Our subject today comes from an inquiry from Russ Hilk of Wavebid.
Russ asked, essentially, if an auction could start without the auctioneer making it clear if that particular lot (property) is selling with reserve or without reserve (absolute?)
Further, could the decision by the auctioneer of the type of auction be made later, after bids are received?
Similarly, could an auctioneer offer ten riding mowers at auction, advertising that four of them (or at least four) will be selling absolute … but not identify which ones are actually selling absolute?
Per the UCC 2-328, all auctions are with reserve unless explicitly noted as without reserve. The exact language is, “Such a sale is with reserve unless the goods are in explicit terms put up without reserve.” Of course, in Louisiana, this is not the case, as all auctions are without reserve by default. However in the other 49 states unless property is explicitly put up without reserve, then it’s selling with reserve.
An auctioneer deciding the type of auction later is deciding too late since the property has already received a bid and that bid is a contract with specific terms and conditions. For instance, if it’s without reserve, the property cannot be withdrawn but if it’s with reserve, it can be withdrawn.
If, for example, a property was offered at auction and a bid was made and accepted, that existing contract can be voided (by a higher bid, for example) but cannot be unilaterally modified by either party. An auctioneer changing the existing bid calling contract from with reserve to without reserve would be constitute a prohibited unilateral change.
Given the terms and conditions of such contracts have to be firm prior to formation, it would be essentially impossible to change the type of auction after such or leave this essential contract provision mysterious. On the contrary, it must be known to both the bidder and seller if the bid calling contract is formed regarding a with reserve or without reserve auction.
We discussed bid calling contracts in more detail here: https://mikebrandlyauctioneer.wordpress.com/2014/08/11/bid-calling-is-just-numbers/. Bid calling contracts have specific contingencies, depending upon the type of auction.
Relatedly, could an auctioneer change an auction from with reserve to without reserve if no bidders were in contract? In other words, if no bids were placed on an item, could an auctioneer say, “Well folks, we’re now selling this without reserve?” Certainly, if the item (property) was withdrawn, it could be put back up at auction under new terms — that is, if it could legally be withdrawn at all.
The right of withdrawal in a with reserve auction exists up until the completion of the sale, where the right of withdrawal in a without reserve auction exists only before the property is put up for auction, and then again after no bid is received within a reasonable time.
In summary, property must be identified as with reserve or without reserve at the moment it is “put up” per the UCC 2-328. Once a bid is received and accepted, that contract is firm including the type of auction under which the offer was made.
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.