An Owner's Right to Reject Bids Cannot be Asserted After the Bid is Accepted by the Fall of Hammer or by any other act of Acceptance by the Auctioneer if the Right to Reject is Neither Stated in the Printed Posters nor Announced at Auction

The Tennessee Court of Appeals, Western Section in Johnson v. Haynes, 532 S.W.2d 561 (Tenn. Ct. App. 1975) held that a Seller cannot secretly keep her right to reject bid.  The Court stated that such right to reject bid cannot be asserted after the highest bid is accepted by the auctioneer if it the right5 to reject is not explicitly stated in the posters or announced at the auction sale.  The Court held that a valid contract was made at a public auction upon fall of the auctioneer's hammer on terms announced only at the sale, regardless of terms in the Seller's contract with the auctioneer. 

The appellee Seller by written contract appointed the Auctioneer, Zirkle-Rainwater Auction Company, to sell certain tracts of real estate to the highest bidder at a public auction.  However, the Seller reserved a right to confirm all sales and agreed to make good and sufficient warranty deeds to any land sold.  The contract, however, did not state the terms for payment of land.  

The Auctioneer prepared printed posters and advertised the public auction.  Also, the poster provided "Terms Announced at Sale," and concluded with "Sale conducted for owners by: Zirkle-Rainwater Auction Company." The Seller was present at the auction and admitted that she knew the posters' contents. The poster did not include the Seller’s right to confirm bids.  Also, this information was not disclosed to the potential bidders at the time of sale.  Cash and finance terms were stated just before the sale.  

At the auction, the Auctioneer accepted the Plaintiff Appellant as the highest successful bidder.  The Plaintiff was ready to pay the bid amount.  However, the Seller told that the Plaintiff failed to comply with the sale terms and therefore she was not ready to sell the land to the Plaintiff.  Consequently, the Plaintiff moved to the Court for specific performance of the auction sale.  Plaintiff sought review of a decree by the Chancery Court of Knox County (Tennessee), which was rendered for the Seller.  The chancellor found that the contract was unenforceable under the statute of frauds and noncompliance with the sale terms. 

The Court held that a valid contract of sale existed at the fall of the auction hammer on the terms announced at the sale and that the auctioneer lacked authority to change the terms. Id. at 564  

The Tennessee Court of Appeals held that a valid contract for the sale of land was created upon the fall of the auctioneer’s hammer. Id.  The auctioneer did not have any authority to change the sale terms announced at the auction sale after the hammer fell. Id.at 565.  

When the seller’s right to reject bid was announced at the auction sale, that condition is binding on all bidders, irrespective of whether the terms were heard by the potential bidders or not. Id. ( citing Moore v. Berry, (1955) 40 Tenn.App. 1, 288 S.W.2d 465).  The Court noted that, when the right to reject bids is not stated in the printed posters and is not announced at the sale, that right cannot be asserted after the bid is accepted by the fall of the hammer or other act of acceptance by the auctioneer.

The Court observed that the Seller was present at the auction and had seen the posters of auction.  She knew the right to reject bids was not in the printed material advertising the auction.  She also knew the right to reject was not announced at the sale.  The Court stated that it would be extremely inequitable to permit the Seller to keep secret her right to reject a bid which had been accepted by the auctioneer, and to thereby void an otherwise completed sale.