Buyer’s action. Id. at 87-88.  The Buyers countered by contending that the action was not barred by the statute of frauds. Id.
The Court found that, although an express written agreement was not entered between Buyer and Sellers, Buyer’s claim was not barred by the statute of frauds.  The Court noted that the statute of frauds requires that: “No action may be brought on any contract for the sale or disposition of land or of any interest in or concerning land unless the contract on which the action is brought, or some memorandum or note of it, is in writing and signed by the party to be charged or some other person lawfully authorized by him”. Id. at 88.

The Court pointed out that the Seller’s argument ignores the contractual significance of an auction held "without reserve." Id. In an auction held "without reserve," mutual assents are achieved in succession as each next high bid is made, and final mutual assent and a final enforceable contract comes into existence when the last high bid is made. Id.  After reaching final mutual assent, the statute of frauds only requires that the parties sign a memorandum encompassing all the elements of a contract. Id. 

The Court found that the Buyer in this case did not get an opportunity to sign a memorandum because sellers rejected his bid. Id.  The Court held that the Buyer is not precluded from specific performance of the sale of lot No. 7 because the Sellers unlawfully rejected Buyer’s bid. Id.  Therefore, the Court affirmed the circuit court’s decision requiring the Sellers to convey title to the buyer for the bid price.  The Court further held that the circuit court may appoint a trustee to sign a contract on behalf of sellers so as to certify the conveyance in case Sellers refused to convey the lot. Id. at 88-89.