Interesting eBay Lawsuit

A lawsuit presently under way in Australia look set to establish a legal precedent on the degree to which eBay contracts are binding.

The brief facts are that a seller put a vintage plane on eBay with a reserve of $150k. A buyer, the sole bidder, paid the reserve price with 20 seconds left in the auction period. However the seller received a $250k offer from somebody else and does not want to sell to the eBay buyer.

Under eBay rules the position is pretty clear. What this case will tell us is how well those rules translate into the realms of actual contract law. So far the judge seems to be favouring the buyer's argument, if that's any guide.

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I don't see this case as setting any precedent. The enforceability of ebay's rules, accepted by participants, seems pretty clear as a matter of contract law. Whether there may be ambiguities in those rules that require clarification or interpretation is another matter, but not one likely to result in any important legal precedent.

I think the only wildcard is the Australian setting - they might treat online transactions as offers which the seller can refuse, not completed transactions. I'm not at all familiar with Australian contract law, though.

As for applicability to contract law in the United States, there is none.

Yeah, when a contract is formed when executed online and where it is deemed to be located have been set for years.

If I remember correctly the online part is irrelevant in Australian law, as long as the seller doesn't claim that somebody else posted the auction I don't see the seller being able to back out.

What do you think of his argument that the two of them have a contracgt with eBay, but neither has a contract with the other?

(For the record, I think it is BS).

I guess by precedent-setting, I was thinking of what happens if the buyer wins.

Also, what is the worst that can happen in the event of non-performance on his part? He gets a neg from Mr Smythe? Can eBay, or the court, make him hand over the plane, particularly if title arguably vests in a 3rd party now?

It's interesting to me that eBay don't seem to want to join the buyer in this dispute. They stand to lose a bit if this seller wins his case.

I would sell to the higher offer and let the bidder give negative feedback. Even if ebay cancels his account, it would be worth it. But they probably wouldn't, ebay almost always sides with sellers because they pay the bills. Perhaps not the most ethical response, but as long as the seller doesn't lie about what happened and is willing to take his ebay slap on the wrist, I think it is ok.

I have had this happen to me a few times, it is a bummer. However, ebay seems unwilling to police its sellers

Originally Posted by California Dreamer

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What do you think of his argument that the two of them have a contracgt with eBay, but neither has a contract with the other?

(For the record, I think it is BS).

I guess by precedent-setting, I was thinking of what happens if the buyer wins.

Also, what is the worst that can happen in the event of non-performance on his part? He gets a neg from Mr Smythe? Can eBay, or the court, make him hand over the plane, particularly if title arguably vests in a 3rd party now?

It's interesting to me that eBay don't seem to want to join the buyer in this dispute. They stand to lose a bit if this seller wins his case.

Several things, none of which are based on Australian law, but are based on applying US contract principles:

The buyer winning the lawsuit would not be precedent setting; the seller winning would be. Basically one has all the elements of a contract: an offer and acceptance. If the seller reneges, the buyer can sue for specific performance and/or damages. If the goods are in the hands of another, a court may, under certain circumstances permit joinder of that third party for the purpose of reqiring specific performance. Then, of course, the 3rd party would have recourse against the seller fr damages.

Here, ebay is the auction house. It has no interest in being involved unless its fees have not been paid. Then it too may seek recourse against the seller.

Now, inasmuch as this is Australia, there may be twists of which I am unaware, but basic principles of contract creation and enforcement apply to all countries whose law devolves from the British common law.

This is not a terribly interesting contract issue, except insofar as it involves the (relatively) sexy subject of eBay. In fact, I am sure that it is no different from the law governing live auctions, whatever that is. I assume, given the language eBay forces you to agree to when bidding, that the contract would be enforceable.

More interesting than which party will win is what relief the court will award. Since the plane has already been sold specific performance (i.e. giving the plane to the original buyer) seems unlikely. The most obvious relief would be to divest the seller of his ill-gotten gains by awarding damages in the amount of the difference between the contracted sale with the eBay buyer and the completed sale with the ultimate buyer (~$100k). Prediction: windfall for eBay buyer.

Of course none of this will have any impact on American contract law in the least.

Originally Posted by marc237

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Several things, none of which are based on Australian law, but are based on applying US contract principles:

The buyer winning the lawsuit would not be precedent setting; the seller winning would be. Basically one has all the elements of a contract: an offer and acceptance. If the seller reneges, the buyer can sue for specific performance and/or damages. If the goods are in the hands of another, a court may, under certain circumstances permit joinder of that third party for the purpose of reqiring specific performance. Then, of course, the 3rd party would have recourse against the seller fr damages.

Here, ebay is the auction house. It has no interest in being involved unless its fees have not been paid. Then it too may seek recourse against the seller.

Now, inasmuch as this is Australia, there may be twists of which I am unaware, but basic principles of contract creation and enforcement apply to all countries whose law devolves from the British common law.

Unless the plane is unique, specific performance will not be allowed. However, the Plaintiff will probably be able to recover money damages for the difference between the contract price and the cost to cover.

Wait a minute, I vaguely recall something about auction law that where there is a reserve set that the bid is actually the offer and that the seller then has to accept before there is a contract. I think this may especially be true where there is a blind reserve. So, if that's true, then in this case, the bid to buy the plane for $150k would be the offer and the seller never accepted that offer.

Also, I would argue that specific performance is not appropriate in this case because money damages can make the would-be plaintiff whole.

EDIT: weeks beat me to it.

Originally Posted by weeks

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Unless the plane is unique, specific performance will not be allowed. However, the Plaintiff will probably be able to recover money damages for the difference between the contract price and the cost to cover.

I do not disagree, it is why I said that specific performance may be available under certain circumstances. One of those would be whether the item in question is unique.

Originally Posted by thepataphysician

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I would sell to the higher offer and let the bidder give negative feedback. Even if ebay cancels his account, it would be worth it. But they probably wouldn't, ebay almost always sides with sellers because they pay the bills. Perhaps not the most ethical response, but as long as the seller doesn't lie about what happened and is willing to take his ebay slap on the wrist, I think it is ok.

I have had this happen to me a few times, it is a bummer. However, ebay seems unwilling to police its sellers

If the bid is deemed to be acceptance of an offer which creates a legal contract under the law, then what eBay does or doesn't do is irrelevant. The seller would be liable for breaching the contract, and would either have to hand over the plane or pay the buyer the difference between 150k and whatever it would cost that buyer to get an equivalent plane. Ebay can only enforce rules as to whether you can or can't use eBay. But if an ebay bid is viewed as a legally binding acceptance by the court, which seems likely, then the court would have its full legal authority to enforce the contract. In other words, the court could issue a judgment and the buyer could take that judgment and get law enforcement to sieze the seller's property if the seller doesn't pay. That's considerably more than just negative feedback.

Theoretically you could do this in small auctions too, but it's not worth it financially, of course, so the only recourse is through eBay.

The seller does not have to sell. Seller did not transfer goods to Ebay posession to sell it for him. Ebay is merely an agent here. Seller violated agents rules and thus have to pay final value fee that is all seller has to do.

What if you refuse to sell your house after offer was accepted by you. You would pay comission to your real esttate broker and walk away from the deal. Same here.

Originally Posted by odoreater

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Also, I would argue that specific performance is not appropriate in this case because money damages can make the would-be plaintiff whole.

EDIT: weeks beat me to it.

I don't agree with this. Being one of the 5 remaining WWII area planes of this kind still flying would sure go a long way toward it being unique.