Licitation

LICITAZIONE. — It is the offer of a price made by several persons who take part, competing with one another, in a sale by auction or public bidding. The term (from the archaic Latin licitari) properly refers to the action of one who bids at auction in competition with others, but in common legal language it is synonymous with auction or bidding, designating that special procedure of sale carried out in the characteristic form of a public competition open simultaneously to several bidders, subject to the requisite publicity, with the obligation on the part of whoever initiated it to award the item to the highest bidder.

I. GENERAL DOCTRINE

Although in its original and predominant meaning the procedure is characteristic of the contract of sale, it also applies to other types of contract, such as, for example, the public or private contracting of works and services, the lease of things, the contract for services, and also the contract for works.

According to the better and predominant doctrine, the contractual transaction begins with the declaration of opening, which has the value of an offer of sale, that is, of a proposal for a contract in incertam personam, and is perfected by the offer to purchase declared by the individual competitor, which is equivalent to the buyer’s acceptance. Each offer to purchase therefore corresponds to a distinct contract, concluded, however, subject to the (suspensive) condition that no one else subsequently offers a more favorable 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 justification, maintain that the declaration of opening is not a proposal for a contract, but an invitation to submit proposals for a contract: these would, on the contrary, consist in the individual offers of the competitors, and the transaction would be perfected by the final adjudication, equivalent to acceptance, by the person conducting the auction. The latter, therefore, would not be bound by virtue of the declaration of opening and, before the adjudication, would always have the right to withdraw.

Some writers instead admit the possibility of either interpretation, depending on the proposer’s different intention: this is therefore a question of fact, to be resolved in each individual case.

In order to bid at auction, the same legal capacity required for every other contract is necessary. Persons lacking capacity may bid through representation.

The auction is distinguished as voluntary or forced (judicial), according as the opening is made spontaneously by the owner of the thing, or is imposed by the executive power in accordance with the law. Between the two, some authors place the necessary auction, carried out ope legis, but not at the request of creditors (for example, the sale of the property of minors and of interdicted or incapacitated persons). The form of the auction has no substantive significance. The systems most commonly used are: by public auctioneer, when the offers are made by the competitors, competing with one another, in public verbal form; by candle auction, when, after the last offer, the burning of one or more candles determines the final adjudication to the winner; by secret verbal offers, confidentially communicated to the person directing the sale; by secret written offers, submitted in a sealed envelope; by the Dutch system, when the offers are made by the person promoting the auction, beginning from a maximum base price and gradually lowering II.
The institution is very ancient. Already in use among various peoples and incorporated into the laws of Athens, it was widely applied in Roman law, not only for compulsory executions but also for voluntary sales. Such sales were said to be made sub hasta, with reference to the spear that the magistrate had planted at the site of the transaction. The action of the person who took part in it with offers was called

licitatio, that is, bidding. Medieval customs and statutes preserved the Roman character of the auction; from the seventeenth century onward, auctions and public bidding became very common in Europe, especially in commercial activity.

II. CIVIL AND CANON LAW

In Italian law, sale by public auction is typical, though not exclusive, in forced sales carried out in execution of judicial decisions, particularly in compulsory executions against movable property (Arts. 534–40 of the Code of Civil Procedure) and immovable property (Arts. 576–91), in compulsory sales of things encumbered by pledge or mortgage (Art. 602), in sales of immovable property for the dissolution of joint ownership (Art. 788), in proceedings for freeing immovable property from mortgages (Art. 795), in compulsory executions for the purchaser’s non-performance (Art. 1515 of the Civil Code), and in bankruptcy liquidations (Arts. 106, 108 of the Consolidated Text of the provisions governing bankruptcy). It is also provided for in certain non-executory sales, for example, in the sale of the property of minors, persons under interdiction, or persons subject to legal disability (Arts. 748, 733 of the Code of Civil Procedure).

In executions against movable property, the auction is conducted through written or oral bids, on the reserve price previously fixed, together with the day and hour, by the enforcement judge (Art. 537). In executions against immovable property, on the other hand, it takes place before the judge, in the courtroom, according to the system of the virgin candle. After each bid, up to three candles are lit successively, each lasting approximately one minute. When the third candle has gone out without a higher bid having been made, the immovable property is awarded to the last bidder. The auction is said to have «failed for lack of bidders» when no bid has been submitted (Art. 581).

Voluntary sales by public auction are governed by specific provisions contained in the Regulations on the General Accounting of the State (R. D. 23 May 1924, no. 824). The auction notice, following a decree of authorization, must be published at least 15 days before the date fixed for the auction, and must be posted at the seat of the authority conducting it and in the municipality where the property is located. Private auctions are governed by Art. 80 of the aforementioned Decree-Regulations. Among the numerous provisions enacted by the legislator on this subject, particular importance attaches to the sanctions set forth in the Penal Code, safeguarding the morality and fairness of auctions, against anyone who, through violence or threats, or through gifts, promises, collusion, or other fraudulent means, prevents or disturbs bidding at public auctions or even at duly authorized private auctions (Art. 353), as well as against anyone who, for money or for another benefit given or promised to him or to others, refrains from participating (Art. 354).

In the CIC, the procedure for sale by auction is provided for the alienation of ecclesiastical goods (can. 1531 § 2) and for the leasing of landed property (can. 1541 § 1). In the case of alienation, it is strictly forbidden to award the property on the basis of a price lower than that fixed by the experts in the valuation specifically requested for this purpose (cann. 1531 § 1, 1530 § 1 no. 1). For the rest, the provisions laid down in this matter by the civil legislator must also be deemed applicable to the canonical legal order, by virtue of the prescription of can. 1529, which gives them canonical force. Under the concordat system, the procedure of public auction or private auction applies to the alienation of beneficed goods in general (cf. Regulation of 2 December 1929, implementing Law no. 848 of 27 May 1929).

III. MORAL THEOLOGY

The moral liceity of the procedure by auction or bidding, besides being grounded in universal custom and in the common doctrine of all moral theologians, finds its foundation in the objective criterion of justice by which it is guided. The price, in fact, resulting from the bidding, upon the offer of which the last bidder is awarded the thing, is genuinely just even if it in reality exceeds the highest price or falls below the lowest, both because the offer of the thing, free and spontaneous on the one hand, corresponds to the offer of the price, equally free and spontaneous on the other; and because the condition of risk, to which the contracting parties freely entrust themselves, is in reality equal on both sides, since on both sides the hope of gain balances the danger of loss. The criterion may prove somewhat problematic

when it concerns a forced auction, in which the compelled seller is not, strictly speaking, free and consenting. The difficulty, however, is chiefly theoretical, since in practice both the law and its executor protect, within the limits of honesty and justice, the rights of the forced seller through various safeguards, foremost among them that concerning the determination of the opening price (base price), which cannot fall below the minimum of the thing’s real value—a value that in many cases, especially when precious things or things of considerable value are involved, must be established on the basis of an official expert appraisal.

The legal and moral obligation, which takes concrete form in the relationship created between the two contracting parties, entails, on the part of the seller, that he must award the thing to the last bidder even if the price offered is below the lowest price, and, on the part of the buyer, the obligation to pay the price offered even if it in reality exceeds the maximum value. Unless law or custom provides otherwise, or unless a base price has been fixed in advance, the seller may not lawfully withdraw the thing when the desired price has not been reached.

The morality of the contract also requires the exclusion of every fraud. For this reason, the seller may not induce false bidders for the sole purpose of increasing the price, without any genuine intention to buy: the competitors, in fact, have the right to demand that the price be determined on the basis of free competition and not through fraud. Nothing nevertheless prevents the seller himself from joining the competitors, either personally or through a representative, for the purpose of buying back his thing, especially when it concerns a forced auction in which the sellers are in reality the creditors rather than the owner himself.

On the buyer’s part, there is fraud and injustice whenever illicit means are used to prevent others from competing or offering a higher price, especially when this leads to cornering the thing at a price below the lowest point of its real value. This offends justice, as well as charity, both with regard to those prevented from competing and with regard to the seller, who is unjustly deprived of his greater profit. The use of prayer and exhortation to induce others to desist from competing is not, however, an illicit means: indeed, according to the prevailing doctrine of moral theologians, even stipulating in an agreement for such abstention cannot be regarded as an illicit means, since, competition depending on the free will of individuals, it is clear that they do not positively violate anyone’s right if they freely agree among themselves not to compete—especially since an abstention agreement concluded among some does not in fact prevent others from competing freely. In practice, however, it is certain that charity is at least offended when the agreement morally compels a needy seller to surrender his thing for a price considerably below the lowest just price. This may occur particularly in judicial auctions and especially in the forced sale of pledges that are customarily conducted periodically by the Monti di pietà.

Fraud and injustice may also be committed by the public auctioneer or director of the auction, especially when he fails to give it the required publicity or deliberately postpones it to a less favorable time in order to limit the number of competitors and thereby favor others, or, for the same purpose, employs cunning tactics to award the thing to his favorite before the time commonly allowed.

BIRL.: G. Cesaro-Cosolo, Trattato dell'espropriazione forzata contro il debitore, II, Torino 1911, p. 580; III, there 1912, p. 420 ff.; N. Garrone, La scienza del commercio, II, Milano 1922, p. 355 ff.; L. Mortara, Commentario del Codice e delle leggi di procedura civile, 5th ed., there 1923, p. 236 ff., 369 ff.; B. Windscheid, Diritto delle Pandette, translated and annotated by C. Padda and E. Bensa, II, Torino 1930, p. 196 ff.; F. Carnelutti, Lezioni di diritto processuale civile. Processo di esecuzione, II, Padova 1931, p. 325 ff.; L. Mattiolo, Trattato di diritto giudiziario civile, 5th ed., Torino 1933, V, n. 789 ff., VI, n. 215 ff.; M. T. Zanzucchi, Diritto processuale civile secondo il nuovo codice, II, II, Il procedimento di esecuzione, Milano, 1941.

Zaccaria da San Mauro