We begin this study of, “Can the auction seller waive rights granted under state law,” in this regard: Let’s say that a seller consigns items to an auctioneer, and then, maybe even last-minute, decides to withdraw those items from the auction.
State law in 49 of the 50 states in the United States dictates that items may be withdrawn prior to the start of the auction, no matter the type (per the UCC 2-328) however, in our case here, let’s say the auctioneer’s contract, that this seller signed, prohibits items from being withdrawn from the auction, once consigned (or once advertised).
So, our question is: Can the auction seller waive the right of withdrawal granted by state law?
Similar questions arise in other cases. For example, can an employer require employees sign a contract mandating arbitration rather than filing suit? Can an employment contract deny the employee’s participation in an class-action lawsuit? Can an employment contract deny maternity leave? And, there are many others …
This issue for auctioneers, while different in different states, basically divides into three points:
- If the seller waives a right that otherwise state law grants, the contract can be signed and executed, but may not be enforceable.
- If the seller waives a right that otherwise state law grants, but some similar right is extended the seller (which is deemed reasonable), the contract can be signed and executed, and the contract is probably enforceable.
- If the seller waives a right that otherwise state law grants, and results in a highly unfair, adhesionary relationship between the auctioneer and seller, the contract can be signed and executed, but the contract will probably not be enforceable.
Let’s look at these three scenarios with an example of each:
In #1, we use the term, “may not be enforceable,” and this one is right in the middle-ground in most courts. Our seller has given up the right to withdraw two items, a 1957 Chevrolet automobile, and a 1969 John Deere 4020 tractor. However, the seller can withdraw any other item up until the day of the auction. A court may view this as reasonable as the seller has give up rights of withdrawal concerning two larger items, but has very reasonable withdrawal rights concerning all other property. Or, a court could view this as unreasonable, since by state law, any of these items could be withdrawn prior to the start of the auction.
In #2, we use the term, “probably enforceable,” and this one leans toward enforceability because the seller is given additional rights, or mitigating rights. For example, our seller has give up the right to withdraw two items, a 1957 Chevrolet automobile, and a 1969 John Deere 4020 tractor. However, if they are withdrawn, a $1,000 fee for marketing those two items must be paid the auctioneer. A court would probably view this waiving of rights as reasonable as the auctioneer would be forgoing his commission on these items (maybe as much as $3,000) and only desiring his marketing costs be covered.
In #3, we use the term “probably not enforceable,” and this one leans toward unenforceability because the seller is positioned in a highly unfair or adhesionary position. For example, our seller has give up the right to withdraw two items, a 1957 Chevrolet automobile, and a 1969 John Deere 4020 tractor. The contract reads that no items may be withdrawn once the contract is signed, and a 50% commission will be charged on any and all items noted herein to be sold, which are not. A court would likely view this waving of rights as unreasonable, as the penalty is so excessive, and items can’t be withdrawn even after one day.
In summary, these types of auction issues don’t get into court very often. I would recommend auctioneers not enter into contracts with sellers where the contract requires the seller to waive rights granted under state law. Of, if an auctioneer feels he must have such a provision, at least offer the seller some other benefit or feature to help balance the agreement, and maintain a reasonable contractual arrangement.
I recommend this for auctioneers too, because we in the auction business must remember that usually a court views us as the professionals, and our seller as a member of the public. If a certain passage in a contract is to get the attention of a court, it will likely be a passage that is to the detriment of the seller, rather than to the detriment the auctioneer.
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.facebook.com/mbauctioneer. He is Executive Director of The Ohio Auction School.