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singer222kThe Uniform Commercial Code (UCC) Article 2 has been adopted by 49 of the 50 states in the United States. Louisiana uses some of the UCC in court decisions; thus constructively the UCC is in effect all across the United States.

For decades, the two most notable sections of the UCC for auctioneers were UCC 2-328 (dealing with types of auctions, and bid calling) and UCC 2-313 (dealing with “as-is” and warranty issues.)

However, since the advent of online auctions, a heightened practice of a seller’s personal property being located in one state being sold to a buyer in another state has resulted in other parts of the UCC becoming more material. In particular, the entire Article 2 which deals with “Sales.”

We’ll talk about today’s topic with an example:

    David owns a somewhat rare Singer Featherweight Model 222k sewing machine. He hires an auctioneer to sell it in one of his upcoming online auctions. Bidding begins at $1.00 and after 5 days, the bidding ends at $1,050. The buyer pays with a credit card through the online provider, and the auctioneer ships the sewing machine out the next day to the new “owner.”
    Or, so he thinks.
    About 10 days after the auction, the auctioneer receives notice that there is a chargeback on his credit card account for $1,185 — exactly the total of the Singer Featherweight Model 222k with shipping and handling included. The auctioneer contacts his credit card company, and is informed that the buyer filed the chargeback citing that he never received the sewing machine.

The auctioneer is surprised. For one, he did indeed ship the sewing machine. Secondly, and maybe more importantly, the buyer agreed to his terms and conditions which say, in part, that he is buying the sewing machine, “as-is” and that once he pays for the machine, he has no recourse if the machine is damaged or lost in shipping.

However, the auctioneer’s credit card company (and processor) points out to the auctioneer that he signed a contract with them (merchant agreement,) agreeing to a mandate that in the event delivery cannot be confirmed, the buyer will be entitled to a full refund.

It’s important to note here that we have several parties involved in this transaction: The seller, the buyer, the auctioneer, the credit card company, the credit card processor, the online auction software vendor and the shipping company.

The buyer has indeed signed (agreed) to accept the sewing machine purchase even if he doesn’t receive it. Yet, that agreement is between the buyer and the auctioneer (and thus the seller.)

In fact, the buyer isn’t requesting a refund from the auctioneer nor seller — but rather his credit card company. And, their terms and conditions say that if this sewing machine was not delivered, he gets his money back.

The auctioneer (and thus the seller) can argue with the credit card company, but he’s agreed to their terms and conditions as well, in order to provide the service.

And, more disconcerting to the auctioneer and seller is state law. The entire basis of the UCC Article 2, Part 3 is based on the premise of:

      § 2-301. General Obligations of Parties.

      The obligation of the seller is to transfer and deliver and that of the buyer is to accept and pay in accordance with the contract.

Basically, without this buyer being actually present at the auction (and having his credit card swiped) or some sort of signed delivery confirmation, the buyer can claim he didn’t receive the sewing machine — even if he did.

The Federal Government oversees “fair credit billing” (http://ftc.gov/bcp/edu/pubs/consumer/credit/cre16.shtm) and can intercede in such a disputed transaction. Given these facts about David’s sewing machine, it’s likely the Federal Trade Commission would also side with the buyer.

Lastly, there is the issue between David and his auctioneer. Who is responsible for this $1,050, minus commissions? That would largely depend upon the contract between David and his auctioneer; lacking such altogether would probably entitle David to his money.

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.