Kurt Bachman of Beers Mallers Backs & Salin, LLP of LaGrange, Indiana frequently writes about auction/legal issues.
Kurt recently wrote about auctioneers entering into contracts with sellers, where the sellers want to sign the contract for auction, but desire the actual auction to take place after their (the seller’s) death.
Kurt correctly noted in his article that this type of “personal services” contract would not likely survive the seller’s death (nor the auctioneer’s death, for that matter) and a better instrument for hiring an auctioneer after death would be a last will and testament or some type of trust.
While state laws vary, personal service contracts generally terminate upon the death of either party where the contract depends upon:
- Existence of a particular person
- Skill or character of the other party
- Personal confidence between the parties
A recent court case (2012) in Texas addressed this particular issue in this aforementioned regard, suggesting that possibly other courts may rule in a similar fashion:
- Bennett v. Spectrum Construction, Inc. Lois A. Bennett as representative of the Estate of Norman C. Bennett, Jr., Appellant v. Spectrum Construction, Inc., Appellee, No. 01-11-00566-CV. Court of Appeals of Texas, First District, Houston.
However, there are other issues for consideration.
This above analysis assumes that both the auctioneer and seller are acting as sole proprietorships (and, thus constituting “personal” service.)
While we’ve long advocated that auctioneers act as limited liability companies (LLC’s) or corporations, some auctioneers still act as a sole proprietorships; sellers with sizable assets would likely benefit from LLC or corporation formation and related estate management as well.
In the case of death after an auction contract is signed — if the death involves a member of an LLC or officer/shareholder of a corporation — the contract would survive, as the LLC (unless the LLC operating agreement clearly calls for the LLC dissolution upon the LLC member’s death) or corporation would survive the death.
Another benefit of creating a business structure is that the laws concerning such are fairly uniform throughout the United States.
For auctioneers, there is little excuse to avoid discussing estate planning with an attorney, accountant and/or a financial planner. As an auctioneer, if you can’t answer the question, “What happens with your business after you die?” then such planning is essential and likely overdue.
As Kurt noted in his article, auctioneers (and sellers) are advised to seek out competent legal counsel.
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.