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moneyhandsAuctioneers should always enter into contracts with their sellers (clients.)

Auctioneers typically enter into contracts with their sellers (clients.)

These contracts often note the date and location of auction, indicate if auction is with reserve or without reserve, commissions and fees charged, and many other provisions.

We wrote previously about 29 things that should be in every auctioneer’s contract with a seller: https://mikebrandlyauctioneer.wordpress.com/2012/08/20/the-29-things-that-should-be-in-an-auctioneers-contract-with-a-seller/

In addition to these 29 (or however many) things that need to be in an auctioneer’s contract, often auctioneers add other provisions in order to deter certain seller behavior. For instance, a clause might say …

    “If the seller bids on his own items without authority, the auctioneer will be due three-times the commission on any items receiving such bids.”

First, liquidated damages totaling three-times the commission is likely excessive (adhesionary:) https://mikebrandlyauctioneer.wordpress.com/2012/09/11/seller-withdrawal-excessive-penalties/

However, our question today is, does such a clause make this contract void? Quoting from the landmark Supreme Court of the United States case Miller v. Ammon, 145 U.S. 421 (1892):

The general rule of law is, that a contract made in violation of a statute is void; and that when a plaintiff cannot establish his cause of action without relying upon an illegal contract, he cannot recover.

I suspect it does make it void. In other words the contract is “made in violation of a statute” in that the exact violation is denoted, and consideration is provided the auctioneer for the illegal act.

Even if you want to think it isn’t void, is there a better way to construct a clause like this that would have the same effect?

Let’s take a look at two different contract clauses, which might well accomplish the same result:

    1. The seller must remain compliant with all local, state and federal laws. If the seller breaches this contract, a $1,000 fee is payable to the auctioneer.
    2. If the seller bids on his own items, or withdraws an item selling absolute after bids have been received, a $1,000 fee is payable to the auctioneer.

#1 above describes nothing illegal. In fact, it suggests both parties are contracting to act in accordance with all local, state and federal laws. If the seller breaches the contract (for any reason,) the auctioneer is due $1,000.

#2 above actually describes the illegal act and ties a payment of $1,000 to the auctioneer as a result of the illegal act (and some arrangements actually earn the auctioneer more — the more illegally the seller acts.)

It may seem subtle, but the differences here are material. Contracts that outline illegal behavior which is directly tied to the auctioneers enrichment might be found to be void, which may well lead to other complications.

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. He serves as Adjunct Faculty at Columbus State Community College, Executive Director of The Ohio Auction School and Faculty at the Certified Auctioneers Institute held at Indiana University.