Tags

, , , , , , , , , ,

cookiesAuctioneers sell property “as-is” (and “where-is”) all the time.

The “as-is” standard is so widely used in the United States that even the Supreme Court of the United States has discussed the issue at length.

However, an issue that hasn’t frequented the courts is when the “as-is” standard is applied — specifically. To illustrate, we’ll pose two examples:

    Diane attends the Burton Produce Auction each week. She buys Amish bread and other baked goods, fruits, vegetables, and anything else that strikes her fancy.
    One week, Diane arrives at the produce auction and just then her phone rings. She has to catch a flight out of town in less than an hour, and must drive to the airport immediately.
    Hurriedly, Diane leaves an absentee bid on three dozen Amish chocolate chip cookies. She tells the clerk to bid for her up to $40 if necessary. The clerk reminds her of the standard terms which include that she’s buying the cookies “as-is” and payment is due when she picks them up.
    “Fine,” Diane says, and runs towards her car to head to the airport.
    Diane ends up on her business trip for over two weeks. Upon her return, she heads town to the Burton Produce Auction. She’s notified that she did indeed win the chocolate chip cookies (for $31) and she can pay for them at the end of the auction, and take them home today.
    After the auction is over, Diane is driving home and reaches into one of the bags, hoping to find one cookie to eat. She finds that one, and takes a bite. It’s just a bit stale, but she expects that after leaving the cookies for over two weeks. And, of course she bought the cookies “as-is.”

Diane’s experience is likely founded well in the “as-is” spirit. The cookies were indeed sold, “as-is” and were likely not stale at that moment of sale. However, stale after two weeks is reasonable although representing a different condition weeks later.

Let’s change our story.

    Jodie attends the Burton Produce Auction each week. She buys Amish bread and other baked goods, fruits, vegetables, and anything else that strikes her fancy.
    One week, Jodie arrives at the produce auction and just then her phone rings. She has to catch a flight out of town in less than an hour, and must drive to the airport immediately.
    Hurriedly, Jodie leaves an absentee bid on three dozen Amish chocolate chip cookies. She tells the clerk to bid for her up to $40 if necessary. The clerk reminds her of the standard terms which include that she’s buying the cookies “as-is” and payment is due when she picks them up.
    “Fine,” Jodie says, and runs towards her car to head to the airport.
    Jodie ends up on her business trip for over two weeks. Upon her return, she heads town to the Burton Produce Auction. She’s notified that she did indeed win the chocolate chip cookies (for $31) and she can pay for them at the end of the auction, and take them home today.
    After the auction is over, Jodie is driving home and reaches into one of the bags, hoping to find one cookie to eat. She finds that one, but notices that part of the cookie is missing. Upon further investigation, all the cookies are missing pieces.
    Jodie takes the cookies back and asks for her money back — citing that the cookies aren’t as-(they were) when she bought them. The auction maintains that the cookies were sold, “as-is” and so there’s nothing they can do.

We view Jodie’s experience much different than Diane’s. The cookies were indeed sold, “as-is” but pieces missing do not constitute reasonable “wear and tear” over a few weeks time. Therefore, incomplete cookies after two weeks is unreasonable even though they were sold “as-is.”

The overriding principle here is that property sold “as-is” denotes the “is” at the time the auctioneer says, “Sold!” Once the buyer takes possession, then the guarantee expires.

Most importantly, the time between “Sold!” and buyer possession where the property remains in the care and custody of the auctioneer (and/or seller,) the auctioneer must endeavor to protect the property to the extent it was represented at the time the contract between the seller and buyer was formed — normal wear and tear excepted.

In practice, this comes up in real property auctions most often. The auction is June 1 but the buyer and seller might not close until July 15. If the property is sold “as-is” on June 1 and then there is substantial damage (wind, flood, fire, or the like) on July 2, the buyer isn’t held to close on the property on July 15 unless it is restored to the condition of June 1.

However, issues constituting normal wear and tear between June 1 and the closing do not upset the contract. For instance, if an worn electrical receptacle fails, or a leak develops in a older roof, the “as-is” standard would hold.

“As-is” is a major issue at auctions. What is important for sellers, bidders, buyers and auctioneers is that the “is” part of “as-is” is at the moment the auctioneer says, “Sold!”

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.