If an auctioneer sold a property of some sort and then due to a breach of contract, had to sell it again — would the auctioneer earn commission twice — each time he put the property (item/lot) up? We don’t believe so.
As such, it certainly got our attention when it was suggested that in the case of buyer breach of contract, the buyer’s premium would be due the auctioneer … each time the property is sold — and/or resold.
As most who study auction law know, the famous attorney and auctioneer J. Stephen (Steve) Proffitt held — to the contrary — that buyer’s premiums belong to the seller and then if the contract provides could be paid to the auctioneer by the seller.
Here’s a passage of Steve’s particular thoughts on this subject:
First, the property being sold belongs to the seller and not the auctioneer. The buyer’s premium is merely part of the purchase money paid by the buyer for the property, so it can belong only to the seller. There is no consideration passing from an auctioneer to a buyer that would entitle the auctioneer to receive any part of this payment. An auctioneer’s receipt of any compensation from an auction, including any portion of the buyer’s premium, comes solely in the form of selling commission or cost reimbursement paid by the seller and as expressly provided by the auction contract. The buyer’s premium is never paid directly from a buyer to an auctioneer, and no thinking auctioneer would want or accept that. Such a result would create a conflict of interests for the auctioneer who would be receiving compensation from each of the opposing parties in the sales equation-seller and buyer.
So, what if an item of personal property is, “Sold!” and then the buyer who now has title refuses to pay? The seller retains possession of the lot and if resold later, would the auctioneer earn a commission for the subsequent sale in addition to his lost commission on the first (nonperforming) sale?
We would hold the auctioneer would not earn two commissions as the seller is only enriched by the subsequent buyer and plus possibly any loss from the second sale price being less than the first.
So, if the seller is only paid once for the property, is there only one commission due the auctioneer? We’re suggesting so, and with a case in which we consulted, this was exactly the court’s opinion as well.
We were hired to assist with a dispute involving a casting machine sold at auction and the auctioneer taking his commission immediately. However, the transaction never closed and the court reversed the auctioneer’s position that he had earned a commission without the seller closing the transaction.
Once the machine was subsequently sold — for far less — the seller sued the first buyer in breach for damages (approximately $200,000 less in sale price) plus other holding costs. The auctioneer was permitted to earn (keep) the commission earned on the second sale, but not the first.
However, the auctioneer was paid for both times for advertising, staffing and other associated costs — but not commission. More basically, seller commissions and buyer’s premiums are treated no different in this regard. Concurrently with the seller being paid — and if per the contract — the seller pays the auctioneer seller commissions and buyer’s premiums.
Could your auctioneer contract state otherwise? In other words, could you hold the buyer’s premium (and/or seller commission) is payable each time the auctioneer says, “Sold!” with a closing or not? Sure you could, but (in our view, and no doubt Steve Proffitt’s view) with a good likelihood a court would rule such a provision is/was unconscionable.
We’ve written about unconscionable auctioneer terms many times before, such as here: https://mikebrandlyauctioneer.wordpress.com/2017/03/01/auctions-that-are-manifestly-unreasonable/ and here: https://mikebrandlyauctioneer.wordpress.com/2017/03/21/unconscionable-auction-terms/.
As Mr. Proffitt suggested in regard to the buyer’s premium, “No thinking auctioneer would want or accept that. Such a result would create a conflict of interests for the auctioneer who would be receiving compensation from each of the opposing parties in the sales equation-seller and buyer.”
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.