LICITATION. – This is the offering of a price made by several persons who, competing with one another, take part in an auction or public sale. The term (from the archaic Latin licitari) properly refers to the action of one who bids at an auction in competition with others, but in common legal language it is synonymous with auction or public sale, to denote that special procedure of sale which is carried out in the typical form of a public competition open simultaneously among several bidders, after the necessary publicity, with the obligation, on the part of the person who has taken the initiative, to award the item to the highest bidder.
I. General Doctrine
Although in its original and prevalent meaning the procedure is typical of the contract of sale, it is also applied to other contractual figures, such as, for example, public or private contracts for works and services, the leasing of things, the hiring of labour, and even of works.According to the best and prevailing doctrine, the contractual transaction begins with the declaration of opening, which has the value of an offer of sale, i.e., a proposal of contract in incertum personam, and is perfected by the offer to purchase declared by the individual bidder, which is equivalent to the acceptance by the buyer. Every offer to purchase thus corresponds to a distinct contract, concluded however under the condition (suspensive) that another does not subsequently offer a more favourable price. It follows that once the offer has been declared by the buyer, the proposer no longer has the right to withdraw. Others, with less foundation, hold that the declaration of opening is not a proposal of contract, but an invitation to make proposals of contract: these would be found, on the contrary, in the individual offers of the bidders, and the transaction would be perfected by the final award, equivalent to acceptance, on the part of the person who institutes the auction. The latter, therefore, would not be bound by the declaration of opening, and before the award would always have the right to withdraw.
Some writers, however, admit the possibility of either interpretation, according to the different intention of the proposer: a question of fact, therefore, to be resolved in each individual case.
To be able to bid at an auction, the same legal capacity is required as for any other contract. Incapable persons may bid through a representative.
The auction is distinguished as voluntary and forced (judicial), according to whether the opening is made spontaneously by the owner of the item or is imposed by the executive power in accordance with the law. Between the two, some authors insert the necessary auction, made by law, but not at the request of creditors (e.g., the sale of the property of minors and of those interdicted or incapacitated). The form of the auction is not relevant from the substantive point of view. The systems most commonly used are: by public auctioneer, when the offers are made by the bidders, in competition with one another, in a public verbal form; by candle (candela vergine), when, after the last offer, the burning of one or more candles determines the final award to the winner; by secret verbal offers, communicated confidentially to the person directing the sale; by secret written offers, presented in a sealed envelope; by the Dutch system, when the offers are made by the person promoting the auction starting from a maximum base price and gradually reducing II.
The institution is very ancient. Already in use among various peoples and received into the laws of Athens, it had wide application in Roman law, not only for forced executions, but also for voluntary sales. Such sales were said to be made sub hasta, with reference to the spear which the magistrate had planted on the site of the operation. The action of those who competed with offers was called licitatio, i.e., competition.
Medieval usages and statutes maintained the Roman character of the auction; from the 17th century onwards, auctions and public licitations became very common in Europe, especially in commercial dealings.
II. Civil and Canon Law
In Italian law, sale by public auction is typical, though not exclusive, in forced sales in execution of judicial judgments, in particular in compulsory executions of movable property (arts. 534-40 of the Code of Civil Procedure) and immovable property (arts. 576-91), in compulsory sales of property encumbered by pledge or mortgage (art. 602), in sales of immovable property for the dissolution of co-ownership (art. 788), in procedures for the release of immovable property from mortgage (art. 795), in compulsory executions for non-performance by the buyer (art. 1515 of the Civil Code), and in bankruptcy liquidations (arts. 106, 108 of the Consolidated Text of the provisions on the discipline of bankruptcy). It is also provided for in certain non-executive sales, for example, in the sale of the property of minors, of those interdicted or incapacitated (arts. 748, 733 of the Code of Civil Procedure).In executions of movable property, the auction is carried out by the system of written or verbal offers, on the base price previously fixed, with the day and hour, by the execution judge (art. 537). In executions of immovable property, on the other hand, it takes place before the judge, in the courtroom, by the candle system. After each offer, up to three candles are successively lit, each lasting about one minute. When the third candle has gone out without a higher offer being made, the immovable property is awarded to the last bidder. The auction is said to have gone “desert” when no offer has been made (art. 581).
Voluntary public auctions are regulated by specific norms contained in the Regulation on the General Accounting of the State (Royal Decree of 23 May 1924, no. 824). The auction notice, following a decree of authorisation, must be published at least 15 days before the date fixed for the auction, and must be notified at the seat of the authority proceeding and in the municipality where the property is located. Private auctions are regulated by art. 89 of the aforementioned Decree-Regulation. Among the numerous norms laid down by the legislator on this matter, particular mention should be made of the penalties contemplated in the Penal Code, for the protection of the morality and sincerity of auctions, against anyone who, by violence or threat, or by gifts, promises, collusion or other fraudulent means, prevents or disturbs the competition in public auctions or even in private ones duly authorised (art. 353), as well as against anyone who, for money or other advantage for himself or others, abstains from competing (art. 354).
In the Code of Canon Law, the procedure of sale by auction is provided for in the alienation of ecclesiastical goods (can. 1531 § 2) and for the leasing of land (can. 1541 § 1). In the case of alienation, it is strictly forbidden to award the item on the basis of a price lower than that fixed by the experts in the appraisal duly requested (can. 1531 § 1, 1530 § 1 n. 1). For the rest, the norms laid down by the civil legislator in this matter must be considered applicable also to canon law, on the basis of the prescription of can. 1529 which canonises them. In the concordatory regime, for the alienation of beneficiary goods in general, the procedure by public auction or by private sale is applied (cf. Regulation of 2 December 1929, executing Law of 27 May 1929, no. 848).
### III. Moral Theology
The moral permissibility of the procedure by auction or bidding is grounded not only in universal custom and the common teaching of all moralists but also in the objective criterion of justice upon which it is based. The price resulting from the competition, with which the last bidder secures the item, is truly just even if in reality it exceeds the maximum or falls below the minimum, both because the offer of the item, freely and voluntarily made on one side, corresponds to the offer of the price, equally free and voluntary, on the other; and because the condition of risk, to which the contracting parties freely subject themselves, is in fact equal on both sides, since on both sides the hope of gain balances the danger of loss. The criterion may become somewhat problematic when dealing with a forced auction, in which the seller is not truly free and consenting. The difficulty, however, is more theoretical than practical, since in practice both the law and its executor safeguard, within the limits of honesty and justice, the rights of the forced seller through various guarantees, foremost among which is the determination of the opening price (reserve price), which cannot fall below the minimum real value of the item. In many cases, especially when dealing with valuable or high-value items, this value must be fixed on the basis of an official expert appraisal.
The legal and moral obligation that arises from the relationship between the two contracting parties entails, on the part of the seller, the duty to award the item to the highest bidder even if the offered price is below the lowest possible, and, on the part of the buyer, the obligation to pay the offered price even if it in reality exceeds the maximum value. Unless the law or custom states otherwise, or unless a reserve price has been previously fixed, it is not permissible for the seller to withdraw the item when the desired price has not been reached.
The morality of the contract further requires the exclusion of any fraud. For this reason, it is not permissible for the seller to induce false bidders solely for the purpose of driving up the price without any genuine intention to purchase: the competitors have the right to demand that the price be determined through free competition rather than through fraud. Nothing, however, prevents the seller himself from joining the bidders, either personally or through a representative, for the purpose of redeeming his own item, especially in the case of a forced auction where the sellers are in reality more like creditors than the actual owner.
Fraud and injustice occur on the part of the buyer whenever illicit means are used to prevent others from competing or offering a higher price, particularly when this leads to the monopolization of the item at a price below its lowest real value. This offends justice, as well as charity, both with regard to those who are prevented from competing and with regard to the seller, who is unjustly deprived of a greater profit. The use of prayer and exhortation to persuade others to refrain from competing is not, however, an illicit means; indeed, according to the prevailing doctrine of moralists, even an agreement to such abstention cannot be considered illicit, since competition depends on the free will of individuals, and it is clear that they do not positively violate anyone’s right if they freely agree among themselves not to compete—especially since an agreement of abstention among some does not in fact prevent others from competing freely. In practice, however, it is certain that at least charity is offended when such an agreement morally compels a needy seller to cede his item for a price significantly below the just minimum. This can occur particularly in judicial auctions and especially in the forced sales of pledges that are periodically conducted in pawnshops.
Fraud and injustice can also occur on the part of the public auctioneer or director, particularly when he fails to give the auction the required publicity or deliberately postpones it to a less favorable time in order to limit the number of competitors and thereby favor certain others, or, with the same intent, employs cunning tactics to award the item to his favored bidder before the time generally allowed.