Such confusion came up in the Nebraska statehouse recently, and made for an interesting analysis.
The UCC 2-328 (3) says (in part):
- “In an auction without reserve, after the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time.” which clearly prohibits the seller from bidding because seller bidding constitutes a withdrawal.
The UCC 2-328 (4) says (in part):
- “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.” which suggests the seller may bid without consequence with adequate notice.
The Nebraska legislature was apparently considering that by looking at the UCC 2-328 (4) that a seller could bid at a without reserve auction with adequate notice, giving no regard to the UCC 2-328 (3)‘s prohibition of such.
While this type of analysis is not new, nor unique to Nebraska, it is concerning.
Auctions are by default “with reserve” and seller bidding is indeed permitted with notice. Yet, if an auction is explicitly noted as a “without reserve” auction, then no reserves can be present — including the seller bidding in person or by proxy (unless in a forced sale situation.)
This particular confusion was a result of a proposed bill (http://nebraskalegislature.gov/FloorDocs/Current/PDF/Intro/LB843.pdf) which is/was attempting to regulate online without reserve auctions, providing remedy for bidders who suffer from seller bidding.
Of course, as we’ve noted, Nebraska already has a remedy for such situations — it isn’t allowed per http://nebraskalegislature.gov/laws/ucc.php?code=2-328
We’ll be keeping an eye on this legislation, as are many others.
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.