What is a lawful auc­tion within the mea­ning of the BGB?

Auc­tions within the mea­ning of the Ger­man Civil Code dif­fer from sales plat­forms and over-the-coun­ter sales.

An auc­tion within the mea­ning of Sec­tion 156 BGB only exists if the purcha­se con­tract is only con­cluded when the auc­tion­eer accepts the bid. It is pre­cis­e­ly this con­sti­tu­ti­ve ele­ment that is miss­ing in the case of pri­va­te trea­ty sales, M&A auc­tion sales and Ebay-like plat­forms: The­re, the con­tract is crea­ted accor­ding to the gene­ral rules of sales law, usual­ly auto­ma­ti­cal­ly or by free sel­ec­tion of the sel­ler. The mere “auc­tion cha­rac­ter” of a pro­ce­du­re does not replace the legal accep­tance of the bid. Anyo­ne refer­ring to an “auc­tion” should the­r­e­fo­re make a clear distinc­tion as to whe­ther it is actual­ly an auc­tion — or mere­ly a struc­tu­red bid­ding pro­cess or a sales plat­form.

What is an auc­tion within the mea­ning of the Ger­man Civil Code? In this artic­le, we cla­ri­fy a ques­ti­on that is often unde­re­sti­ma­ted in prac­ti­ce — but is of cru­cial legal importance: When does an “auc­tion” within the mea­ning of the Ger­man Civil Code actual­ly exist — and when does it not?

We look in par­ti­cu­lar at sec­tion 156 of the Ger­man Civil Code (BGB) and distin­gu­ish tra­di­tio­nal auc­tions from online auc­tions such as eBay and from the so-cal­led bid­ding pro­cess.
The­re are major misun­derstan­dings here — with serious con­se­quen­ces when it comes to pled­ges of rights, rights to sepa­ra­te satis­fac­tion or insol­ven­cy-pro­of liqui­da­ti­on.

The legal basis: Sec­tion 156 BGB.

Sec­tion 156 of the Ger­man Civil Code is crys­tal clear:
“In the case of an auc­tion, the con­tract is only con­cluded when the bid is accept­ed.”

This means that it is not the bid that estab­lishes the purcha­se con­tract — but the knock­down.
And the knock­down is a decla­ra­ti­on of intent by the auc­tion­eer. Wit­hout this acti­ve knock­down — no con­tract. That is pre­cis­e­ly the cen­tral point.

When is it not an auc­tion within the mea­ning of the BGB?

Many peo­p­le think that an auc­tion on the Inter­net is auto­ma­ti­cal­ly an auc­tion within the mea­ning of the law. This is wrong. Exam­p­le: Ebay.

The Fede­ral Court of Jus­ti­ce has repea­ted­ly ruled that eBay auc­tions are not auc­tions within the mea­ning of Sec­tion 156 of the Ger­man Civil Code (BGB). Why? Becau­se the­re is no knock­down by a per­son, but the con­tract is auto­ma­ti­cal­ly con­cluded with the pas­sa­ge of time — via an algo­rithm. And that is not enough. Becau­se the knock­down must be a decla­ra­ti­on of intent by an auc­tion­eer — not a machi­ne.

What about the so-cal­led bid­ding pro­cess?

The so-cal­led bid­ding pro­cess, as it is often known from the real estate sec­tor or from the M&A sec­tor — whe­re it is also refer­red to as an “auc­tion sale” — is also not an auc­tion within the mea­ning of the BGB.

Why? Becau­se non-bin­ding purcha­se pri­ce offers are usual­ly obtai­ned the­re wit­hout a clear knock­down by an auc­tion­eer.
The hig­hest bid is often only used as a basis for fur­ther nego­tia­ti­ons — not as a bin­ding offer that is accept­ed by knock­down.

In legal terms, this is mere­ly an “invi­ta­tio ad offe­ren­dum”, i.e. an invi­ta­ti­on to sub­mit bids — but not an auc­tion with a knock­down in accordance with sec­tion 156 of the Ger­man Civil Code (BGB). Even a bid­ding pro­cess with seve­ral bids, with dead­lines and docu­men­ta­ti­on — remains legal­ly a free­hand sel­ec­tion pro­cess.
And that is not enough if an auc­tion is requi­red by law.

When is the­re a genui­ne auc­tion within the mea­ning of Sec­tion 156 BGB?

Genui­ne auc­tions within the mea­ning of the BGB only exist if:

1. bids are sub­mit­ted,
2. and the auc­tion­eer — i.e. a per­son -
3. accepts the bid, i.e. decla­res accep­tance.

This is the case with tra­di­tio­nal face-to-face auc­tions — for exam­p­le in an auc­tion room with an auc­tion­eer. It is also the case with pro­fes­sio­nal online live auc­tions, whe­re the auc­tion­eer fol­lows the bid­ding in real time and makes the win­ning bid in per­son — whe­ther by shou­ting, cli­cking the mou­se or making an elec­tro­nic decla­ra­ti­on. What is important here is that a per­son must deci­de whe­ther and to whom to accept the bid. Only then does the con­tract come into being — in accordance with Sec­tion 156 of the Ger­man Civil Code (BGB).

Only two forms of auc­tion are reco­gni­zed by law.

This is legal­ly unam­bi­guous: Only the fol­lo­wing two forms are con­side­red auc­tions within the mea­ning of the law.

First­ly, the clas­sic face-to-face auc­tion — with a phy­si­cal auc­tion­eer and ver­bal knock­down.
Second­ly, the online live auc­tion, in which the auc­tion­eer hims­elf knocks down the lot in real time — i.e. no auto­ma­ted auc­tion soft­ware, but a real decis­i­on by a human being.

All other pro­ce­du­res — i.e. sta­tic online auc­tions, eBay sales, bid­ding pro­ce­du­res or auto­ma­ted sel­ec­tion for­mats — are not auc­tions in the legal sen­se. They may look like an auc­tion from the out­side — but they are not legal­ly suf­fi­ci­ent if the law requi­res an auc­tion. Why is this so important?

Rele­van­ce for the rea­liza­ti­on of cre­di­tors.

Quite sim­ply, if you as a cre­di­tor have a pledge of rights or a right to sepa­ra­te satis­fac­tion, you may only rea­li­ze the col­la­te­ral by public auc­tion, unless a pri­va­te sale in accordance with Sec­tion 1221 BGB is spe­ci­fied. And “public” within the mea­ning of the law means:
Auc­tion with per­so­nal knock­down in accordance with sec­tion 156 BGB.

A sale via eBay — or a bid­ding pro­cess — is not suf­fi­ci­ent for this.
The con­se­quence: risks of rescis­si­on, dama­ges, objec­tions by insol­ven­cy admi­nis­tra­tors, loss of col­la­te­ral.

Key mes­sa­ge:

An auc­tion within the mea­ning of the Ger­man Civil Code only exists if the bid is accept­ed by a decla­ra­ti­on of intent by the auc­tion­eer.

An algo­rithm, a time lap­se or an infor­mal sel­ec­tion pro­cess does not replace this award.

The fol­lo­wing the­r­e­fo­re appli­es:
Only two for­mats are legal­ly reco­gni­zed: face-to-face auc­tions and online live auc­tions with a per­so­nal ham­mer pri­ce.

Ever­y­thing else is eit­her a sale by pri­va­te trea­ty — or legal­ly sim­ply not an auc­tion.

If you, as a cre­di­tor, want to sell your pro­per­ty secu­re­ly and in com­pli­ance with the law, make sure that a public bid is accept­ed by an auc­tion­eer — whe­ther in per­son or live online.

Fur­ther infor­ma­ti­on on col­la­te­ral enforce­ment — prac­ti­cal, stra­te­gic and legal­ly com­pli­ant — can be found on our web­site:
www.deutsche-pfandverwertung.de

We are publicly appoin­ted and sworn auc­tion­eers with many years of expe­ri­ence in the field of col­la­te­ral enforce­ment.