At an auction of construction equipment, a backhoe is being auctioned in a lot with reserve. The contractor signals the auctioneer to withdraw the backhoe before the sale is completed. A bidder sues the contractor for the backhoe. How should the court rule?

• A. In favor of the contractor, because the auctioneer had not brought down the gavel to complete the sale.
• B. In favor of the bidder, because no-reserve auctions cannot permit withdrawal after bidding.
• C. In favor of the contractor, because the no-reserve rule requires that goods be withdrawn only after the sale is completed.
• D. In favor of the bidder, because the auctioneer cannot withdraw once bids are received.

Answer: (A)

At an auction, a binding sale isn't formed until the auctioneer’s hammer falls and the sale is completed. Until that moment, bids are offers, and the seller can withdraw the item. A no-reserve auction means there’s no minimum price to meet, so the item is expected to sell to the highest bidder if the sale goes through, but it does not remove the requirement that the sale must be completed to create a contract.

In this scenario, the contractor withdrew the backhoe before the sale was completed. Because no sale had been concluded, no contract to transfer ownership had formed, so the bidder cannot compel the sale. The contractor is favored. The other statements wrongly assume a sale had already been finalized or that withdrawal is prohibited once bids exist.