Microsoft DHCP requires setting a DHCP scope, setting aside excluded and reserved addresses. Microsoft DHCP does come with a conflict detection mechanism built into the server and the client.
SERVER BEHAVIOR
Windows NT
Windows NT 4.0 (and earlier versions) did not posess a conflict detection mechanism. This was added to NT 4.0 in Service Pack 2, however it was not enabled by default. Microsoft recommends enabling conflict detection in most environments, but does not recommend setting the conflict detection attempts to greater than 2.
Windows 2000
Windows 2000 comes with a built-in conflict detection mechanism as well as an authorization mechanism designed to block 'rogue DHCP servers'. However, if the DHCP server in question is a Microsoft NT server running DHCP, it is NOT detected as a 'rogue server'.
CLIENT BEHAVIOR
Starting with Windows 98, the client actually performs an ARP for the address offered by the DHCP server. If the address is in use, it rejects it and asks the server for another IP.