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We’ve discussed “cut bids” and “refusing bids” and the like before. So, here’s the bottom line of sorts. As an auctioneer/seller if you are selling a lot (property) without reserve (absolute) and put it up for bid — and receive a bid within a reasonable time — you are bound to sell it to the highest bidder.
If you don’t, your seller is open to a lawsuit by the high bidder seeking specific performance. In other words, the high bidder (even if not the buyer) can sue the seller for title. One of the most notable cases regarding this issue is: Pitchfork Ranch Co. v. Bar TL 1980 WY 73 615 P.2d 541
As well, the Law Offices of Stimmel, Stimmel & Smith (Lee D. Stimmel) notes:
Where the subject of an auction sale is land, either the vendor or vendee may obtain specific performance of the contract in an equitable proceeding. Under particular circumstances, specific performance may be invoked regarding the sale of personal property. In re Cole & Stevens Roofing Co., 134 B.R. 60 (Bankr. S.D. Fla. 1991). The highest bidder may specifically enforce the acceptance of the bid where:
the sale is without reserve; and
the right to withdraw the property does not exist after a bid has been made.
The highest bidder may also enforce a transfer of the property pursuant thereto, or may recover damages for breach of contract. There is no contract between the parties in the absence of a sale without reserve, or where the property is withdrawn from auction sale before the acceptance of any bid. In such circumstances, the specific performance remedy is not available.
We’ve previously written that buyers can force sellers to sell. Here in essence the high bidder in an absolute auction is the buyer from an equity standpoint. An auctioneer-denoted buyer does not have equity for title unless this buyer is also the high bidder. You can read more on that here: https://mikebrandlyauctioneer.wordpress.com/2017/11/16/at-auction-can-we-force-sellers-to-sell-buyers-to-buy/
As we’ve previously stated in our treatise on reasonable increments … (that article can be read here: https://mikebrandlyauctioneer.wordpress.com/2017/12/04/auctioneer-may-establish-reasonable-bid-increments/)
Even in a state such as Kentucky or Indiana where state law suggests “reasonable bid increments” may be used, nobody on earth really knows what “reasonable” means specifically. Since the U.S. Mint produces penny coins, it not reasonable for them to be used in commerce? While penny bids are rare, could this argument coupled with not selling to the highest bidder cause confusion in a court of law?
When you as an auctioneer (working for your seller) promise to sell to the highest bidder, you should sell to the highest bidder. If you choose not to do that, the high bidder might well be seeing you in court.
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.