Auctioneers around the United States have held since the forming of this country that at auction, the seller can bid at a with reserve without any recourse so long as that right is reserved.
Specifically, this was first codified as state law in the Uniform Sales Act (3) and (4) in 1906. Once the Uniform Commercial Code (UCC) 2-328 was written, these same assumptions followed with the somewhat famous paragraph 4 (8th 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.
Recently, I had an attorney tell me that this 8th sentence — in fact — does not permit the seller to place a bid. My reply? Of course it does, or the entire sentence makes no sense.
In other words, why denote that if the seller bids and there is no notice the buyer has recourse … unless when the seller bids and there is notice, there is no recourse? If the seller can never bid (outside of a forced sale) why not simply say, “The seller may not bid?”
For that matter, the 5th sentence of the UCC 2-328 says:
In an auction with reserve the auctioneer may withdraw the goods at any time until he announces completion of the sale.
In other words, if the auction is with reserve, a seller’s bid would constitute a withdrawal — which is permitted anytime before the completion of the sale. In other words, the seller can bid with the 8th sentence further clarifying that the buyer has recourse lacking disclosure.
Let’s say you’ve been borrowing your neighbor’s lawn mower and your neighbor says, “If you use my lawn mower, and don’t fill up the tank when you’re finished, your borrowing privileges will be suspended.”
Are you safe to assume if you fill the tank your lawn mowing privileges will not be impacted? It appears clear that is the arrangement — even though the neighbor never actually said, “If you fill the tank …” and rather said, “If you don’t …”
More importantly in this example, if your neighbor doesn’t want you borrowing his lawn mower at all, wouldn’t he say, “You can’t borrow my lawn mower?” Here as well, it is as important what your neighbor says as what he doesn’t say.
Relatedly, we previously noted that seller bidding portrayed as non-seller bidding (as another bidder’s bid) could be considered a shill bid — falsely suggesting another arm’s length bidder to induce a higher bid. That treatise is here: https://mikebrandlyauctioneer.wordpress.com/2019/02/27/when-is-a-sellers-bid-a-shill-bid/.
However, the bottom line is this: At auctions in the United States, the seller can indeed bid with proper disclosure in a with reserve auction without any recourse — by bidding himself or via a proxy including the auctioneer; any other interpretation of this overall principle is preposterous.
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.