It happens every so often. At an auction, a gun is deemed sold by an auctioneer who is a Federal Firearms Licensee (FF.) The buyer fills out the ATF Form 4473 and subsequently is denied possession of the gun.
Upon denial, the buyer can’t have the gun. Outside of appealing this denial with the ATF, the gun remains the property of the seller. The seller is whoever is in title — the person or business entity who owned the gun just before the auctioneer said, “Sold.”
The UCC § 2-301 suggests that this contract for sale of this particular gun is void due its intrinsic illegal purpose; it’s illegal for the seller to transfer the gun to this buyer.
It’s important to note that if an auctioneer takes guns on consignment, he doesn’t become the owner nor seller. He is an agent for the seller no matter if he is an FFL or not. As an FFL, he would most likely take the gun(s) into his possession, but that’s all he has — possession, not ownership.
Of course, if an auctioneer (FFL) was buying and selling guns, he would be the owner and seller until the guns were sold [at auction] and transferred to buyers.
Nevertheless, what happens next following a denial? Auctioneers have to be careful. In the typical case of an auctioneer FFL taking this gun on consignment:
- If the buyer appeals, the gun has to be kept until his appeals are exhausted.
- In the event the gun is to be sold again, the auctioneer’s contract with the seller must contain such express knowledge and consent.
- If and before the gun is returned to the seller, that transfer must be approved by the ATF.
- All completed ATF Form 4473’s indicating denials are to be kept for five years separate from approvals.
In essence, the flow of title and possession is this: the original owner has title and possession. Once consigned the seller gives the auctioneer possession and retains title. Once the auctioneer says, “Sold!” there is a contract formed between the seller and buyer.
If the buyer pays and the transaction is approved, the auctioneer gives the buyer possession and the seller transfers title, thus unifying title and possession again.
Yet, if the buyer is denied, the auctioneer still has possession, and the seller still has title. To unify title and possession, the buyer will have to win his appeal, the auctioneer acquire title or the seller reacquire possession.
Some suggest that if the buyer pays for the gun and then is denied, the auctioneer (or seller) can retain the consideration. While terms and conditions might suggest such, it’s unlikely given the contract is considered void.
If a denied buyer agreed to give up the purchase price as a form of liquidated damages then the monies could certainly be retained. However, voiding a contract is more like a rescission than a cancellation.
Lastly, if the buyer is denied, and further the seller is denied to repossess — and doesn’t agree to a subsequent auction, an FFL could be deemed the owner (title and possession) by default — with the seller materially selling the gun to the auctioneer.
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.