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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
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Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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I understand that the eBay user agreement is legally binding,

Resolved Question:

I understand that the eBay user agreement is legally binding, but can eBay policies void an otherwise valid contract between the buyer and seller?

Example: A seller offers a one-of-a-kind collectible on eBay. Immediately after the sale, seller finds evidence that the buyer had violated numerous eBay policies, including possible shill bidding, and refuses to go through with the deal. The violations are reported to eBay, and the buyer is then suspended. This action renders the buyer "not a registered user" (NARU) and per eBay rules, releases the seller from any pending obligation to the buyer.

Both parties are in California. Assuming that no money or goods were exchanged, does the buyer still have a valid breach claim? A contract between the two parties was entered into upon auction close. Does the third party, eBay, have the authority to void the contract, or is the agreement still in force, legally?

If possible, please cite specific California case law in your answer. Thanks!
Submitted: 4 years ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 4 years ago.
There is no CA case law or other case law on point, what the buyer has done is committed a breach of contract based upon fraud and that is the argument you have here. If the buyer has committed the acts of fraud you have grounds to void the contract based upon the fraud. Now, if the buyer and seller have agreed upon the price, the buyer and seller have entered into that contract under the terms that eBay has set forth, so they must comply with those terms and this is where eBay can, unlike another unconnected third party, can indeed interfere with this contractual obligation because the parties using the eBay service have agreed to that by using the service. Typically, without this type agreement, a third party that has no contractual privity with the parties cannot interfere in a contract between two parties under the theories of contract law, but here both buyer and seller do have a contract with eBay to abide by their terms and this makes eBay more than a third party which gives them a right to control the sales made on their site.

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Customer: replied 4 years ago.
Thank you so much. I have looked far and wide, and this is by far the clearest, most concise answer I have received. Your fraud argument reinforces what an eBay representative told the seller (verbally), i.e., that the initial agreement is considered "null and void" due to the buyer's user agreement violations. Unfortunately, eBay did not state this in writing, and since the auction took place several years ago, the seller fears that it may be difficult or expensive to supoena specific evidence of fraud from eBay. As a "second leg" to stand on, would the fact that the buyer's suspension, which per eBay releases seller from contractual obligation, be an equally strong defense, since that is a more easily provable violation of the user agreement that both parties have agreed to? One last question (it's optional). Do you happen to know what the CA statute of limitations would be on such a case? I've seen conflicting information, ranging from two years to four.
Expert:  Law Educator, Esq. replied 4 years ago.
This would be a written contract since eBay has a written contract with sellers that they agree to when they sign on and it is a 4 year statute of limitations.

The buyer's suspension for violations would be evidence of breach of the buyer's contract with eBay's terms and as such a very strong defense to any actions against the seller by the buyer.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 92793
Experience: All corporate law, including non-profits and charitable fraternal organizations.
Law Educator, Esq. and 8 other Business Law Specialists are ready to help you
Customer: replied 4 years ago.
Excellent! Thank you again for your valuable insights.
Expert:  Law Educator, Esq. replied 4 years ago.
Thank you.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 92793
Experience: All corporate law, including non-profits and charitable fraternal organizations.
Law Educator, Esq. and 8 other Business Law Specialists are ready to help you
Customer: replied 4 years ago.
I have another question about this eBay issue. As mentioned, the buyer was suspended from eBay, relieving the seller from any obligation to the complete the transaction. However, eBay reinstated the seller two days later. The seller called eBay and was told by a young rep (verbally) that the deal was "back on" and seller is obligated to complete the original transaction. This seems arbitrary. During the two day window that the deal was "off" per eBay rules, what if the seller had sold the item to another party? Assuming seller is bound by the eBay user agreement, and eBay can, at will, "suspend" and "unsuspend" the buyer during the transaction phase, where does that leave the seller, legally? It's a can of worms! Please advise.
Expert:  Law Educator, Esq. replied 4 years ago.
If the deal was off and the seller in good faith sold the item during that time, then the seller would have the defense that they did not breach the contract but it was canceled by the terms of the eBay agreement and they were reasonable in relying on that cancellation. The recourse of the seller would then be against eBay for changing the terms of the contract and you are right, it is a big can of worms that eBay keeps putting themselves into when doing this, since you cannot cancel and then reinstitute a contract and you would be reasonable as a seller relying on their cancellation of the contract such that eBay would be the one ultimately liable to the buyer if the buyer sues.
Customer: replied 4 years ago.
That makes perfect sense. But what if the seller had not sold the item during that brief suspension window, and instead sold it to another party after the buyer had been reinstated on eBay? If the seller is still in possession of the item and chooses to sell it before the four year SOL runs out, what is their exposure?
Expert:  Law Educator, Esq. replied 4 years ago.
If you still have it and everyone was reinstated and the buyer is willing to pay the agreed upon price, then you would be expected to sell it to the buyer upon them paying the price. If the seller chooses not to honor the agreement, then they could be sued for damages in the loss of the sale by the buyer, whatever those damages would be that they could prove.
Customer: replied 4 years ago.
I see. Since seller is bound by eBay's rules, the "second leg" defense, based on the buyer's suspension, would not hold up if they were reinstated. However, is the fraud defense still viable if it is provable that the buyer violated terms of the user agreement that both parties signed? Or can eBay ignore that provision as well?
Expert:  Law Educator, Esq. replied 4 years ago.
The fraud defense could be viable by the seller. But again, if the buyer is willing to pay the agreed upon price, the fraud issue would be minor as long as they are paying what was agreed upon and the court may hold that the buyer would be still entitled to purchase regardless of the fraud unless you prove that the buyer used fraudulent bids to preserve his right to buy at a lower price, then the seller would prevail.
Customer: replied 4 years ago.
One last question. Assuming the seller is now potentially liable for breach, and still does not want to make a deal with the buyer, then the seller's last avenue would be to wait out the four year statute of limitations and hope that the buyer does not bring suit within that time frame. When the SOL expires, seller would then be free and clear to sell the item to another party. Would you concur? And are there any "tolling" provisions or other statutes that could conceivably lengthen the SOL beyond the four year term?
Expert:  Law Educator, Esq. replied 4 years ago.
You are correct in your assessment. Yes.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 92793
Experience: All corporate law, including non-profits and charitable fraternal organizations.
Law Educator, Esq. and 8 other Business Law Specialists are ready to help you
Customer: replied 4 years ago.
Thank you. I've really enjoyed our discussion and look forward to consulting with you again.
Expert:  Law Educator, Esq. replied 4 years ago.
Thank you have a great day.

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