These auctions are often for executors of estates, guardianships, people retiring or moving, and the like.
While William has been fairly successful in the auction business, and has never been sued by a client, following a seminar he attended at the National Auctioneers Association Conference & Show, he is thinking he may want to include some type of “hold-harmless” clause in his auction contract.
What William wants to avoid is a seller being disappointed with the auction results, and suing him for damages; or be responsible for anything else a client may deem unsatisfactory.
Before we continue, we note that we’ve written about the types of contracts auctioneers enter into, or are materially involved in supervising.
Three such articles can be read here:
Now back to today’s topic …there are basically two types of hold-harmless clauses:
- 2-Party. This type of hold harmless clause involves the auctioneer and the seller only. This clause would hold the auctioneer harmless from any claims from the seller.
- 3-Party. This type of hold harmless clause involves the auctioneer, the seller and a third-party. This clause would hold the auctioneer harmless from any claims from the seller, and as well obligate the seller to save the auctioneer from other third-party claims.
Here is a sample 3-party hold-harmless clause:
- “The seller shall protect, defend, and save the auctioneer, its agents, contractors and employees, while acting within the scope of their duties as such, harmless from and against all claims, liabilities, demands, causes of action, and judgments (including the cost of defense and reasonable attorney fees) arising on account of any and all relating to the services performed or omissions of services or in any way results from the negligent acts or omissions of the auctioneer, its agents, contractors and employees.”
Most states allow for 2-Party and 3-Party hold-harmless clauses and deem them enforceable.
However, some states (California for one) enforce hold-harmless clauses, but only allow them to be used for claims that arise outside of the agreement, brought by a third-party; for instance, in a case of a buyer suing an auctioneer for a defective purchase of seller’s property.
Importantly, hold-harmless clauses in contracts are enforceable only with specific language and compliance with laws in the state where the contract is memorialized.
Generally, states look at a 5-prong test for enforceability:
- Is the clause clear, unambiguous?
- Does the clause contain clear, explicit language waiving a person or entity’s liability?
- Is the clause language conspicuous within the document or hidden in small print?
- Is the parties’ intent to “waive negligence” clearly and expressly stated in the contract?
- Were the parties sufficiently informed about the potential risks in order to permit a “knowing” waiver of risks and associated liabilities?
William contacts his attorney who reviews William’s auction contract in entirety, and adds a hold-harmless clause for him. And, we would suggest this is prudent for any auctioneer — looking to add a hold-harmless clause or not — to get with an attorney and review the auction contract in entirety.
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.