Tags

, , , , , , , , , , , , , , , , ,

All states except Louisiana have adopted the UCC 2-328 strictly into their state law.

While it is important to note that a few of those states have slightly modified that same state law, all those states basically operate under the same rules.

Further, Louisiana courts have ruled as if the UCC 2-328 is in effect; therefore we have almost perfectly uniform law governing types of auctions and the basics of bid calling in the United States.

While it appears to many that the United States only began to operate under these rules in the early 1960’s, these guidelines for auctioneers were actually developed in England (Old English Auction Case Law) and further refined by early court cases in the United States.

Which brings us to another interesting legal question about proper auction procedure in the United States.

Our question is:

    Can an auctioneer refuse any opening bid at an absolute auction?

Let’s look at an example:

Auctioneer William is holding an absolute auction on Saturday. Among the many items selling Saturday, Auctioneer William and his client have discussed that they both expect the seller’s Boucher diamond flower pin to demand at least $1,500, and likely more.

Auctioneer William comes to Lot # 312, the Boucher diamond flower pin, and asks for an opening bid of $2,000. A bidder to the left of the podium yells out to Auctioneer William, “I’ll give you $50!”

Auctioneer William notes the bid, and says, “We’d like to start higher, thank you!” Soon after, another bidder bids $500 and the auction continues until the Boucher pin finally sells for $1,750.

After the auction, the “$50 bidder” talks with Auctioneer William and says that Auctioneer William was obligated to accept his $50 bid on the Boucher pin — as no bid may be refused at an absolute auction because such refusal constitutes a reserve.

Auctioneer William responds that he feels he is not obligated to accept the $50 bid, but is only bound to sell the Boucher pin at the point he “received a bid within a reasonable time.”

Further, Auctioneer William notes the UCC 2-328 (3) clearly says:

    In an auction without reserve, after the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time.

Our questions at this point are:

    1. Does the UCC 2-328 (3) imply that the only limitation on the auctioneer is to not withdraw the item once a bid is made within a reasonable time? As such, there is no restriction regarding the opening bid itself?
    2. Does the refusal of an initial bid constitute a reserve? Does such a refusal constitute a withdrawal which the UCC 2-328 (3) prohibits?
    3. What claim does the “$50 bidder” have? The pin sold for $1,750 so what does it matter that his initial bid of $50 was refused?
    4. Assuming that any refusal of a higher bid constitutes a reserve, does that include the initial bid when no other bids have been accepted?

In summary, it appears to us:

  • This refusal of the $50 bid is immaterial, especially since the pin sold for more than $50.
  • The refusal of any initial bid seems inconsequential as it doesn’t comprise any certain increase over another bid, but rather just a starting point — it doesn’t disadvantage any other bidder.
  • The refusal of any initial bid does not result in a withdrawal of the property so long as the property is ultimately sold.
  • The refusal of an initial bid is far different than a refusal of a higher bid over a previous bid.

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 serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.