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car-718781_1920The UCC 2-328 has many nuances; we’ve previously noted many of those through this blog.

Today, we look at paragraph four. In this paragraph, the law states basically that there is buyer recourse (remedy) if the seller bids without authority.

Here is what might be the most bemusing part of the UCC 2-328:

(4) If the auctioneer knowingly receives a bid on the seller’s behalf or the seller makes or procures such a bid, and notice has not been given that liberty for such bidding is reserved, the buyer may at his option avoid the sale or take the goods at the price of the last good faith bid prior to the completion of the sale. This subsection shall not apply to any bid at a forced sale.

Is there any difference between an auctioneer receiving a bid on the seller’s behalf — and the seller making or procuring a bid? If there is, it’s subtle.

The first qualifier uses “auctioneer knowingly receives” and the second uses “seller makes or procures” which doesn’t indicate that such bid was received, but rather merely made.

Further, does the first part refer to someone bidding for the seller without the seller’s knowledge and/or consent? Maybe. Does the second part say that the auctioneer’s knowledge of the seller bidding isn’t important, as when he makes or procures a bid the buyer remedy is now available?

For instance, what if no disclosure is made (reserving the right,) and a seller bids (offers) but the auctioneer doesn’t accept the bid? In this case, the seller has “made a bid?” Could a non-seller-buyer void his purchase?

It would seem if the auctioneer unknowingly accepts a bid from the seller without prior disclosure that a buyer would still have recourse because for the auctioneer to accept the bid — it would have to have been made or procured.

Of course, all this depends upon the buyer being knowledgeable of the seller bidding; as the Supreme Court of the United States suggested in 1850, that knowledge could come far after the completion of the auction.

Thus our question, “Can auctioneer take seller bid unknowingly?” Certainly — but the buyer has recourse if he knows of it. In fact, it appears even if that bid is only made, but not accepted, the right to void the purchase materializes.

It also seems that if a seller bid (offers) despite not being accepted, a buyer could void his purchase or take the goods [property] at the last good faith bid prior to that offer — even if that offer (bid) was from someone else.

Our conclusion?

Seller bidding [even if not accepted] without disclosure (and/or without the right in a without reserve auction) is not supported by the UCC 2-328 unless a forced sale, and as such the contract formed with the buyer includes a contingency — allowing the buyer to be compensated by modifying the consideration or withdrawing from the contract altogether.

It’s about that simple, despite this muddled final section.

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, Real Estate Showcase and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College of Business, Executive Director of The Ohio Auction School and Faculty at the Certified Auctioneers Institute held at Indiana University.