Licitation

LICITATION. - It is the offer of a price made by several persons who take part, in competition with one another, in a sale by auction or public auction. The term (from the archaic Latin licitari) refers properly to the action of one who bids at auction in competition with others, but in common legal language it is synonymous with auction or public sale, to indicate that special procedure of sale which is carried out in the typical form of a public competition opened simultaneously among several competitors, after the necessary publicity, with the obligation, on the part of the one who has taken the initiative, to award the thing to the highest bidder.

I. GENERAL DOCTRINE

Although in its original and prevailing meaning the procedure is typical of the contract of sale, it also applies to other contractual figures, such as, for example, public or private contracts for works and services, the lease of things, the hiring of work and even of works.

According to the best and prevailing doctrine, the contractual transaction begins with the declaration of opening, having the value of an offer of sale, that is, of a proposal of contract in incertam personam, and is perfected with the offer of purchase, declared by the individual competitor, which is equivalent to the acceptance of the buyer. To each offer of purchase there therefore corresponds a distinct contract, concluded however under the (suspensive) condition that others afterwards do not 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 proposals of contract: these would on the contrary be found in the individual offers of the competitors, and the transaction would be perfected with the final adjudication, equivalent to acceptance, on the part of the person who institutes the auction. The latter, therefore, would not remain bound by virtue of the declaration of opening and, before the adjudication, would always have the right to withdraw.

Some writers, on the other hand, 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.

In order to be able to bid at the auction, the same legal capacity is required as is required for every other contract. Persons lacking capacity may bid by means of representation.

The auction is distinguished into voluntary and forced (judicial), according to whether the relative 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 insert the necessary auction, made ope legis, but not at the request of the creditors (for example, the sale of the goods of minors and of persons interdicted or incapacitated). The form of the auction has no relevance from the substantive point of view. The systems most commonly used are: by public auctioneer, when the offers are made by the competitors, in competition among themselves, in public verbal form; by candle, when, after the last offer, the burning of one or more candles determines the definitive adjudication 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 lowering it.

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 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 on the site of the transaction. The action of those who took part in it with offers was called licitatio, that is, competition. Medieval customs and statutes preserved for the auction its Roman physiognomy; from the 17th century onwards auctions and public biddings became in Europe of quite common use, especially in commercial activity.

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 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 a pledge or a mortgage (art. 602), in sales of immovable property for the dissolution of co-ownership (art. 788), in proceedings for the release of immovable property from mortgages (art. 795), in compulsory executions for the buyer's non-performance (art. 1515 of the Civil Code) and in bankruptcy liquidations (arts. 106, 108 of the Consolidated Text of the provisions on the regulation of bankruptcy). It is also provided for in certain sales of a non-executory character, for example, in the sale of the property of minors, of persons under interdiction or incapacitated (arts. 748, 733 of the Code of Civil Procedure).

In executions against movable property the auction is carried out by the system of written or oral bids, on the base price previously fixed, together with the day and hour, by the execution judge (art. 537). In executions against immovable property, on the other hand, it takes place before the judge, in the courtroom, by the system of the virgin candle. After each bid, up to three candles are lit in succession, each lasting about a 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 gone "unsold" when no bid at all has been submitted (art. 581).

Voluntary sales by public auction are governed by their own rules contained in the Regolamento di contabilità generale dello Stato (Royal Decree of 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 notified 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-Regulation. Among the numerous rules laid down in this regard by the legislator, particular mention should be made of the sanctions contemplated in the Penal Code, for the protection of the morality and sincerity of auctions, against anyone who, by violence or threats, or by gifts, promises, collusion or other fraudulent means, prevents or disturbs the bidding in public auctions or even in duly authorized private ones (art. 353), as well as against anyone who, for money or other benefit given or promised to him or to others, abstains from competing (art. 354).

In the CIC the procedure of sale by auction is provided for the alienation of ecclesiastical property (can. 1531 § 2) and for the leasing of lands (can. 1541 § 1). In the case of alienation, it is strictly forbidden to award the thing on the basis of a price lower than that fixed by the experts in the appraisal requested for that purpose (cans. 1531 § 1, 1530 § 1 no. 1). For the rest, the rules laid down in this matter by the civil legislator must be considered valid also for the canonical order, on the basis of the provision of can. 1529 which adopts them. Under the concordat regime, for the alienation of beneficed property in general, the procedure by public auction or by private auction applies (cf. Regulation of 2 December 1929, implementing the law of 27 May 1929, no. 848).

III. MORAL THEOLOGY

The moral licitness of the auction or bidding procedure, besides resting on universal custom and the common doctrine of all moralists, finds its foundation in the objective criterion of justice by which it is informed. The price, in fact, resulting from the competition, by the offer of which the last bidder wins the thing, is truly just even if in reality it exceeds the maximum or is below the minimum, both because the offer of the thing, free and spontaneous on the one hand, corresponds to the offer, equally free and spontaneous, of the price 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 is a matter of a forced auction, in which the coerced seller is not in truth free and consenting. The difficulty, however, is more theoretical than practical, since in practice both the law and its executor protect, within the limits of honesty and justice, the rights of the forced seller with various guarantees, foremost among them that concerning the determination of the opening price (base price), which cannot fall below the minimum of the real value of the thing, a value which in many cases, especially when it is a matter of precious things or things of considerable value, one is bound to fix on the basis of an official expert appraisal.

The juridical 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, and, on the part of the buyer, the obligation to pay out the price offered even if it in reality exceeds the maximum of the value. Unless law or custom provides otherwise, or unless a base price has been fixed beforehand, the seller is not permitted to withdraw the thing when the desired price has not been reached.

The morality of the contract further requires the exclusion of all fraud. For this reason the seller is not permitted to bring in false bidders for the sole purpose of raising the price, without a true intention to buy: the competitors, in fact, have the right to demand that the price remain determined on the basis of free competition and not by means of fraud. Nothing, however, forbids the seller himself from joining the competitors, either for himself or through a representative, for the purpose of buying back his thing, especially when it is a matter of a forced auction in which the sellers are in reality the creditors rather than the owner himself.

On the part of the buyer there is fraud and injustice whenever by illicit means others are prevented from competing or from offering a higher price, especially when this leads to the acquisition of the thing for a price that is below the lowest of the 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 his greater profit. However, the use of prayer and exhortation to induce others to desist from competing is not an illicit means: indeed, according to the prevailing doctrine of the moralists, even the stipulation in a pact of such abstention cannot be held to be an illicit means, since, the competition depending on the free will of individuals, it is clear that these do not positively injure anyone's right if they freely agree among themselves not to compete, all the more so since the pact of abstention concluded among some does not in truth prevent others from freely competing. In practice, however, it is certain that at least charity is offended whenever the pact morally compels the needy seller to give up his thing for a price notably below the just minimum. This can occur in particular in judicial auctions and especially in the compulsory sales of pledges that are customarily held periodically in the Monti di pietà.

Fraud and injustice can also occur on the part of the public auctioneer or director of the auction, especially when he does not give it the publicity it deserves or deliberately postpones it to a time less favorable for the purpose of limiting the number of competitors and thus favoring others, or, for the same purpose, uses cunning to award the thing to his favorite before the time commonly allowed.

Zaccaria da San Mauro