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

We have written extensively on the UCC 2-328 and its many subtleties. In our topic today, we reference a treatise we wrote in 2011 concerning the seller bidding without authority and possible recourse by other bidders — or buyers.

That analysis is here: https://mikebrandlyauctioneer.wordpress.com/2011/06/30/if-the-seller-bids/

As we have stated in countless classrooms, seminars and workshops all across the United States, if the seller bids without authority at an auction, the buyer may take the goods [property] at the last good faith bid which is the last bid before the first bid in bad faith.

We say buyer because the UCC 2-328 uses the term “buyer” and necessarily not “bidder.” Too, the UCC 2-103 (1) (a) defines a “buyer” as someone who buys or contracts to buy … in other words, the buyer may have rights where a bidder may not.

Steve Proffitt wrote a similar view of this particular statute in his article titled, “A Closing Look at UCC Section 2-328” in early 2000 where he noted that words “matter” and inferred a buyer might take the property at the last good faith bid if the seller bid without authority, but probably not necessarily the last good faith bidder.

Our view is in fact a bit different as the UCC 2-328 says “buyer” and “last good faith bid” and not “last good faith bidder,” and/or “bidder” in this regard. In other words, the buyer might even claim the property for someone else’s last good faith bid. However, Mr. Proffitt continued that he felt this was an “unfortunate reduction in the reach and power of Section 2-328.”

Here are Steve’s comments from that article:

Still, if I were representing an aggrieved bidder in a lawsuit on this point, I would argue to the court that the word “buyer” includes my client, a “good faith would-be buyer.” Some liberal courts would likely buy this argument and give my client his victory, but strict construction courts likely wouldn’t give an inch. In the latter case, I would advise my client to pursue a fraud action against the seller in an effort to recover damages.

I agree 100% with Steve’s above analysis; an attorney representing a non-buyer against a seller-buyer bidding without authority should first claim that the bidder was a “buyer” in a sense, and if that argument fails, sue the seller otherwise.

Nonetheless, does the UCC 2-103 (1) (a) help with Steve’s first argument? As I’ve noted, bidders enter into contracts to buy while bidding, even if not deemed the high bidder. Such analysis is detailed here: https://mikebrandlyauctioneer.wordpress.com/2014/08/11/bid-calling-is-just-numbers/. This might help that so-called liberal court to rule bidders are buyer(s).

We’ll await that court decision. Until then, it seems to us a strict interpretation regarding this issue is probably best and (as I’m sure Steve Proffitt would agree) further capricious or arbitrary treatment (as in “the auctioneer/seller/bidder may …”) is the worst strategy.

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.