Jake Williams has been an auctioneer for 20 years. When asked, he would say that he, “Sells mostly anything, but he prefers the three-C’s: cars, cattle and coins … and I like coins because they’re light and don’t take up much real estate.”
Frequently and particularly at his monthly coin auctions, bidders seem to bid at the last second, resulting in some bids being missed, and others coming in “while the hammer is falling …” where he may (and usually does) reopen the bid.
Jake thinks maybe he can revise his policy where he can reopen the bid anytime after he utters, “Sold!” — maybe even up to a minute or more after. The theory here being that another bid, even 59 seconds later, is more money for him and his seller.
Jake modifies his terms and conditions to reflect his new policy. Mindful that this policy may not be well received by his bidders, he decides to memorialize this new policy on third page of his terms and conditions, in 6 point size type, where it probably won’t attract much attention.
At Jake’s next coin auction held at the Jackson County Fairgrounds, he has about 700 lots of coins including many gold coins and many Morgan and Peace silver dollars. Of special interest, he has a 1879 Morgan silver dollar mint error — a rotated reverse — and it’s the only known 1879 of this kind.
Bidding begins on this special 1879 coin (Lot #4) and the opening bid is $1,000, followed by bids of $1,500, $2,000, $2,500 … all the way up to $11,500. At this point Jake is asking for $12,000 and gets a bid of $11,750. Without receiving any further bids, he sells this coin — by declaring, “Sold!” for $11,750 to bidder # 174.
As Lot #5 comes up for bid, the $11,500 bidder motions for Jake, as he thought [mistakenly] he was the high bidder at $11,750 … and is now willing to bid $12,000. Jake announces that the bidding for Lot #4 will be reopened and takes the $12,000 bid, asking the prior (buyer) bidder to bid $12,250.
Bidder # 174 protests. He says that this coin was sold to him for $11,750 and that his bid cannot be voided; that the bid cannot be reopened. Jake responds to this bidder, while informing his entire crowd, that his terms and conditions say that he can reopen the bid in this and similar instances.
Jake counters that his terms and conditions remain, and that with no other bidding, this coin is now sold to bidder # 39 for $12,000. Bidder # 174 stands up and walks out of the auction. Jake’s auction continues, selling his final lot about six hours later.
A few days pass when a letter arrives for Jake from Trett Roberts, a local attorney. The letter states that Mr. Roberts represents a bidder at Jake’s last coin auction, and that he would like to discuss making things right with his client, and the auctioneer’s unconscionable auction terms.
Today, we explore unconscionable auction terms, which courts today often refer to as something that “shocks the conscience of the court.” In an article written in 2000 by attorney Paul Bennett Marrow of New York, Mr. Marrow points out that he believes there are three threshold rules leading to a conclusion that a covenant [in a contract] is actually unconscionable — i.e., one-sided, oppressive and likely to result in unfair surprise:
- Its effect is profoundly discriminatory to one of the contracting parties
- It contains language that attempts to sanction abusiveness, arbitrariness or the imposition of a needlessly burdensome condition
- It contains language the real meaning of which is intentionally obscured from one of the parties
Given Mr. Marrow’s three threshold rules, could we conclude that Jake William’s bid reopening policy is unconscionable? Should we make such a conclusion? Here’s Mr. Marrow’s complete article on this subject: http://www.columbia.edu/~yc2271/files/teaching/unconsc.pdf
Mr. Marrow points out in the above writing that unconscionable covenants have a “profoundly discriminatory effect on one of the contracting parties” and can involve exploitation, unfettered power, arbitrariness, unilateralism and terms counter to public policy.
Here is another treatise on unconscionable contract terms — especially so-called “standard-form” contracts by Western State University College of Law Emerita Law Professor Edith R. Warkentine: http://digitalcommons.law.seattleu.edu/cgi/viewcontent.cgi?article=1056&context=sulr
We’re not necessarily suggesting that Jake’s reopen policy is unconscionable, but we are saying that it might be. Further, will his 10% commission on $250 pay for his attorney and court costs even if it’s not? We can answer that …
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.