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Death of a Salesman is a 1949 play written by American playwright Arthur Miller. It concerns an over-the-hill salesman facing a personal turning point when he loses his job and attempts to make peace with his family.

Could an auctioneer face this same predicament? It seems possible that any (innocently?) uninformed auctioneer could be at risk as we discuss (again — where [apparently] we previously weren’t clear) expressed and implied fraudulent inducement.

Here’s that prior treatise where we attempted to cover the highlights of this important issue: https://mikebrandlyauctioneer.wordpress.com/2019/04/09/professional-auctioneers-shouldnt-be-trusted-really/.

First, legally, an inducement is a pledge or promise that causes an individual to enter into a particular agreement. A fraudulent inducement is (generally) the same except the pledge or promise if false and the relying party is damaged.

When auctioneers are bid calling, they are inviting offers from bidders. Therefore the auctioneer suggests — invites — bidders to bid certain amounts. For instance, “Folks, start me out on this tractor at $50,000 …” Here, the auctioneer is attempting to say this tractor may be worth about $50,000.

What if this auctioneer instead said, “Folks, I have $45,000 on this tractor and I want $50,000 …?” This type of statement expressly communicates that there is a bid for $45,000 and the auctioneer is inviting a bidder to outbid this prior bid.

Additionally, what if the auctioneer merely said, “Folks, $45,000 now $50,000 on this tractor here …?” This type of statement implies that there is a bid for $45,000 and the auctioneer is inviting a bidder to outbid this prior bid.

In either of these above cases (expressed or implied) if the $45,000 bid doesn’t really exist, that is almost assuredly fraudulent inducement to bid $50,000. Fraudulent inducement is illegal and actionable in court. A bidder who bids against expressed or implied fictitious bids has excellent standing to be compensated.

From a strictly civil standpoint — as bid calling creates contracts — the Restatement (2nd) of Contracts § 164 notes:

If a party’s manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying, the contract is voidable by the recipient.

… in other words, the ultimate buyer could rescind his purchase if there were any bids which were fraudulently induced, as once a bid is placed in bad faith, all bids subsequent are in bad faith and able to be nullified. We discussed more about this here: https://mikebrandlyauctioneer.wordpress.com/2011/10/27/last-good-faith-bid/.

Further, such an auctioneer could face regulatory or criminal charges for fraudulent inducement — and this has already happened to more than one auctioneer in the United States. My hope is there isn’t yet another auctioneer on-deck for similar treatment.

Incidentally, there is no need to alert the bidders of the increments planned at this point in the auctioneer’s chant. As soon as a legitimate bid is accepted, the next suggestion accomplishes this almost immediately. And again, these increments are solely suggestions as the bidders make the offers, not the auctioneer.

And … customary increments are well-known in the live auction buying community (and often otherwise stipulated in many live/online auctions) as they tend to center on about a 10% raise over the prior bid as soon as the price reaches over half of market value.

For instance, if our $50,000 tractor started at $10,000 the next bids might be $20,000, $30,000 and then would likely moderate to $35,000, $40,000, $45,000; increments sometimes decrease (as a percentage) again near the final bid price — might a typical auctioneer accept $47,500? $46,000? Sure.

This is far from the first time we’ve wrote about this issue. In fact, a federal case in which we were consulted involved this very issue — portraying fictitious bids as genuine that were meant to induce a higher bid. https://mikebrandlyauctioneer.wordpress.com/2018/01/29/i-have-it-but-i-dont-and-then-again-again-again/.

In this case, this particular attorney who called me was pursuing damages per the Sherman Antitrust Act (bid rigging, shill bidding and the like.) In other words, state and federal charges are possible — something I would think no auctioneer would desire to face.

Lastly — and on the contrary — I’ve yet to see even one auctioneer get into any trouble by honestly and properly portraying what the current bid is, and what the desired next bid is … and as such there seems little question this would be best practice given we’re otherwise discussing fraud, voiding contracts, shill bidding and bid rigging.

Mike Brandly, Auctioneer, CAI, CAS, 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, Executive Director of The Ohio Auction School, an Instructor at the National Auctioneers Association’s Designation Academy and America’s 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.