Our phone rings regularly from attorneys all over the world. A few days ago, this particular attorney asked the same question as the title to this story: Does “No Reserve” mean absolute? In other words, if an auctioneer is selling “No Reserve” then the seller can’t bid, nor is there any minimum bid or no no-sale if a bid is received within a reasonable time after the property is put up for sale?
Let’s start with this: State law in all 50 states in the United States says that auctions are either “with reserve” or “without reserve,” and further the United States judicial system has routinely equated the word “absolute” to the words “without reserve.” However, some auctioneers use words like “no reserve” or “unreserved” which appear to be the same thing — but are they?
If a property was put up “No Reserve” and bids were placed, and then the property was not actually sold, could a bidder argue that the property was put up “without reserve” and therefore could not be withdrawn? Could an auctioneer argue that the property was not put up “without reserve” but rather “No Reserve” meaning it had no particular fixed reserve?
We previously wrote about some auctioneers using alternate words to suggest something is selling without reserve when it’s actually selling with reserve: https://mikebrandlyauctioneer.wordpress.com/2012/06/08/what-is-an-unreserved-auction/. We also wrote about the power of the word “absolute” here: https://mikebrandlyauctioneer.wordpress.com/2016/08/25/the-power-of-the-word-absolute/.
We’ve also written and held the definition for selling absolute which in our proposition is “the genuine intent to transfer to the highest bidder regardless of price” as we wrote about here: https://mikebrandlyauctioneer.wordpress.com/2015/11/27/genuine-intent-to-transfer-to-the-highest-bidder-regardless-of-price/.
To answer our attorney’s question, we think selling “absolute” or “without reserve” or “no reserve” or “unreserved” or any other similar language means you are selling absolute or without reserve … or you should be if you’re not. Interestingly, this attorney’s question involved an auctioneer claiming “No Reserve” which he said meant the seller/auctioneer hadn’t decided the reserve yet.
The particular language in the United States (minus Louisiana) is that “Such a sale is with reserve unless the goods are in explicit terms put up without reserve.” Thus the often-asked questions include: What is ‘explicit?’ Explicit to who? The expression itself? Interpreted as such? Said commensurate with other statements? What was the intent?
This has been litigated numerous times here in the United States. Different courts, different judges, different states, different days resulting in a fairly consistent theme that if the words or representations otherwise suggest to the typical person “absolute” or “with reserve” then the auction is to be (or should have been) conducted as such.
In a case in which I testified, a court upheld my view that words such as “a complete liquidation” and related actions were meant to convey that the auction was without reserve — or at a minimum that the seller/auctioneer was endeavoring to portray the auction as such. Accordingly, a seller and/or auctioneer isn’t advised to put reserves on property where they have expressed (or implied) there aren’t any such reserves.
However, in the famous case of Drew v. John Deere Company of Syracuse, Inc., 19 A.D.2d 234, 241 N.Y.S.2d 267, 269-270 (1963) the judge, in this case, pointed out that “selling to the highest bidder” was not the same as a without reserve auction — even though Drew felt the advertising clearly denoted an absolute auction.
Nonetheless, there’s a timeless lesson here as even though John Deere of Syracuse, Inc. won their case, they were in court and sustained substantial costs and time. What’s a better plan than you often hear about? Stay out of court? Indeed: https://mikebrandlyauctioneer.wordpress.com/2018/07/26/auctioneers-you-want-win-in-court-or-stay-out-of-court/.
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.