We wrote about the seller’s right to bid at auction some time ago. Our question today involves if the seller does indeed bid — lacking that right. What next?
The UCC 2-328 speaks to this issue in a somewhat peculiar fashion.
- 2-328 (4) If the auctioneer knowingly receives a bid on the seller’s behalf or the seller makes or procures such a bid, and notice has not been given that liberty for such bidding is reserved, the buyer may at his option avoid the sale or take the goods at the price of the last good faith bid prior to the completion of the sale. This subsection shall not apply to any bid at a forced sale.
Let’s say Harriet consigns her lifetime collection of jewelry to Bobby Cousins, Auctioneer. The auction is without reserve and not a forced sale, so Harriet would not have the right to bid on her items up for auction.
Bobby begins the auction and the first ten jewelry items sell.
The next jewelry item, a diamond necklace, comes up for bid and reaches a high bid of $2,100 (made by Tim.) Then Harriet bids $2,200. Tim bids $2,300 and Harriet bids $2,400. Tim bids $2,500 and Harriet doesn’t bid any further, and Tim wins the necklace for $2,500.
The next jewelry item, a diamond brooch, comes up for bid and reaches a bid $3,100 (made by Earl.) Then, Harriet bids $3,200. Earl bids $3,300 and Harriet bids $3,400. Earl bids $3,500 and Harriet bids $3,600. Earl doesn’t bid any further, and Harriet “wins” (her own brooch) for $3,600.
At this point, the UCC 2-328 has particular good news for Tim, but not so much good news for Earl.
- Tim may take the diamond necklace for $2,100, or void the sale altogether.
- Earl may … not have any rights at all to the diamond brooch.
What’s the difference in our two stories? Tim is the buyer and Earl is a bidder, and not a buyer. The UCC 2-328 provides a option for Tim, but notes no such for Earl.
Earl may pursue Bobby Cousins and/or Harriet in court, but the courts have ruled rather consistently that the buyer has standing in such suits, while those who are not the high bidder have no such standing.
Further, even if Earl was found to have standing, how are his damages calculated? If he bid again, would Harriet have kept bidding? Would anyone else bid? Given there is no proof that he would have been the high bidder, courts are generally unsympathetic in such cases.
The irony of this law is: If Earl bids again for $3,700 and Harriet stops bidding (and nobody else bids,) Earl would have the right to take the diamond brooch for $3,100 or void the sale altogether.
If the seller bids … without authority, and another bidder wants to have rights to that item, he better keep bidding.
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.