An auction is a process in which property is sold or bought by drawing lots and accepting bids. The highest bidder wins the property. If no bidder makes a higher bid, the auction ends and the property remains unsold. In most cases, the auction house collects a commission from the winning bidder, which is deducted from the gross proceeds due to the consignor/seller.
Auctions take place in public venues. A successful bidder pays a deposit to demonstrate commitment to the sale. The rest of the price is due at a certain date, and the recipient of the earnest money holds it as liquidated damages. The deposit may be cash, check, or other form of payment.
Auctions are different in that the seller sets a minimum price for the property before the auction. The highest bidder then competes by offering competitive prices. Usually, the seller accepts the highest bidder’s price, which is often higher than the minimum price. The auctioneer, who is hired by the seller, is paid by the seller on a commission.
Auctions are categorized into three types. These differ in structure, but they all have certain common features. Auctions are a popular business tool, and the law that applies to these transactions is extensive. Some issues covered include contracts, warranties, licenses, and more. Listed below is a brief overview of some of the general legal principles that govern auctions.