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A notable lawsuit recently involved an auction house contracting to sell items at auction belonging to a famous artist, placing those items online for bidding prior to the auction “commencing.”

For example, say the auction date is November 15.

November 1 the auction house places a list of the items to be offered at auction on November 15 and allows interested parties to place bids starting November 1 up until the November 15 auction.

Then, November 15, the auction begins at 1:00 p.m. and the bids received online prior are used as the starting bids at the live auction. As well, bidders could bid online independent of their participating online prior.

This particular auction was a “no reserve” auction and thus once the auction commences per the UCC 2-328 (3):

    In an auction without reserve, after the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time.

In this case (using our example above) many bidders have placed bids online starting November 1. Then, on November 10 (five days prior to the auction “commencing”) the auction is cancelled and all items are withdrawn by the auctioneer (per the seller).

Richard is a bidder who placed bids prior to November 10, and filed suit claiming “ownership of items he bid for online ahead of the auction.”

Further, Richard maintained the auction was “no reserve” in nature, meaning the highest bidder could claim each item without the possibility it could be removed from the auction.

In this particular case, the Los Angeles Superior Court ruled against Richard’s claim.

Undoubtedly, the Court’s reasoning was that the auction didn’t actually start until November 15 at 1:00 p.m., and the pre-bidding was just that — bidding prior to the auction itself.

Yet, the UCC 2-328, uses a particular term suggesting when an auction starts — “after the auctioneer calls for bids on an article or lot.” and not the word “commence” nor “start.”

Richard argued — and one certainly could — that by placing those items online and allowing for competitive bidding, the auctioneer was “calling for bids …” at that very moment.

Richard’s attorney said after the verdict that current contract law has not kept up with the advent of the Internet and online bidding. We would agree.

We wrote about asking for bids prior to auction here: https://mikebrandlyauctioneer.wordpress.com/2010/05/06/asking-for-bids-before-the-auction-is-starting-the-auction/ and whether or not such an invitation “started” the auction. We concluded that just asking — lacking the auction’s start — certainly didn’t constitute an auctioneer calling for bids …

We also wrote about offers prior to auction here: https://mikebrandlyauctioneer.wordpress.com/2010/05/01/offers-prior-to-an-auction/ and concluded that bidders may well mistake a pre-auction bidding opportunity as the auctioneer calling for bids …

I suspect cases such as this will continue to be heard by courts across the United States, with conflicting interpretations and results.

For auctioneers, it will be prudent to ensure any bidding prior to the auction is clearly identified as such if the right of withdrawal is desired to be maintained in a “without reserve” auction.

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.