The Art of Voiding Auction Contracts

The Art Newspaper has an interesting article on “sleepers,” aka art objects that sell for an undervalued amount at auction, and subsequently are re-sold for their true (read: much, much higher) amount. For those of law-speak, this is a great review of the factors necessary for a binding agreement.

At auction, a sale is normally treated as binding and complete when a bid has been accepted by the fall of the hammer. But things are not always so straightforward. The common factor where a sleeper is concerned is the seller’s, and the auctioneer’s, lack of appreciation of the true or potential value of the item for sale. How does the law react in these circumstances?

By definition, the seller of a sleeper has failed to appreciate the true value of the item he or she is putting up for auction. In limited circumstances, the law may treat a contract as void where it was made on the basis of a mistaken understanding on the part of one or more of the parties at the time the contract was made. However, a high degree of proof is required to persuade a court that a mistake should nullify the sale. The court will carefully need to consider whether there has been a mistake as to the terms of the offer, as distinguished from a mistake as to the quality of what is being offered.

A seller who is unable to persuade his buyer, or the court, to void the contract of sale may instead consider looking to the auctioneers for a remedy.