My friend Richard “Dick” Brodie of Michigan posed a conjecture during an auctioneer CE class I was teaching the other day.
As we discussed in our story about maximizing absentee bids, virtually any policy or procedure in regard to absentee bids is acceptable if all involved (seller, bidders, buyer) have knowledge of it, and consent to it.
However, too often in some markets, the absentee bidder leaves a bid to be executed as, “I’ll bid as much as $1,500,” when the bid is actually executed as, “I’ll bid $1,500.”
Dick suggested that the UCC 2-328 proposes a remedy for the, “As-much-as $1,500 bidder” when he becomes, “The $1,500 bidder.”
The UCC 2-328 (4) says:
- “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.”
Dick asserted that if the absentee bidder was “run” by the auctioneer up to his maximum absentee bid without notice, that the auctioneer’s bidding could be construed as the seller bidding (the auctioneer bidding for the seller’s behalf) and that the buyer at $1,500 could then void the sale, or take the item at the “last good faith bid.”
- I might add here, that “notice” in regard to the seller bidding would necessarily include notice to the absentee bidder as well as the other bidders.
In other words, given the auctioneer had this $1,500 absentee bid, and suggested to his crowd (or bid online under a different identity) that he “had $400 bid, and now $500, now $600, now $700, now $800, now $900 … Sold! for $1,500,” that the buyer at $1,500 might rightly void the sale.
In the case of any legitimate bid being placed, such as a $700 bid from some other bidder than the seller — with the genuine intent to purchase — that the buyer at $1,500 might rightly take the item at $700 — the last good faith bid.
Further, it’s worth noting that if the auctioneer bid for the seller at some price less than the $700 legitimate bid that it’s more likely even the $700 bid is not the last good faith bid. We discussed that topic here: Last good faith bid?
As well, Dick correctly suggested that the seller (or someone on behalf of the seller) cannot bid at a without reserve auction (except in a forced sale situation,) and therefore seller bidding against the absentee bidder to the bidder’s maximum bid would be prohibited by the UCC 2-328.
We would conclude that in addition to unethical (and therefore illegal) activity involved in running the bid without knowledge and consent to the absentee bidder’s maximum, that state law actually provides relief for that harmed absentee winning bidder.
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.