Tags

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

graypicAuctioneering in the United States was governed — in part — by the Uniform Sales Act beginning in 1906.

The Uniform Sales Act, drafted by Samuel Williston (1861 – 1963) who served as private secretary for U.S. Supreme Court Justice Horace Gray [pictured here,] was a precursor to Article 2 of the Uniform Commercial Code. Between 1906 and 1947 it was adopted in 34 states.

Williston’s other accomplishments included helping to formulate the state constitutions of North Dakota and South Dakota, Harvard Law School Professor, and regarded author on contract law and treatise. Among Williston’s most known works is “Williston on Contracts,” which is still published today, as last edited by Richard A. Lord.

We wrote about Williston and that 1906 Act § 21 along with the follow-up Uniform Commercial Code (UCC) § 2-328 here: https://mikebrandlyauctioneer.wordpress.com/2012/10/03/uniform-sales-act-of-1906/

As these laws prescribed, there was absolutely no provision for reopening the bid at an auction prior to the UCC § 2-328. Beginning with the adoption of the UCC § 2-328, auctioneers gained an option — discretion — to reopen the bid in one specific circumstance.

This condition of reopening the bid is described as follows:

Where a bid is made while the hammer is falling in acceptance of a prior bid the auctioneer may in his discretion reopen the bidding or declare the goods sold under the bid on which the hammer was falling.

To illustrate this option, let’s say we have three auctioneers named Bill, Frank and Henry:

    • Bill is an auctioneer who holds that when he says, “Sold!” it’s over, and he never reopens the bid.
    • Frank is an auctioneer who believes that when he says, “Sold!” he may reopen the bid if a bid is made while the hammer is falling …
    • Henry is an auctioneer who holds that when he says, “Sold!” he must reopen the bid if a bid is made while the hammer is falling …

And Bill’s, Frank’s and Henry’s behavior as auctioneers is completely legal and ethical. That’s because in the event of a bid being made as the hammer is falling (and ultimately falls,) the auctioneer may reopen the bid or not, as he wishes.

In addition to the UCC § 2-328 there is also the UCC § 1-302 which refers to variation by agreement. Here is that section of the UCC in complete:

(a) Except as otherwise provided in subsection (b) or elsewhere in [the Uniform Commercial Code], the effect of provisions of [the Uniform Commercial Code] may be varied by agreement.

(b) The obligations of good faith, diligence, reasonableness, and care prescribed by [the Uniform Commercial Code] may not be disclaimed by agreement. The parties, by agreement, may determine the standards by which the performance of those obligations is to be measured if those standards are not manifestly unreasonable. Whenever [the Uniform Commercial Code] requires an action to be taken within a reasonable time, a time that is not manifestly unreasonable may be fixed by agreement.

(c) The presence in certain provisions of [the Uniform Commercial Code] of the phrase “unless otherwise agreed”, or words of similar import, does not imply that the effect of other provisions may not be varied by agreement under this section.

As can be seen here, sections of the UCC can be varied (modified) by agreement [UCC § 1-302 (a)]; as such sellers/auctioneers and bidders/buyers could conceivably agree that once the auctioneer said, “Sold!” the bid could be reopened unilaterally and for any reason …

However, the UCC § 1-302 (b) says that any such agreements (modifications) must conform with good faith, diligence, reasonableness and care. Would an agreement that the bid could be unilaterally reopened for any reason [to settle a dispute, for example] be held as in good faith, diligent, reasonable, and in standard care?

Wouldn’t a premise that is, at minimum, reasonable and in good faith be the UCC § 2-328 itself? In other words, can terms alter this basic treatise of auctioneer conduct and remain in good faith and reasonable? The most referenced case in regard to this question might be: Callimanopulos v. Christie’s Inc. (621 F. Supp. 2d 127 (S.D.N.Y. 2009)).

In this 2009 case involving Christie’s of New York, the Court noted that the auctioneers had reserved the right to settle any disputes or errors, but ultimately referenced the UCC § 2-328 (b) which gave the auctioneer the right to reopen the bid with a bid coming in as the hammer fell …

Makes me wonder, although not material to this case, if courts would consider an agreement that the auctioneer could unilaterally reopen the bid after saying, “Sold!” for any reason, with the bidder not afforded that same right? In other words, if the auctioneer can reopen the bid after, “Sold!” for any reason and any circumstance, then why couldn’t the buyer rescind the same contract unilaterally?

In the Restatement (Second) of Contracts § 205 [1981] (Duty Of Good Faith And Fair Dealing,) section D notes that bad faith can involve, “Evasion of the spirit of the bargain, lack of diligence and slacking off, willful rendering of imperfect performance, abuse of a power to specify terms, and interference with or failure to cooperate in the other party’s performance.”

Certainly if the auctioneer mandates terms and conditions which require bidders to acquiesce to unilateral reopening of bids, that may well rise to abuse of power to specify terms, and/or failure to cooperate with the other party’s [buyer’s] performance.

In the dozens of auction cases in which I’ve consulted attorneys around the country, the good faith, diligence, reasonableness and standard care of the UCC § 2-328 has always been the benchmark in and out of the courtroom, and largely terms and conditions countering have been viewed adhesionary. As such, terms and conditions in opposition to the UCC § 2-328 are not likely enforceable nor advisable.

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.