Few days ago somebody won an auction for a 2008 BMW M3 on Ebay for $60,000. Minutes after he was confirmed the winner, the dealership–selling the car– gave him a phone call; they told him that the listing price was a mistake and he would not be getting the car. It makes sense why the dealer didn’t want to sell the car to him: The new M3 is so popular that many dealerships have been spiking up the price from $70,000 to over $100,000. This incident has sparked controversy all over the online automotive niche; should he be able to purchase the car with the price he won the auction with? To answer this question let’s talk about contracts.

 
What is a contract? It is an agreement between two entities that is enforceable by law.

There are two types of contracts.

• 1. Bilateral- a promise exchanged for a promise( This incident is a Bilateral one)
  2. Unilateral – a promise exchanged for an act.

There are four requirements to a contract

• 1. There must be an agreement made between two parties
  a. Offer
  b. Acceptance
  2. Must have consideration( both parties must give something in the bargain)
  3. Contractual Capacity – all parties are legally capable of entering into contracts
  4. Legality – contract must be legal

 
Obviously, the 3rd and the 4th requirements are met. Both the parties know what is at risk and are competent enough to make their own decisions. There are a few exceptions to this rule; neither party can be insane, drunk, or underage when the contract was made. If any of those qualifications are met, the contract will become a voidable one (legal but can be voided). The 4th requirement is met, because it’s an exchange for two promises that are legal. The guy gives the dealer money, and then the dealer gives the guy the car, nothing illegal there.

 
The 1st requirement is the most controversial to meet. An agreement for a contract happens by two events: an offer and an acceptance. The offer is a promise to perform or refrain from performing an act in the future. In auctions—like Ebay— the seller invites people to bid on their products by submitting offers; however, these offers are not offers to form a contract. Think of it as the sellers are just testing the waters to see how much money somebody would go into a contract for. The seller can revoke bids or all bids, until the auction ends. But when the auction ends a contract is usually formed: All auctions are considered to have a reserve, unless otherwise stated. The reserve means that the seller can refuse to sell and not make a contract. But in this case, the Ebay auction had “no reserve” and therefore entered a contract with the buyer. Auctions that clearly state they have no reserve must be sold to the highest bidder. The Uniform Commercial Code ( I believe chapter 15) states reinforces this concept of the reserve. There is a court case relating to this issue: A plaintiff won a domain name and the company refused to sell it. In the end, the company was forced to sell it because it was a legal contract. Lim v The.Tv Corp. International, 99 Cal.App.4th 684 (2nd Dist 2002).

 
The second part of the 1st requirement requires acceptance. This means that the seller must have shown assent, or agreement to the terms of the offer. The dealership knew what it was getting into by putting no reserve and listing it on Ebay. Additionally, an acceptance can be made through words or conduct. If the dealership had already setup directions on how to pay and what would be done when won; it is basically accepting the agreement before the offer is made.

 
The 2nd requirement for a contract requires consideration. It must have legally sufficient value and there must be a bargained-for exchange. Having legal value just means, the seller and buyer are not obligated to exchange goods but are doing so anyways. The guy doesn’t have to buy the car, there are no legal consequences by doing so; he does it by his own will. Bargained-for exchange means that either now or the future both parties must incur detriment, meaning they must lose something; the guy would lose the money and the dealership would lose the car. Both parties have to lose something. For instance, if Jon said he’ll give you $500 and never does, you can’t sue him for breach of contract: This isn’t bargain-for exchange because Jon isn’t getting anything in return. Consideration is really easy to meet in the case of auctions because. There are no obligations to sign up for the auction and there is always an exchange from both parties. That guy wasn’t required to bid, but since he won he suffers detriment, by trading his money for the car. Both requirements are settled for consideration.

 

That guy has a really good shot at purchasing the car for the price he won it at. It seems like all the requirements for a contract are met; therefore, it’s legally enforceable. Too bad he can’t take it straight to Federal Court: I believe the amount in question has to be greater than $70,000. But I doubt he’ll have to use the courts; most likely, the dealership will settle with him by giving an incentive to release them from the contract.

 

Yeah.