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The UCC § 2-328 (Sale by Auction) only has nine sentences, but they all are widely misunderstood. Here we take a look at sentence #8, shedding some light on what it means. Here is this eighth sentence:
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 penultimate sentence of the UCC 2-328 is a bit confounding. First, it notes that if the auctioneer knowingly receives a bid on the seller’s behalf … and later suggests only that if such a bid is made (even unknowingly) that the buyer has recourse.
Nonetheless, it appears if the seller bids directly or via a proxy without authority (at all — in a without reserve auction) or undisclosed in a with reserve auction, that the buyer has certain rights … to void the sale altogether or take the property at the last good faith bid.
Voiding the sale is fairly straightforward. However, the last good faith bid is widely debated. It has been established that the last good faith bid is the last bid made prior to the seller bidding for the first time — regardless of what other bids follow. We discussed more here: https://mikebrandlyauctioneer.wordpress.com/2011/10/27/last-good-faith-bid/
As we wrote in 2017, noted attorney Steve Proffitt opined that the buyer could merely be a bidder — and in other words, if the seller was the high bidder, that another bidder would possibly claim title. We further explored here: https://mikebrandlyauctioneer.wordpress.com/2017/05/22/bidders-last-good-faith-bids-and-recourse/
Additionally, however, this eighth sentence notes “the” buyer signaling that there should be only one — so if Mr. Proffitt was correct, this under-bidder would be a certain person … possibly only the runner up bidder? It seems more textual to say that the bidder with recourse must be the actual buyer.
Too, there is the issue of who the seller actually is — and is not. Selling for a corporation? The president and/or other officers are not the seller; selling for an estate? A beneficiary is not the seller. We discussed more here: https://mikebrandlyauctioneer.wordpress.com/2017/02/16/at-an-auction-whos-not-the-seller/
Disclosure of the seller’s right to bid seems to be necessary in the contract between the auctioneer and seller as well as in the terms and conditions for the auction and further announced at any live auction. Therefore in a with reserve auction, the seller may indeed bid directly or via a proxy with no recourse if disclosed.
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, an Instructor at the National Auctioneers Association’s Designation Academy and Faculty at the Certified Auctioneers Institute held at Indiana University.