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

I was the auctioneer for an event in Chicago and had a bid of $270 on one lot up for auction. Another bidder bid (offered) $265 and I quickly informed him “We are going to the other way … I’ll take $275 …” I think most auctioneers (and attorneys) would agree I couldn’t have upset my contract with the $270 bidder for a contract of $265.

However, what if my $270 bidder was paying with a credit card costing the seller 3.5% and the $265 bidder is paying cash? $270 minus 3.5% is $260.55 and that’s less than $265. So was the $265 cash bid a higher bid than the $270 bid with a credit card? Appears here that the $265 bid nets the seller more … therefore I could have said, “I have $270 … thank you $265 cash, now $270 cash, or $279.80 with credit card?”

This of course makes no sense … no auctioneer would do this, right?

It could get even stranger.

Auctioneer has a bid of $7,000,000 from a bidder with a substantial chance of not closing, and another bidder offers $6,900,000 with ready cash. Is an offer of $6,900,000 cash worth more than an offer of $7,000,000 with a good chance of a breach of contract. Which would you prefer if you were the seller? Of the people I’ve asked — every one has said with a smile — “Give me the $6,900,000 …”

Or consider the opposite. A bidder with $6,900,000 in cash is outbid by a bidder offering $7,000,000 with little chance of closing. Could the $6,900,000 bidder cry foul? Could the $6,900,000 bidder claim his bid was upset by a lower bid, not a higher bid? Can bidders be outbid by a bid which is less in value? Lower?

If you’re not an auctioneer (or even if you are,) here’s a treatise on how bid calling contracts are formed and otherwise operate: https://mikebrandlyauctioneer.wordpress.com/2014/08/11/bid-calling-is-just-numbers/

Let’s say our $6,900,000 bidder approaches the auctioneer: “How can you take that bid of $7,000,000 over my bid from an unqualified bidder?” Of course the auctioneer replies that the seller has consented to this “unqualified” bidder to participate.

Our $6,900,000 bidder then replies that he wants to bid $7,100,000 but not with cash, but financing which has not been arranged. Of course our seller says that the terms and conditions say you must have cash — unless the seller/auctioneer directs otherwise — and they are not willing to take the $7,100,000 bid under those terms — as they had to be set prior to the start of the auction.

If you’re not convinced yet, here’s a third example.

A nice shiny tractor is being put up for auction and bidders can register but are not required to do so — per the auctioneer’s and seller’s terms and conditions. One bidder does register and starts the bid at $10,000. Another unregistered bidder bids $15,000 and the bidding continues between these two bidders until the price reaches $126,000.

At the checkout window, both bidders arrive. The registered bidder is paying his bill while the other unregistered bidder is telling him and everyone else that he has no money … and he just thought it would be really fun to bid at an auction. How does our registered bidder feel now? I suspect he likely thinks he shouldn’t have to pay $126,000 for his new tractor.

But, these types of things happen …

So, what’s the solution? Or do you feel this is acceptable if the auctioneer/seller has agreed to these imbalanced, unfair, inequitable terms and conditions for different bidders … in essence allowing each bidder to have their own unique stipulations.

I tend to think it’s flat-out lunacy.

Here’s what I recommend: Treat all bidders to the same terms and conditions so that price is the only differentiation. Then, $275 is actually a better bid than $270; $7,000,000 is really a better bid than $6,900,000 and that “to-be-registered” bid of $15,000 is actually better than the registered bidder’s $10,000 bid.

I know … you as an auctioneer have bidders paying cash, credit cards, checks, paying later, financing … all kinds of payment options. Yes you do, but make those predetermined terms and conditions available to every bidder; the guy planning on paying cash can use a credit card or write a check if he wants; the woman planning to finance her purchase can alternately use cash.

We have written about this phenomenon but much to our surprise, it’s being discussed again that different bidders can bid with different terms and conditions. One such article from 2010 is here: https://mikebrandlyauctioneer.wordpress.com/2010/03/08/can-auctioneers-treat-bidders-differently/. Another from 2016 is here: https://mikebrandlyauctioneer.wordpress.com/2016/12/16/another-wacky-auction-legal-argument/

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 Texas Auction Academy. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by the The Supreme Court of Ohio for attorney education.