You’re the Auctioneer for a property and it’s auction day.
At the auction there’s a purchaser that has friend of theirs bidding for them, the bidders are talking to the absent purchaser on the telephone.
The purchaser has provided an authority for the Auctioneer to sign the contract on their behalf.
The bidding stalls and the auction stops, the property is passed in. The vendor needs time to make a decision about pricing.
Negotiation takes place with the absent purchaser and they in turn increase their offer by $5,000. The vendor accepts the purchaser’s increased offer.
Does the Auctioneer still have the authority to sign the contract for the purchaser in a post auction scenario? Additionally, does the Auctioneer have the authority to sign the contract for the vendor in a post auction scenario?
At common law, an auctioneer has the authority to sign a contract for sale on behalf of the purchaser and vendor when the hammer has fallen and a party refuses to sign. However, once the property is passed in and the parties subsequently reach an agreement then it is best to obtain a specific written authority for the auctioneer to sign on behalf of a vendor or purchaser.
In the scenario, the purchaser has provided an authority for the auctioneer to sign the contract on their behalf, however, there is no mention of the scope of that authority. For instance, when did that authority expire (eg. 11.59pm on the day of the auction?) Was it limited to the auction only, despite the auctioneer’s common law authority to sign?
In the absence of answers to these questions, best practice is to err on the side of caution and for auctioneers and agents to always obtain the requisite written authority from the relevant parties prior to entering into an agreement. Such an authority should specify an effective start and expiry date and it should be in writing - by way of a letter or email (or even a text message at the very least).
If an authority was received prior to the auction, covering the post-auction period (but only effective on the day of the auction), the auctioneer should get written confirmation from the authorising party that the authority applies for that post-auction period. This would protect the auctioneer, particularly where a negotiated sale price is below the reserve price and a party verbally authorised the auctioneer to sign over the telephone.
In essence, once a property is passed in, a new written authority should be obtained with respect to an agreement to be signed by the auctioneer on behalf of a party following negotiations.