Auctions exposed as non binding ~ [ Return ]

Consider the following scenario;

You are the successful bidder at an on - site Auction in Melbourne. The
Property was knocked down to you for $2.7 Million and you are
overwhelmed with joy.

As you start walk inside to sign Contracts with the Vendors and pay the
ten (10) percent Deposit, several people approach you to advise there
are major asbestos problems with the home.

Are you bound to the purchase?

Well, this particular scenario happened to a purchaser who within his rights in Victoria, decided to get in his car and drive away without signing and tendering a deposit - there was no legally enforceable contract.

From a purely legal point of view, to have an enforceable contract you need to "have all three points present at the fall of the Hammer";

• Tender a deposit (known as consideration)

• Signed offer (Purchasers executed Contract) and acceptance
(Vendor executed Contract) in the form of a written Contract for a valid
sale of Real Estate.

No Real Estate can be sold without a written Contract in NSW; Contracts
cannot be verbal to sell a property in NSW.

• Intention to be legally bound.

Even as a student of Conveyancing studying what a simple Contract is - Bidding at Auction only fulfils one of the three requirements for a Legal Contract - intention to be legally bound, the other two of a Deposit and a Signed Purchaser and Vendor Contract are not present at the "fall of the Hammer".

As the above example shows the Purchaser drove off before signing the Contract and tendering a Deposit - At that point there was no legally binding Contract.

I had an interesting discussion with a Victorian Lawyer over the holiday break and he described an Auction as a game of "musical chairs" where the last man sitting on the last chair from a legal point of view is under no Legal obligation to sign the Contract or to tender a deposit if he is the successful Bidder.

There are moves within the Victorian Real Estate Institute to have the contracts signed and take a small deposit" before" all Auctions to ensure the above scenario does not happen again.

The NSW position is "The Auction Regulations do allow for the Auctioneer to sign the Contract if the Purchaser or Vendor refuses to sign". In the heat of the Auction and practicality of emotions, time, money and "possible Legal action" (see below) the probable outcome would be to sell to the second highest bidder.

The authorisation for the Auctioneer in NSW to sign would come under great test if challenged by a Purchaser or Vendor in the Courts- because authorisations to sign legal documents on someone's behalf must be must in writing for a individual specific request or task to fulfil from a Purchaser or Vendor.

Rather than an outside third party (the Auctioneer) seeking to sign a Contract without written authorisation who is not a party to the Contract. (It is the Vendor and Purchaser who exchange promises and actions in the Contract not the Auctioneer)

I have not read a case in NSW where The Auction Regulations have been challenged by the historical concept of what an "enforceable and binding Contract has to contain" - Consideration, Written Offer and Acceptance; let alone the potential & real issue of "individual separate & specific written authorisations from Purchasers and Vendors" for Auctioneers to sign the Contract on their behalf.

We have updated our section - Why use Brown & Brown - Fees;
http://www.conveyancers.net.au/why.htm

Market news: There is a lot of activity in Real Estate, the Election held everything late last year.

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