A bid is only an Offer and does not Alone Create a Contract

The Texas Court of Appeals of the Eleventh District, Eastland in Peterson v. NCNB Tex. Nat'l Bank, 862 S.W.2d 182 (Tex. App. Eastland 1993) held that an auction sale contract is created only when a bid is accepted by the seller.  A bid is simply an offer and a valid contract is created only upon its acceptance by the seller.     
 
This case relates to disputes concerning auction sale of residential lots by a bank.  In this case, NCNB Texas National Bank (“Bank”) advertised for sealed bids for the sale of residential lots in Erath County.  A copy of sealed bid instructions was also provided to the bidders.  These instructions specified that the bids must be presented in the Purchase and Sale Agreement that the Bank provided and no alterations to the purchase and sale agreement was allowed. Peterson, the bidder, (“Appellant”) was also given a copy of the Sealed Bid Instructions.  Appellant submitted bid in the form of a Purchase and Sale Agreement, but marked out certain provisions relating to title insurance. Appellant was the highest bidder but his bid was rejected with the notation ‘ "Contract ALTERED Unacceptable."  The Bank sold the residential lot to a lower bidder. The Appellant filed a suit in the trial court and trial court rendered a take nothing judgment.  After that, the Appellant sought review of the judgment. 
 
Appellant alleged that the trial court erred in its conclusion that "Peterson's bid was an offer to Purchase Lot 10, which offer was not accepted by NCNB; therefore, no contract ever came into existence." Id. at 183. 
 
The Court stated that a bid is only an offer and does not alone create a contract. Id. See Urban Electrical Services, Inc. v. Brownwood Independent School District, 852 S.W.2d 676 (Tex.App. - Eastland 1993, no writ); A & A Construction Company, Incorporated v. City of Corpus Christi, 527 S.W.2d 833 (Tex.Civ.App. - Corpus Christi 1975, no writ).  For a contract to be binding and valid, it requires both an offer and an acceptance. Id.  ( citing Smith v. Renz, 840 S.W.2d 702 (Tex.App. - Corpus Christi 1992, writ den'd).
 
The Appellant argued that the bid in question being a sealed bid, the special rule for sealed bid auctions applied in this case. Id.  Relying upon cases from other jurisdictions, Appellant contended that in sealed bid auctions, the act of opening a sealed bid in proper form is an acceptance for purposes of determining when a contract is formed, conditioned on no higher bid being made. Id.  Peterson,862 S.W.2d 183

The Court held that, in the cases that the Appellant cited/referred to, the letter used to solicit bids specified in clear and definite terms that a contract would be awarded to or an agreement of sale tendered to the "highest. . .bidder." The courts in these cases determined that the definite language transformed the notice from a solicitation for offers to a firm offer to sell to the highest bidder. Id.

However, the Sealed Bid Instructions in the present case did not provide that the sale would be made to the highest bidder. Id.  Moreover, the seller and its agent clearly reserved the right to reject any and all bids or offers. Id.
 
Considering the facts and law discussed above, the Court found that the trial court did not err in concluding that the Appellant’s bid was an unaccepted offer to purchase and, therefore, no contract came into existence. Id.