What is an auction?
Legal definition
An auction is an offer to buy an item at a specific price at a public sale. It represents a bid made by a bidder as part of a specific procedure. This offer to purchase is part of a formalised process in which the property is awarded to the highest bidder.
Distinction from related concepts
An auction is clearly different from a higher bid. The latter only occurs after an initial auction and is only permitted for certain sales. An overbid consists of proposing a higher price than that of the initial bid, leading to a new auction.
La repeat bids This refers to the resale of a previously auctioned item when the successful bidder has not fulfilled his or her obligations, in particular payment of the price. This procedure replaces the former "folle enchère" (irresponsible bidding).
The different auction systems
The dominant system in France is bottom-up bidding. Potential buyers offer successively higher prices until no one bids higher.
In contrast, "discount" sales initially set a high price, which is gradually reduced. The item is sold to the first bidder to express an intention to buy.
In addition, the rise of electronic auctions has introduced new dematerialised sales methods, requiring a specific understanding of their procedures and particularities, particularly with regard to the right of withdrawal.
General legal framework for auctions
Applicable texts
The rules governing public auctions are governed by a number of fundamental texts:
- The French Commercial Code (articles L.320-1 to L.322-16 and R.321-1 to R.321-55) for voluntary sales of movable property
- The Code of Civil Enforcement Procedures for forced sales
- The Civil Code for the general principles of contracts and certain specific provisions
- Ordinance no. 2016-728 of 2 June 2016 on the status of commissioner of justice
To navigate this complex framework and ensure compliance with procedures, particularly in the event of seizure or post-adjudication litigation, expertise in enforcement law is essential.
Guiding principles for public auctions
Public auctions are based on essential principles:
- Prior publicity of the sale
- Transparency of the process
- Free competition between bidders
- Equal treatment of participants
- Award to the highest bidder
- The formation of a contract by auction rather than by bidding alone
Conditions required to bid
Legal existence of the bidder
The bidder must legally exist at the time of the auction. A natural person must be alive. For a legal entity, it must be validly constituted with legal personality.
A company in formation can validly bid if it has sufficient financial guarantees and if the commitments are then taken over by the definitively incorporated company.
Legal capacity
Participation in auctions requires legal capacity to contract. Unemancipated minors and protected adults are considered incapable.
Minors may be represented by their parents or guardians. Adults under guardianship act through their guardian. Adults under guardianship must be assisted in respect of property other than that for everyday use.
Disabilities specific to auctions
In addition to the general disqualifications, there are specific prohibitions on bidding:
- Article 1596 of the Civil Code prohibits guardians, mandataries, public administrators and public officers from bidding on the property in their charge.
- In real estate matters, article R.322-39 of the Code of Civil Enforcement Procedures prohibits auctions by the distrainee debtor, court officers and magistrates involved in the process.
- For sales of movable property, judicial and auctioneer commissioners may not purchase the goods they have been instructed to sell.
Protection of freedom of bidding
Role of the sales authority
The auction authorities (auctioneers, notaries and judges) are responsible for policing auctions. They ensure that order is maintained, that the process is fair and that auctions are free to compete.
In the case of judicial property sales, the enforcement judge supervises the proper conduct of the auctions and rules on any disputes relating to their validity.
Criminal penalties for obstructing auctions
Obstructing free bidding is an offence punishable under articles 313-6 and 313-7 of the French Criminal Code. The penalties are as follows
- Dismissing a bidder by means of gifts, promises or fraudulent agreements
- Obstruction by violence, assault or threats
- Participation in an auction without the assistance of the competent officer
The penalty is six months' imprisonment and a fine of €22,500, in addition to the additional penalties applicable to individuals.
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