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bailmentA seller sends items (or drops off items) to an auction house, and then the auction house informs the seller that their items have been lost, or broken, or stolen, or come up missing …

What happens now?

The first place these two parties should look to is their contract. Typically, auctioneers and auction houses enter into contracts with sellers detailing each party’s rights and duties.

Such as: the auctioneer has a right to sell the items, and a right to receive a commission; the auctioneer has a duty to adequately advertise, care for, and collect payments for the seller. The seller has a duty to provide title to the buyers of their items, and a right to a net proceeds check and associated accounting from the auctioneer.

In the event the contract between the auctioneer (or auction house) and the seller details what happens in the case of items being lost, stolen, broken or missing, then the contract would rule on the next steps.

In the event the contract doesn’t detail about this circumstance (or if there is no contract,) then we look to common law to answer our question. Our case of someone giving an auctioneer or auction house items to sell is considered a bailment. The seller is the bailor and the auctioneer or auction house is the bailee.

Auctioneers owe their sellers (clients) reasonable care absent contrary provisions detailed in the contract. Reasonable care would almost always favor the auction-bailor in the event the auctioneer-bailee or auction house-bailee lost a consignment.

Other common issues with this type of situation include how do the parties decide the amount of loss? If the items haven’t been sold at auction yet, what are they worth? Who decides what the value of the loss is for the seller?

These and related questions are not easily answered. It’s best for all sellers and auctioneers to enter into written contracts, which include provisions for what happens in situations such as this.

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.