The legal framework for furniture auctions: what you need to know

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Public auctionsWith its characteristic ritual and the hammer that seals transactions, it fascinates as much as it questions. The legal framework surrounding it has changed radically in recent years. Since 2011, the field has been liberalised, opening up new possibilities while maintaining the necessary framework.

Recent developments in the law governing sales by auction

The legal landscape for auctions underwent a major transformation with Act 2011-850 of 20 July 2011. This law abolished the historic prohibition on "making public auctions a customary method of conducting one's business", which appeared in the former article L.320-1 of the French Commercial Code.

Under article L.321-1 of the French Commercial Code, "voluntary sales of furniture by public auction may involve new or second-hand goods". They may be conducted on a retail basis, by lot or wholesale.

This change put an end to the auctioneers' monopoly on voluntary sales, creating a more open but still regulated system.

Organisation of voluntary sales of furniture by auction

Auction players

The 2011 law has reshuffled the cards. Voluntary sales of furniture by public auction are now organised by operators operating "as individuals or in the legal form of their choice" (article L.321-2 of the French Commercial Code).

These operators must meet strict conditions:

• Individuals must be French or nationals of an EU Member State, hold a professional qualification and have declared their activity to the Conseil des ventes volontaires (CVV).
• For legal entities: they must be incorporated under the laws of an EU Member State, have an establishment in France and include at least one qualified person among their directors.

Please note: notaries and bailiffs may, in municipalities without a judicial auctioneer, organise voluntary sales on an ancillary basis (article L.321-2, paragraph 2).

The Conseil des ventes volontaires: role and powers

Created by the law of 10 July 2000, the Conseil des ventes volontaires (CVV) plays a central role in regulating the sector. This independent administrative authority has legal personality and is made up of eleven members appointed for four-year terms.

The CVV has a number of key missions:

• Operator approval
• Drawing up a compendium of ethical obligations
• Penalties for professional misconduct

Its powers of sanction are graduated: warning, reprimand, temporary ban (up to three years) or permanent ban on carrying on business (article L.321-22 of the French Commercial Code).

The responsibilities of auction operators

Operators act as agents for the owner (article L.321-5). This status imposes a number of obligations on them:

• The impossibility of purchasing the goods offered on their behalf
• A ban on selling their own goods, unless expressly stated in advertising
• The obligation to provide proof of a special account for funds held on behalf of third parties
• The need for professional liability insurance

Article L.321-14 of the French Commercial Code states that "voluntary sales operators are responsible to the seller and the buyer for representing the price and delivering the goods".

This liability cannot be set aside by any clause to the contrary. Proof of the importance attached by the legislator to the protection of the parties.

Preparing and carrying out sales

Sales mandate and estimates

Every sale begins with a written mandate. The sales operator acts as the owner's agent. This mandate must be in writing, as confirmed by the Court of Cassation (Civ. 1re, 15 June 2016, no. 15-19.365).

The vendor may stipulate a reserve price, i.e. a minimum amount below which the property will not be sold. Article L.321-11 of the French Commercial Code states that "if the property has been estimated, this price may not be set higher than the lowest estimate appearing in the advertisement".

An important new feature is that the operator may grant an advance on the auction price (article L.321-13) or guarantee the seller a minimum price (article L.321-12).

Advertising and catalogues

Sales advertising is not subject to any particular formalities, but must contain certain mandatory information listed in Article R.321-33 of the French Commercial Code, in particular :

• The date and location of the sale
• The identity of the operator and its approval number
• The seller's status as a trader or craftsman for new goods
• The fact that the property is new
• The possible involvement of an expert

The information in the catalogue is the responsibility of the trader. The Court of Cassation has clearly stated that such information constitutes contractual documents (Civ. 1re, 27 Feb 2007, no. 02-13.420).

Auction procedure

Auctions must be public and free. No member of the audience may be prevented from bidding. The sale is awarded to the last bidder, i.e. the bidder who offered the highest price.

Article L.321-9 of the French Commercial Code stipulates that "the operator of voluntary sales of furniture by public auction shall designate the last bidder as the successful bidder or declare the property not sold and draw up a record of the sale".

If the reserve price is not reached, the property is declared not auctioned. However, the operator may, with the seller's agreement, sell the property by mutual agreement after the sale, provided that this is at a price at least equal to the last bid.

The legal effects of the award

Transfer of ownership

The auction results in the immediate transfer of ownership. This rule was confirmed by the Conseil d'État in a recent decision (CE 28 March 2024, no. 463879).

This transfer is not accompanied by either the eviction guarantee or the guarantee against hidden defects (article 1649 of the French Civil Code). The purchaser therefore buys the item "as is".

Obligations of the seller and the successful bidder

The seller is required to deliver the goods. In practice, this obligation is fulfilled by the sales operator, who is responsible for delivery to the buyer (article L.321-14).

The successful bidder has two main obligations:

1. Pay the price, usually in cash
2. Removing the asset by the agreed deadline

The price must be paid to the auction operator, who will remit it to the seller within a maximum of two months.

The irresponsible bidding procedure

In the event of non-payment, Article L.321-14 of the French Commercial Code provides for a specific procedure: the " repeat bids "(formerly known as "folle enchère").

After formal notice has been served without success, the property is put back up for sale at the seller's request. This request must be made within three months of the auction date, failing which the sale is automatically cancelled.

The defaulting bidder remains liable to pay the difference between his bid and the price obtained at the second sale, if the latter is lower. They may also be ordered to pay damages.

Electronic auctions: specific legal aspects

Article L.321-3 of the French Commercial Code specifically defines electronic auctions as "the act of offering, acting as the owner's agent, an item for remote public auction by electronic means in order to sell it to the highest bidder".

These sales are subject to the same rules as physical sales. The law specifies that "the mere fact that a confirmation, in accordance with the provisions of article 1127-2 of the Civil Code, is required has no bearing on the classification of the sale".

Be careful not to confuse these sales with auction brokerage transactions carried out remotely by electronic means. The latter are characterised by the absence of a best bid auction and the intervention of a third party in the conclusion of the sale.

The exact legal classification of the transaction is essential as it determines the applicable regime. For example, the Versailles court refused to classify certain internet platforms as auctions because there was no automatic adjudication (Versailles, 16 June 2011, RJDA 2011, no. 1013).

To protect yourself against any difficulties at an auction, it is a good idea to consult a specialist lawyer. At our firm, we regularly assist sellers, buyers and operators with their transactions. Don't hesitate to call on us to secure your transactions and assert your rights.

Sources

• French Commercial Code, Articles L.320-1 to L.321-38 and R.321-1 to R.321-73
• Law no. 2011-850 of 20 July 2011 on the liberalisation of voluntary sales of furniture by public auction
• Court of Cassation, Civil Division 1, 15 June 2016, no. 15-19.365
• Court of Cassation, Civil Division 1, 27 February 2007, no. 02-13.420
• Court of Cassation, Civil Division 1, 19 February 2013, no. 11-23.287
• Council of State, 28 March 2024, no. 463879
• Versailles Court of Appeal, 16 June 2011, RJDA 2011, n°1013

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