We frequently talk about auction-related contracts and more so recently on waving expressed and implied warranties. Of course, we’ve recommended all disclaimers regarding merchantability and fitness for a particular purpose (UCC § 2-316) be in writing and CONSPICUOUS.
The specific treatise on that subject is here: https://mikebrandlyauctioneer.wordpress.com/2021/09/06/are-you-selling-as-is-or-as-is/ and we find case law largely in support of this holding including Osborne v. Genevie, 289 So. 2d 21 (Fla. Dist. Ct. App. 1974).
Additionally, our previous writing on disclaiming expressed warranties is here: https://mikebrandlyauctioneer.wordpress.com/2021/06/21/can-an-auctioneer-disclaim-an-express-warranty/ and our previous writing on disclaiming implied warranties is here: https://mikebrandlyauctioneer.wordpress.com/2020/10/27/unless-the-circumstances-indicate-otherwise/.
While auctioneers cannot disclaim expressed warranties, auctioneers can potentially disclaim implied warranties by the usage of statements such as “AS IS” and the like. Are there other potential issues here? There are because auctioneers don’t know who the buyer is until it’s too late to properly disclose or disclaim.
For instance, to disclaim by an “AS IS” disclaimer it requires that “which in common understanding calls the buyers attention to the exclusion of warranties and makes plain …” In other ways, auctioneers can potentially disclaim warranties through the citing of a “course of dealing or course of performance or usage of trade.”
Course of dealing, course of performance or usage of trade definitions reference “sequence of conduct between the parties” and “sequence of conduct concerning previous transactions” and further “practice or method of dealing having such regularity of observance in a place, vocation, or trade.”
So if our buyer was someone who has purchased before, or been involved in previous transactions, or is knowledgeable of such regular events — then he could know — for example — the subject item was selling without an implied warranty.
However at an auction, the auctioneer is taking offers from any number of bidders — who may or may not have any history with auctions or this auctioneer, nor understanding of any such regular events and related customs, nor share any other common understanding.
The UCC § 1-303 also helps us resolve course of dealing, course of performance, and usage of trade if they conflict (are not reasonable;) “usage of trade” is the least important criteria used to resolve if a disclaimer is sufficient:
Except as otherwise provided in subsection (f), the express terms of an agreement and any applicable course of performance, course of dealing, or usage of trade must be construed whenever reasonable as consistent with each other. If such a construction is unreasonable: (1) express terms prevail over course of performance, course of dealing, and usage of trade; (2) course of performance prevails over course of dealing and usage of trade; and (3) course of dealing prevails over usage of trade.https://www.law.cornell.edu/ucc/1/1-303
As a result, laws that typically govern one seller and one identifiable buyer are applied differently when one seller and auctioneer have 1,000’s of potential bidders. Therefore, any disclaimers involving any of these prospective buyers would essentially have to speak to the so-called least knowledgeable and seasoned bidder.
Of course, providing an opportunity to preview can also allow for disclaiming implied warranties, but even that inspection must be “in regard to defects which an examination ought in the circumstances to have revealed to him.” With our least knowledgeable and seasoned bidder, can we expect the circumstances would reveal to him all material defects?
Further, in regard to inspection, there are auctioneers who don’t provide any opportunity for preview — because they feel “they don’t have to” and nobody can tell them what to do. Per this law alone, the “as is” auctioneer may need to provide the opportunity for preview, where the “AS IS” auctioneer may not — although when is an opportunity to preview a bad idea?
As a result, what is clearly proper disclosure to the least knowledgeable and seasoned bidder? Assuming it is always prudent to put any such [implied] disclaimers in writing, the UCC § 2-316 (2) would prevail that any such writing was CONSPICUOUS. In fact, there is never any reason to put such disclaimers in any less than CONSPICUOUS print unless one is trying to hide something.
Can you have different terms for different bidders? It appears unlikely given Erie Cole & Coke Corporation v. U.S. 266 U.S. 518 (1925) said “The terms and conditions of the sale as set forth in the advertisement were binding alike upon the United States and the bidders,” and Alex Lyon & Son, Sales Managers and Auctioneers, Inc. v. Leach, 844 S.E.2d 120 (W.Va. 2020) which held in part that, “Fundamental principles of fairness required the defendant to treat the [original] plaintiff and [other bidder] equally.”
In conclusion, what should auctioneers do? At a minimum, put any implied warranty disclaimers in CONSPICUOUS print. Augment this protection with the reasonable opportunity to inspect prior to the auction’s conclusion to properly attend to that buyer we don’t know yet.
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.