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cat-233367_1280There has been a fair amount of talk about “non-existent tie-bids” and “missed bids” lately.

So just what is a missed bid? Is it a bid at all? Maybe not.

First, some contract basics in regard to auctions: Bids are offers made by offerors. However, a meeting of the minds is required for a contract, typically and traditionally-thought to be formed by an offer (a bid) and acceptance. Once an offeror makes an offer (bid,) it has to be received by the offeree (auctioneer) to then be accepted or rejected; if accepted a contract is formed.

Now, let’s look at three situations commonly denoted as a “missed bid:”

    1. The auctioneer says, “Sold!” and two bidders hold up their bidder cards, or a ringman has a different bidder than the auctioneer.
    2. The auctioneer says, “Sold!” and as the hammer is falling a bid comes in for a higher amount than the current bid.
    3. The auctioneer says, “Sold!” and after the “D” sees that a bidder was apparently intending to bid more than the current bid.
  • In situation #1, we would hold that the bid from the other bidder is not a bid (not a valid bid) which should be accepted nor addressed with reopening, since it is the same amount as the current bid. No valid bid can be upset by another bid (offer) of the same or lesser amount; secondly, there is no “tie-bid” here as there is no such thing.
  • In situation #2, we would hold that the bid may be reopened per the UCC 2-328 as the bid is made “while the hammer was falling …” This is essentially the law all across the United States.
  • In situation #3, we would hold that the bid should not be reopened since the hammer has already fallen. In basic contract law, it is the offeror’s responsibility to make his offer known to the offeree, and not the other way around; the auctioneer/seller didn’t miss any bid, but rather the other bidder failed to deliver [present] his offer to the auctioneer either personally or through a proxy.

But far more importantly, in situations #1 and #3 we believe it may be held manifestly unreasonable for the auctioneer/seller to reopen after the “D” unless winning bidders are afforded the unilateral option to void their purchases. What’s sauce for the goose is sauce for the gander? Essentially, yes.

To us, it seems obvious that if the auctioneer can unilaterally and exclusively reopen a closed bid under circumstances outside of current law, that such is clearly, unmistakably and self-evidently unreasonable. (See Black’s Law Dictionary 962 (Bryan A. Garner ed., 6th ed., 1990) (cited with approval in Morgan Buildings & Spas, Inc. v. Turn-Key Leasing, Ltd., 97 S.W.3d 871, 880 (Tex. App. 5th Dist. 2003))

So what is reasonable? If the auctioneer can reopen a completed “sale” for basically any reason, the high bidder should be able to unilaterally void his contract to purchase … which of course, would be something almost no auctioneer/seller would be inclined to favor. There is already enough “buyer’s remorse” in the world without expressly allowing buyers to get out of their purchases.

Otherwise, the tendency to reopen any auction (“lot,” per the UCC 2-328) after the hammer has fallen is clearly to attempt to maximize price which obviously benefits the seller. Yet, by reopening the bid does this in the long term undermine confidence in the process and discourage bidders from making their best offers clearly and in a timely fashion?

If the terms say that the auctioneer can (or will) reopen the bid if another bidder simply believes he or she was the high bidder, what keeps anyone from waiting until, “Sold!” and then holding up their card? Would such disruption cause the legitimate buyer to lose interest? Would such long term disruption cause less bidders to participate?

Further, are people who are declared the buyer, only to be upset by another bidder, disappointed? Likely to sue? The two cases we just recently cited (Hoffman v. Horton, 212 Va. 565, 186 S.E.2d 79 (Va. 1972) and Callimanopulos v. Christie’s Inc., United States District Court for the Southern District of New York, 621 F. Supp. 2d 127 (2009)) in a previous blog involved plaintiffs suing for that very reason, and there’s not much litigation — if any — when the bid isn’t reopened.

It would seem reopening the bid due to a missed bid (or so-called nonexistent tie-bid) simply benefits short term, but is otherwise a detriment to the seller’s position long term, and invites litigation. Ironically, the very cases which are quoted frequently proposing auctioneers can reopen missed and non-existent tie-bids show why maybe we as auctioneers shouldn’t — we might actually get sued as well.

And with reopening the bid for any reason, would that not require us to then treat everyone fairly, and reopen the bid again, and again, and again, and again in the same auction event? Wouldn’t a better policy be to never reopen the bid than always reopen the bid? Or, do auctioneers reopen bids in a capricious fashion, nearly guaranteeing further litigation?

Finally, what about that one — maybe significant — property? Say a $10,500,000 property for example? Let’s say an auctioneer says, “Sold!” for $10,500,000 and just then another bid for $10,750,000 comes in? Another $250,000 is no doubt material to the seller, but does the cost of possible litigation rise commensurate with this increase? I would submit it has and does.

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, RES Auction Services 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.