Auctioneers generally work for others — the owners of the property they are selling, whether that be real or personal property.
When a client engages the services of an auctioneer, what duties does the client have the right to expect? In such cases, the auctioneer takes on a fiduciary responsibility. Per many dictionary references, fiduciary responsibility is:
Law. a person to whom property or power is entrusted for the benefit of another.
Basically, the specific duties an auctioneer is required to take on are spelled out in the contractual agreement between the client (seller) and the auctioneer.
The agency relationship is one of “special agency” in that the auctioneer is engaged to perform very special duties and no other duties (such as, the auctioneer is typically not granted permission to give the client’s children up for adoption, empty the client’s retirement account, and the like.)
These special duties usually include tasks and/or responsibilities such as displaying the property, advertising, registering bidders, collecting monies, protecting both property and monies, and settling with the client.
Additionally, auctioneers can remember their basic overall fiduciary duties with the phrase “OLDCAR.”
Let’s take one at a time, with a short example of each:
Obedience is following the client’s legal instructions. If the client wants their auction on Saturday, then the auction is to be Saturday. However, if the client wants the auctioneer to run the bid on their items, or advertise them absolute but with a minimum bid, those are not legal instructions, and cannot be followed.
Loyalty is putting the client’s interests above your own. The auctioneer may want to purchase one of the items in the client’s auction, and purchase it for as little as he can; however, he must put the client’s wishes ahead of his own, and hope (counter to his wishes) that the subject item sells for top-dollar.
Disclosure is a bit complex, but basically the auctioneer must disclose facts material to the client, such as a thought-to-be high priced piece of pottery that is consigned has a crack, or a tractor consigned is leaking oil, etc. Too, this sometimes involves what other people, typically interested buyers, are saying about the client’s property. Such information may be that their house smells bad, or the client’s car shows signs of substantial repair, etc. In other words, keep the client informed.
Confidentiality is keeping some information confidential for the client’s protection. Such as, if the client is filing for bankruptcy, that is a piece of information the auctioneer is to keep confidential, in that it isn’t usually material to the value, condition or marketability of the property being sold. However, exactly what is disclosed and/or kept confidential is ultimately up to the client, unless the client wishes to keep confidential information about the item selling, which constitutes an otherwise latent defect which buyers are entitled to know.
Accounting is simply that the auctioneer must account to the client for his actions. Certainly, the most common accounting request involves payment of the net proceeds of the auction. In addition, however, if the client wants to know how or where their auction was advertised, or a list of the people working the auction, or a report on what people have said who have inquired about the property, the client is owed this information also.
Reasonable care is the most general of duties. It mandates that the auctioneer do what the what the “reasonable person” would do to protect their client. If, for example, it rains the day of the outdoor empheria auction, it would be deemed reasonable by most people that the paper goods be kept dry to protect their value. Reasonable care would include setting up of tents, or moving the merchandise inside. The concept of what is reasonable can be decided by a court, with the first ruling on it in English courts being Vaughan v. Menlove (1837) 3 Bing. N.C. 467, 132 E.R. 490 (C.P.).
What happens if an auctioneer does not perform the necessary duties for his client? This breaks into two basic remedies:
- Breach of contract lawsuit (if the duties breached were specifically outlined in the contract)
- Breach of fiduciary duty lawsuit (if the duties are more general as outlined above)
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.face book.com/mbauctioneer. He is Executive Director of The Ohio Auction School.