Contracts and Sales Multistate Bar Practice Exam

In an auction conducted "with reserve," when is a sale considered complete?

1. When the seller announces it is sold

2. At the moment bidding starts

3. When the auctioneer's hammer falls

4. When the highest bid is declared

The correct answer is: When the auctioneer's hammer falls

In an auction conducted "with reserve," the sale is considered complete when the auctioneer's hammer falls. This is a standard procedure in auctions, signifying the conclusion of the bidding process and the acceptance of the highest bid by the auctioneer. In a "with reserve" auction, the seller retains the right to reject bids that do not meet a predetermined minimum price, known as the reserve price. Thus, although a bid may be the highest offered, the auction is not automatically completed until the auctioneer formally signals the acceptance of that bid with the fall of their hammer. This action indicates that a binding agreement has been reached between the seller and the highest bidder, effectively transferring ownership of the item to the highest bidder at that point in time. As for the other choices, while the seller may announce that the item is sold, that announcement alone does not make the sale binding without the hammer falling. Starting the bidding does not signify completion, and simply declaring the highest bid does not finalize the sale unless the auctioneer affirms it with the hammer fall.