Auctions and contract symmetry
It was bound to happen I suppose. We receive a call from an attorney about once a week and a few weeks ago, this particular inquiry was no surprise — other than it took this long.
We have argued for years that auction contracts (listing contracts, consignment contracts, terms and conditions, bid calling contracts) need (or should) be equitable, fair, reasonable. Likewise, contracts that are highly unfair, unreasonable, inequitable are possibly unenforceable and worse yet bad for our industry.
This attorney inquired regarding an issue in bid calling contracts — where some auctioneers say they can reopen the bid under virtually any circumstance, but bidders/buyers strictly cannot — and even more interesting attempt to unilaterally bind runner-up bidders in some cases …
Our prior writing on irrevocable offers is here: https://mikebrandlyauctioneer.wordpress.com/2017/12/18/can-your-bidders-offer-bid-be-irrevocable/ and more recently our proposed solution here:https://mikebrandlyauctioneer.wordpress.com/2018/10/03/make-an-auction-offer-irrevocable-accept-it/
We have written about this reopening issue many times, including here:https://mikebrandlyauctioneer.wordpress.com/2011/07/07/never-reopen-the-bidding/ and more lately here: https://mikebrandlyauctioneer.wordpress.com/2018/02/03/won-sold-reopen-exceptions/.
With the permission of this attorney, I can tell you this much: This is a case where an auctioneer was routinely (but not consistently) reopening bids after, “Sold!” However, when one particular bidder wished to void his bid after, “Sold!” that same right was denied. The terms and conditions were explicit that the auctioneer could reopen in cases of tie bids, missed bids and the like but there was no mention that bidders could likewise reopen their own bids.
We discussed the arbitrary nature of reopening bids — capriciously — when he asked me about contract symmetry. “How is it reasonable that the auctioneer can reopen the bid but the bidder cannot void the same contract?” he asked. Little did he know (or he may have) that I’ve asked that somewhat rhetorical question 100’s of times.
I listened as this attorney said this “one-sidedness” in bid calling contracts suggested to him such contracts in this case lack symmetry … “the auctioneer can reopen after, “Sold!” but the bidder cannot?” he asked again. I reminded him that the UCC 2-328 does allow an ever-so narrow circumstance for reopening the bid (UCC 2-328 (2)):
"Where a bid is made while the hammer is falling in acceptance of a prior bid the auctioneer may in his discretion reopen the bidding or declare the goods sold under the bid on which the hammer was falling."
Many have asked me if reopening the bid after, “Sold!” citing a tie bid, missed bid, or whatever benefiting the seller’s position is outweighed by the possible action by an auction bidder/buyer who pursues damages. My answer is that this seller benefit better be significant or it’s almost assuredly not worth it. It’s not difficult to have legal expenses exceeding $30,000 in even a simple auction claim.
Contract symmetry suggests equal remedies for both parties. This attorney explained that if the auctioneer wanted a remedy for a tie bid or missed bid (of course I told him those were fallacies) then why wasn’t an equal remedy available to the bidders? “This auctioneer said, “Sold!” then said he was going to reopen the bid because his ringman had another bidder on … but my client was told 3 lots later he could not void a similar contract? You’ve got to be kidding me, right?”
I told him I wasn’t kidding — that auctioneers have been moving to more and more inequitable terms/conditions for years, largely because there’s been no push-back; auction participants have grown accustomed to being treated like second-class citizens and the thought “they all do it …” cements the idea there’s little they can do.
Remember Bank of America‘s $5 debit card monthly fee:https://www.washingtonpost.com/business/economy/bank-of-american-drops-debit-card-fee/2011/11/01/gIQADvugcM_story.html?utm_term=.ae1ffe860a44? I’m sure the folks at Bank of America thought this was a great idea until it wasn’t.
I directed this attorney to a prior writing from 2017, and a good read for any auctioneer: https://mikebrandlyauctioneer.wordpress.com/2017/07/28/the-integrity-of-the-bidding-process/ Anytime you have an auction, you are either helping or hurting the industry that supports your livelihood.
Finally, treating customers as second-class citizens doesn’t endear them to the auction industry — and as I’ve noted before, consumers have choices. If we better preserve the integrity of the auction (bidding) process, maybe we as auctioneers can hang on to those who still enjoy buying at auction, and I’m not talking to an attorney about this at all?
This article has been published with permission from the author.
The original article and image can be found here.
Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, RES Auction Services and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, an Instructor at the National Auctioneers Association’s Designation Academy and America’s Auction Academy. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by the The Supreme Court of Ohio for attorney education.