Tags

, , , , , , , , , , , ,

corvetteCars sell at auction every day in the United States. In fact, tens of thousands of cars sell at auction every day.

Many cars selling at auction sell, “as-is” and “where-is” and essentially include terms that the bidders are to not rely on any statements made by the auctioneer or seller.

For instance, “We’re selling a 1966 Corvette Coupe 427/390 HP engine – 4-speed transmission – Restored in 2009 – Red with Black interior and White top – Side pipes” … but you must agree that you can’t rely on any of those statements since we’re selling it “as-is” and entirely based upon your own inspection.

So if I buy this car and it isn’t a 1966 Corvette, or doesn’t have a 427 engine in it, or isn’t a 4-speed transmission … I still own it? I have no recourse?

The courts in the Unites States say, generally, I do have recourse except when the I agree to not rely on anything the auctioneer said.

But isn’t this fraud? Certainly the auctioneer and/or the seller knew this wasn’t a 1966, or didn’t have that engine, or didn’t have that transmission? The courts essentially say that fraud requires reliance on a false statement, and that since the bidder agreed to “not rely” on the description of the car, there’s no fraud.

We wrote about auction fraud in 2011 and noted one tenant of fraud is reliance: https://mikebrandlyauctioneer.wordpress.com/2011/02/19/what-is-auction-fraud/

But what about a contract? Doesn’t a contract have to have mutual assent? A meeting of the minds? These same courts have combined the terms and conditions of the registration process with the sales contract to indicate the parties agree that mutual assent only means a mutual understanding of no reliance — that the property description is of no consequence.

We written several times about auction contracts, including: https://mikebrandlyauctioneer.wordpress.com/2009/12/01/the-essential-elements-of-any-contract/

Here’s another somewhat typical example of a “no reliance” statement:

    Bidder is responsible for inspections and verifications of condition, authenticity and completeness of any vehicle purchased. No warranties or representation of any kind are made by the auction company. Statements printed in catalogs, signs, and verbal statements made by auctioneers or auction staff are representations that are not to be relied upon as factual or accurate and no such representations are made by the auction company but rather communicated by the consignor.

This concept — of course — would apply to cars, tractors, trucks, tables, chairs, jewelry, coins … virtually any personal property.

So, if an auctioneer was selling a 1885-CC $1 Morgan Silver Dollar PCGS MS66 and the buyer agreed to not rely on the auctioneer’s description, then if the coin was actually a 1945-D Mercury Dime, he just bought a dime, and not a much more valuable Morgan Dollar.

Our question today is, “Is this fair?” I submit that while legally permitted, it’s not fair.

Increasingly auctioneers are making “no reliance” terms and conditions part of their bidder registration process. Buyers looking for certain property at auction find themselves confronted with the choice of agreeing to not rely, or finding another auction.

Is it fair that an auctioneer can purposely misrepresent personal property and the buyer has no recourse when he discovers property isn’t what was described? Are buyers even aware they have signed away those rights of restitution? I suspect not.

It’s always been to some extent “buyer beware” at auction. In auctions requiring waiver of reliance, it is especially so.

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 Hondros College of Business, Executive Director of The Ohio Auction School and Faculty at the Certified Auctioneers Institute held at Indiana University.