agreement, auction, Auction Law, auctioneer, auctioneers, auctions, bid calling, bidders, client, complete, contract, knowledge, ownership, possession, sold, title, UCC § 2-106, UCC § 2-301, UCC § 2-328, UCC § 2-511
The default position of the Uniform Commercial Code (UCC) appears to say that title transfers when the auctioneer says, “Sold!” or the online platform notes that “You won.” However, at that very moment, does the buyer own (have title to) the property just sold?
We take this assumption from the UCC § 2-328 and the phrase, “Sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner.” Further, UCC § 2-106 says that “A “sale” consists in the passing of title from the seller to the buyer for a price.”
We may be arguing semantics, but UCC § 2-106 says “the passing of title” [present participle — continuous tense] and not that title is passed [past tense] at this moment or concurrent with the fall of the hammer. Is the sale more a process than a moment in time? Does a sale constitute steps to carry out subsequent?
I think we’d all agree that clearly, at almost every auction (maybe every auction) in the United States, the sale is not complete at “Sold!” because at that moment, the buyer hasn’t paid …yet, and the property hasn’t been delivered nor released to the buyer … yet; although it’s considered complete?
In light of this, we have argued that practically, if not legally, the sale being completed signals that the contract for performance by the parties (buyer and seller) is firmed. Given this premise, this contract could dictate that the buyer must pay and the seller must deliver or release, for example.
We’ve offered that auctioneer bid calling forms contracts. We wrote about this phenomenon here: https://mikebrandlyauctioneer.wordpress.com/2014/08/11/bid-calling-is-just-numbers/. No differently, online auction software (platforms) form contracts. Additionally, the UCC § 2-301 notes that, “The obligation of the seller is to transfer and deliver and that of the buyer is to accept and pay in accordance with the contract” — noting a contract is established.
As we look further at the UCC to try and clarify this unclear circumstance, the UCC § 2-511 (1) notes that “Unless otherwise agreed tender of payment is a condition to the seller’s duty to tender and complete any delivery.” In other words, an auctioneer could by default require payment before delivery — and delivery or release of the goods could signal transfer of title?
We think citing the UCC § 2-511 might be sufficient, and otherwise that your terms of auction could say that “title and possession transfers upon payment.” We view this as quite reasonable, and not adhesionary, unreasonable nor inequitable. Yet, the longer you as the auctioneer retain possession, the more responsibility you have for care and control.
This is essentially a “title retention clause” (akin to a Romalpa clause) where as the name suggests, title is retained by the seller until some event, such as payment. These clauses need to be acknowledged by the bidders/buyers before they are effective which would seemingly suggest their placement in the terms and conditions would be sufficient.
Title and possession are mutually exclusive. However, title usually includes possession. You as an auctioneer may want to disjoin possession and title to burden the buyers with more responsibility for care and control. Maybe to the extent that you can, consider providing buyer possession at the fall of the hammer or soon thereafter, and title upon payment?
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.