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We recently wrote about “Caveat emptor,” which means “Let the buyer beware.”

In contrast, today we write about “Caveat venditor” which is Latin for, “Let the seller beware.”

So, how does caveat venditor relate to the auction business? How do sellers need to beware?

The practical matter of caveat venditor is that sellers should be alert to omission, deception and misrepresentation in transactions, including auctions.

The famous 1916 New York Court of Appeals case, MacPherson v. Buick Motor Co., 217 N.Y. 382, 111 N.E. 1050, expanded on the concept of “inherently dangerous” products and thereby effectively eliminated the requirement of privity — a contractual relationship between the parties in cases that involve defective products that cause personal injury.

Prior to the MacPherson case, if a seller sold a defective product to a wholesaler, who in turn sold the product to a consumer, the consumer would not have the ability to successfully hold the original seller liable for defects or other imperfections.

The MacPherson case essentially removed the concept of privity which required that only a party to the sales contract could have potential liability — especially in cases of personal injury from a defectively made product.

As a result of MacPherson, auction sellers must be alert to selling anything that would potentially cause personal injury or similar detrimental issues for the auction buyer, or even someone who the auction buyer sold the property to post-auction, and so forth.

However, in today’s auction environment, the term “Caveat venditor” is often used in lawsuits any time property is sold which is not “as advertised.”

As sellers are bewaring, it occurs to us that there are three (3) distinct things sellers should ensure before they sell at auction:

  1. The bidders (buyers) have the genuine intent to pay.
  2. The property selling does not pose the danger of personal injury or fail to perform as advertised.
  3. The bidders (buyers) will accept possession (title) as agreed.

To illustrate these three (3) tenets above:

  • For the first tenet, almost every auctioneer (and auction seller) has had at least one instance of the high bidder having no intention to pay, or refusing to pay. Auctioneers and their sellers should endeavor to ensure eligible bidders have consented to the terms and conditions of the auction, and do not otherwise give any indication of disingenuous bidding.
  • For the second tenet, we chose to picture above Steve Jobs and the Apple iPhone. Numerous lawsuits were filed after the release of the iPhone 3G alleging that the speed and functionality of the iPhone was, “not as advertised.” In this sense, it’s caveat venditor as Apple would be potentially liable for their advertised claims of form and function, even if the phone’s owner purchased the phone from some entity other than Apple directly. Auctioneers and auction sellers need to be conscience of potential liability for what they claim about what is being sold.
  • The third tenant for sellers relates to the willingness of the buyer to take possession. For example, a buyer might buy an entire item only wishing to take part of the item (or a part off the item) with them — while the seller wishes the entire item to be removed, thus freeing up the space which the item is taking up. As with payment, auctioneers and their sellers should endeavor to ensure eligible bidders have consented to the terms and conditions of the auction, and do not otherwise give any indication of disingenuous removal and/or possession.

The caveat venditor laws and court decisions in the United States allow buyers to buy at auction with some insulation from liability to/from sellers. For sellers, these same laws say, beware.

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 adjunct faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.