This does happen also, but not nearly as often as a buyer not performing. What we have in this case is a seller who, after the auctioneer says, “Sold!” doesn’t want to allow transfer of title — doesn’t want to agree to the sale.
Let’s discuss, first, when a seller can withdraw an item from an auction without recourse. In the two types of auctions per the UCC 2-328:
- With reserve: The seller may withdraw the item from the auction anytime up until the announcement of “Sold!”
- Without reserve: The seller may withdraw the item prior to the opening solicitation for bids, or may withdraw the item if after that solicitation, no bid is received within a “reasonable time.”
What we now want to discuss here in more detail is what happens when a seller wants to cancel or otherwise won’t agree to the sale by auction, outside of his permitted methods of withdrawal aforementioned.
Case #1: Seller wants to withdraw the item in a without reserve auction after the opening solicitation for bids, and after a bid is received within a reasonable time. This case is clearly prohibited by contract law precedent and the UCC 2-328. Court cases with standing in this type of withdraw have ruled nearly unanimously that the seller may not withdraw the item given these circumstances.
Case # 2: Seller wants to withdraw the item in a with reserve or without reserve auction after the auctioneer announces, “Sold!” The word, “Sold!” means that a contract has been formed between the seller and a buyer. If the seller wishes to void this contract, or withdraw from this contract, it can only be done with the consent of the buyer.
For example, the seller could say, “Gosh, I really didn’t want to sell my grandmother’s wedding ring, and I hope you (the buyer) understand … is it okay with you if I (the seller) just keep it, and you don’t pay for it?” Outside of mutual release from the contract, the seller’s voiding or withdrawal constitute a breach of contract; the buyer can sue for specific performance or compensatory damages, and typically win easily.
Is seller performance sometimes used in illegal and unethical schemes by auctioneers to promote, in particular, absolute (without reserve) auctions? Yes, unfortunately this has happened over the years, and continues in some markets. The schemes are basically one of two kinds and work as follows:
Scheme #1: Betty, the owner of a farm in Lincoln, Nebraska, wants to sell her farm at auction. These auctioneers using this unethical, illegal scheme tell Betty that by marketing the property as “SELLING ABSOLUTE” she will attract far more inquiries, and demand much more attention, and more bidders, for her auction. Yet, Betty doesn’t necessarily want to accept just any amount for her farm. The scheme is designed to go ahead with the absolute auction, and then if the final bid is not acceptable to Betty, she can just refuse to close (breach the contract).
How can this work? If the buyer wishes to sue Betty for specific performance, the auctioneer can assist Betty with a long, drawn out defense of the lawsuit, which in many cases, the buyer will see as costing them more than if he would just let Betty out of the deal. A variation on this scheme sometimes involves the auctioneer offering the buyer a bit of compensation “for their trouble,” in return for dismissal of the lawsuit.
Scheme # 2: Another scheme sometimes employed, and more-so in our Internet-age, is bidding for the seller in absolute (without reserve) auctions, thus withdrawing the item with such a bid. The Internet allows these types of bids to be made in an undisclosed fashion, via online bidding, so this can be accomplished without the other bidders’ knowledge. And, not to ignore that this same scheme was employed decades before now, with non-existent phone bidders, and/or phony absentee bidders. In other words, this scheme is much older than the current technology used to employ it.
Most auctioneers are ethical and act in accordance with the law. Schemes such as the above are being more exposed and buyers are becoming more informed about unethical and illegal auction practices; so as these practices become exposed, hopefully their use will diminish. Still, sellers sometimes won’t agree to the sale.
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.