It’s been said (even memorialized in some state law) that at an absolute (without reserve) auction, the seller has the bona fide intention to sell to the highest bidder regardless of price.
We’ve held similarly that an absolute seller has the “genuine” intention to transfer to the highest bidder regardless of price: https://mikebrandlyauctioneer.wordpress.com/2015/11/27/genuine-intent-to-transfer-to-the-highest-bidder-regardless-of-price/.
We also find some case law in which this “bona fide” label is then applied to the bidder/buyer. For instance, in an absolute auction, the property is sold to the highest bona fide bidder. Who is this highest bona fide bidder?
For the most part, bona fide bidders are genuine, and not the seller, nor someone just kidding, nor someone without the money to complete the purchase. Of course, we often don’t know all these facts until it’s too late. Would it be reasonable to then conclude the highest bona fide bidder was the last — highest — bidder with the genuine intent (and ability) to purchase?
The possible implications of such thinking are … when auctioneers truly sell to the highest bidder in an absolute auction, all is good. However, if auctioneers don’t sell to the highest bidder citing that bidder wasn’t bona fide, that highest bidder may have a claim.
For instance, what if the online platform goes down prematurely? What if the access road is closed at that live auction? What if the truly highest bidder has a flat tire, or his computer (not the platform) goes down? Could an auctioneer “no-sale” an absolute auction (withdraw the property) noting the highest bidder wasn’t the highest bona fide bidder?
For that matter, could the seller “no-sale” his absolute auction citing that he doesn’t feel the highest bidder is the highest bona fide bidder? Could auctioneers and sellers being advertising absolute auctions with the intention to only sell if they want to? If they don’t want to, they can just say their highest bidder wasn’t the highest bona fide bidder?
Maybe strategies develop where the auctioneer puts up an absolute online auction but then just unplugs the server when/if the auctioneer and/or seller aren’t satisfied with the prices? “Sorry guys, we had system problems …?” I’m certainly not suggesting this scheme, but I’ve been privy to some far more egregious maneuvers.
So, let’s assume we auctioneers or our sellers can just claim the high bidder isn’t the highest bona fide bidder and cancel the auction. This is a slippery slope that auctioneers and the public may never recover from, where countless attorneys argue before judges and juries when (and when isn’t) the highest bidder is the highest bona fide bidder.
Any auction is basically “the intent to sell to the highest [registered] bidder” with a “with reserve” auction to allow this intent to be overridden by the want of bids; in a “without reserve” auction, that intent can rarely — if ever — be overridden once a bid is received.
One doesn’t have to sell to the highest bidder … yet … but in an absolute auction the seller can’t withdraw the subject property once a bid is placed (within a reasonable time.) So what else can the auctioneer do? Wait? Wait some more? The choices are to sell to the highest bidder or wait … but the lot cannot be withdrawn.
The other problem comes from an evaluation of “customary practice” where the auctioneer normally says, “Sold!” after asking for bids for maybe 1-2 minutes and then wants to keep asking for higher bids for 72 hours for some other lot due to some circumstance … and if a court considers that “reasonable.”
“Highest bona fide bidder” at absolute auction has been defined in much of English and United States case law as the highest [registered] bidder that has the genuine intent to purchase, with the means, and is not the seller or other(s) bidding disingenuously — in other words, “in good faith.” See, for example, Payne v Cave (1789) 3 TR 148.
Do we start to expand what the “highest bona fide bidder” means (is) so auctioneers/sellers can unilaterally select to sell or not at absolute auctions? I want to believe that most auctioneers who sell absolute truly do, and let’s hope this “bona fide” argument doesn’t license auctioneers to not.
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.