Auctioneers (and thus sellers) have bidders who register to bid, win the bid, but refuse to pay. It’s fairly common in the online auction world and found to a lesser extent in the live auction business. Nonetheless, if the buyer doesn’t pay, here’s what the auctioneer can (and maybe should) do: https://mikebrandlyauctioneer.wordpress.com/2020/11/25/auction-buyer-didnt-pay/.
There is also the case of a buyer paying and taking the property into his or her possession, and then cancel the payment (credit card chargeback, bounced check and the like.) This circumstance can rise to a crime if the buyer had the intent to possess the property without paying.
However, it’s important to note that if an auctioneer then contacted this buyer and accepted a “partial payment” then this case almost certainly becomes a civil case, rather than criminal. That’s because the auctioneer and/or seller have entered into subsequent “revised terms” regarding a payment plan of sorts.
For example, if an auctioneer sold a car at auction for $4,000 and the buyer paid with his credit card and drove his new car to his home, and then initiated a chargeback on that credit card, with intent to “convert” the car, that’s likely a crime. But, if this same buyer offered the auctioneer $1,000 cash as a partial payment and the auctioneer accepted, this is then a contract (civil) matter and almost assuredly not criminal.
What’s the difference between criminal buyer behavior and civil (breach of contract) buyer behavior? Criminal actions can be investigated by the police or sheriff’s office, where civil matters are largely settled in court. And if the buyer doesn’t pay at all — that’s civil but is typically handed by reselling the property and then possibly suing for damages.
We were privy to an auctioneer who sold over $50,000 of inventory to a buyer who then paid with a credit card — and then initiated a chargeback. The buyer contacted the auctioneer and told him that he could make a $3,000 payment each week until paid in full. The auctioneer accepted his offer and the first (and last) payment of $3,000 and never saw that buyer again.
This auctioneer contacted his local police department who took a report — but informed him since he accepted partial payment, this was not a criminal matter they could take on, and rather a civil matter. The seller (with the assistance of the auctioneer) sued the buyer but it cost over $15,000 and over two years to eventually recover most of the $47,000 balance.
Here’s our summary:
- If a buyer buys and doesn’t pay and you retain possession — it’s a civil case and you can likely resell the property.
- If a buyer buys and doesn’t pay but has possession — it could constitute a criminal case.
- If a buyer buys and doesn’t pay but has possession and you accept partial payments — it’s likely a civil case.
We wrote about the related issue of forcing an auction buyer to buy; largely until the seller/auctioneer can quantify their damages, there is generally no prudent lawsuit nor criminal case: https://mikebrandlyauctioneer.wordpress.com/2017/11/16/at-auction-can-we-force-sellers-to-sell-buyers-to-buy/.
As we’ve noted before, securing competent legal counsel is always a good idea when you find yourself and/or your seller in any of these situations. One wrong move (action or inaction) on behalf of your seller could be costly for you and your principal.
Lastly, online auctions can be a bit different — in that, if an online purchase involves intent to convert, it may well constitute wire fraud. We wrote about that topic here in more detail: https://mikebrandlyauctioneer.wordpress.com/2020/03/24/online-bidding-and-wire-fraud/.
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, and an Instructor at the National Auctioneers Association’s Designation Academy and Western College of Auctioneering. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.