The subject of the auction being a former home of Elvis Presley, and one of the plaintiffs being “celebrity psychic Uri Geller,” the district court’s ruling in Gleason v. Freeman, No. 06-2443 (W.D. Tenn. June 16, 2008) is getting a lot of press. (And prompts one to wonder how it is that Geller didn’t foresee that the litigation would have an unfavorable outcome, and save some attorney fees.)

The dispute involved the listing of a home in Memphis, Tennessee, the pre-Graceland residence of Elvis Presley, on the eBay real estate auction site. The eBay Terms of Use with respect to the real estate auction site provides in part that “eBay Real Estate auction-style advertisements of real property do not involve legally binding offers to buy and sell. Instead, eBay Real Estate’s auctions are simply a way for sellers to advertise their real estate and meet potential buyers.”

eBay’s online help pages expand upon the company’s position on the non-binding nature of its real estate auctions, with a detailed disclaimer asserting that it is not acting as a real estate broker. But notwithstanding that position, eBay lists the real estate licenses that it holds it almost every state.

However, despite the language in the eBay TOU, in the case of this particular auction, the seller added language to the item listing stating that “bidding on eBay is a legally binding contract in which the winner commits to following through on the purchase.”

Following the notification to the plaintiffs, including Geller, that theirs was the winning bid, a series of negotiations began through the sellers’ real estate attorney on matters such as the deposit amount and the time of possession. Several contract drafts were exchanged, but when another participant in the auction proffered a bid at a higher price than the plaintiffs’ auction bid, the defendants executed a contract of sale with that bidder, and this litigation ensued.

The court relied in part on the eBay TOU in concluding that the plaintiffs and the sellers had not intended to make a binding contract, finding that the terms in the TOU “are unambiguous in their intent not to make the auction a binding sales agreement.” The court disposed of the additional language by pointing to evidence in the record suggesting that it was added by the sellers only to “scare off potentially fraudulent bidders, not to create a binding contract.” The court also pointed to the plaintiffs’ subsequent negotiation on price and terms of the sale as evidence of their lack of intent to create a binding contract:

Even if the eBay terms and conditions were ambiguous and allowed sellers to create a binding contract for sale, there is no evidence of a manifestation of an intent to form a binding contract by the parties in this case. When the words used create a doubt as to the parties intention to be bound, the Court looks to “the situation, acts, and the conduct of the parties, and the attendant circumstances.” APCO Amusement Co., 673 S.W.2d at 527. The record shows that Defendants added additional terms to scare off potentially fraudulent bidders, not to create a binding contract. (Freeman Dep. 17.) Plaintiffs demonstrated that they too did not intend to be bound to the sale by their high bid when they continued to negotiate the terms of the sale. First, Plaintiffs negotiated a $15,000.00 deposit amount, which was well below the customary 10%, after the end of the auction. (Shutts Dep., Ex. 9.) After receiving a final sales contract containing both those terms negotiated during and following the online bidding, Plaintiffs rejected the sixty-day possession provision to which they had previously agreed. (Id.) This continued negotiation manifests Plaintiffs’ intent not to be bound to a sales contract for the house simply by bidding on it.

The evidence in the record leaves no genuine issue as to any material fact that the parties did not intend to create a binding contract for the sale of Defendants’ house through their participation in the eBay auction.

So, the opinion leaves open the perhaps more interesting question of whether the parties to an eBay auction sale could override the “non-binding” language in the TOU with an unambiguous statement of their intent to be bound by the results of the auction. And the court also left open the question addressed in the parties’ briefs, concerning the applicability of the Statute of Frauds, with the comment that the issue was moot in light of its ruling that the auction did not create a binding contract.