An Auction that is Advertised as "Absolute" is not Necessarily Binding on Prospective Seller, if prior to the sale there are Announced Conditions Attached to the Sale

The Colorado Court of Appeals in Washburn v. Ronald W. Thomas & Raymond Wayne Thomas Charitable Rem., 37 P.3d 465 (2001) held that even though an auction to sell property is advertised as absolute, it may actually be conditional if other material that is provided to prospective bidders informs them that it is subject to certain conditions.

In this case, the Plaintiffs, highest bidders (“Appellants”) at an auction of real property did not obtain a deed on the land on which they bid because one of the Defendant sellers (“Defendants”) refused to proceed with the transaction. Appellants filed a suit against Defendants seeking damages and specific performance in the form of conveyance of the property on which they were the high bidders. Defendants in turn filed a motion for summary judgment contending that the Appellants were not entitled to specific performance.  Defendants pointed out that, prior to the auction, Appellants were informed that any successful bidder was required to execute a written sales contract and such contract limited Plaintiffs' remedies in the event of the sellers' default to a return of their earnest money deposit. And all the Appellants had signed the contracts. In response to the summary judgment motion, Appellants contended that were not bound by the terms of the written sales contract because that contract was "superfluous." Id. at 468. Additionally, Appellants argued that the auction was advertised as "absolute" and the contract was formed upon the acceptance of their bid. Id. The trial court dismissed Appellant’s action and determined that the sellers and marketers breached the sales contract, but, that by virtue of the contractual terms, the buyers' only remedy was return of their earnest money. This appeal before the Court of Appeals followed. 
 
The Court in deciding whether the auction was absolute or not made the findings noted below. Id. The Court noted that, even though the auction advertisement used the term "absolute," usage of that term was not dispositive. Id.   The Court stated that the advertisement also referenced the sales brochure that provided notice of the conditions. Id.   The Court found that any purported reliance on the advertisement must fail in light of the conditions clearly spelled out in the bid card and the written sales contract. Id.   Also, the Appellants through their bids specifically acknowledged and warranted that they had read the documents and agreed to be bound by them. Again, before the auction started, the auctioneer announced that any successful bidder would be required to sign the written sales contract. Id.    

The Court stated that the Appellant’s arguments do not undermine the Appellant’s agreement to be bound by the terms and conditions stated in the bid card and the written sales contract. Id.   (Internal citations omitted).  A sale bill advertising that an auction is "absolute" is not necessarily binding on the prospective seller, if before the auction starts, there are announced conditions attached to the sale. Id. (citing Milwaukee Stove & Furnace Supply Co. v. Apex Heating & Cooling, Inc., 142 Wis. 2d 151, 418 N.W.2d 4, 7 (Wis. Ct. App. 1987). Furthermore, a buyer is bound by the terms and conditions of a public sale announced prior to the sale, regardless of whether the buyer knew of them or understood them. Id. at 467. See United States v. Blair, 193 F.2d at 560 (internal citations omitted.)  Unless a contrary intention is manifested, bids at an auction embody terms made known by advertisement, posting, or other publication of which bidders are or should be aware, as modified by any announcement made by the auctioneer when the goods are put up for sale. Restatement (Second) of Contracts, supra, § 28(2); see Lawrence Paper Co. v. Rosen & Co., 939 F.2d 376, 379 (6th Cir. 1991). The Court stated that an auction may be conditional if other material that is provided to prospective bidders informs them that the auction is subject to certain conditions regardless of the fact that it was advertised as an “absolute” auction. Id. at 467. See Dry Creek Cattle Co. v. Harriet Bros. Ltd. P'ship, 908 P.2d 399, 402 (Wyo. 1995). 

Based on the above, the Court found that there was no genuine issue of material fact that the auction was conducted pursuant to the terms and conditions set forth in the bid card and the written sales contract and that the parties' rights were governed by those documents. Id. at 468.