There may not be a personal property auctioneer focused on estates, guardianships, and downsizing type auctions that hasn’t signed a contract to sell “all of the contents” only to arrive subsequent to see that somebody (the kids, for example) has removed much of the inventory.
We might have the best (worst) of these stories, in that we booked a sizeable onsite estate auction at a residential property — contracting with the attorney/administrator. We inventoried (2 full days,) advertised ($1,000,) and secured auction-day staff ($750) only to show up at 4:30 am the morning of the auction to a completely empty home.
Generally, when there is a contract breach, there are two possible results — what is called “substantial performance” (or an immaterial breach) or a material breach. The kids removing two $50 chairs from a $50,000 auction is considered substantial performance. Removing $49,000 in property from a $50,000 auction is a material breach.
Auctioneers can have provisions in their contract for any type of breach. Most importantly, auctioneers should have something in their contract concerning material breaches as those are the ones that matter. The auction with the two missing chairs goes on, where if $49,000 in property is missing, it might not.
What are the possible remedies? Could the auctioneer charge commission on any missing items? Could the auctioneer raise his commission on any remaining property? Could the auctioneer cancel the auction and charge fees to cover his lost commissions and expenses? Could the auctioneer charge what he would have made conducting another auction that same day?
Generally, auctioneers can expect a court to view any claims for damages to coincide with actual losses — actual damages — following a good faith effort to “solve your own problem.” In other words, if the auctioneer would have earned $13,250 in commissions and expenses following this $50,000 aforementioned auction, then the claim would be $13,250 plus possibly attorney fees and incidental costs.
In reality, it’s often somewhere between two $50 chairs and 98% of the property missing. Maybe it’s the best few items missing, or five of the twelve firearms removed, or the client sold the car and truck to a neighbor … so if the auction is going to go on despite, then it’s fair since the seller reformed the contract, that the auctioneer can reform it as well — with a higher commission on the balance of the inventory, for example.
However, reforming it to 10-times the expected commission (for example) or anything else far exceeding what the commissions and fees would have been had the property not been removed … is what makes auctioneers look bad — and not just to the client, but any judge or court in the United States. Such contracts or agreements are often referred to as “unconscionable” as in fundamentally unfair to one party.
In other words, using terms to penalize sellers (or bidders/buyers) far beyond actual damages, possibly in hopes to deter some type of behavior is ill-advised. It only takes one seller, one bidder, or one buyer and the right attorney, and all that ill-gotten money and more will be spent defending any such decision. I might add, this is what you’re not told when you are indeed told your contract, “can say anything …”
We’ve written about unconscionable contracts numerous times including here: https://mikebrandlyauctioneer.wordpress.com/2018/04/19/extraordinary-liquidated-damages-in-auction-contract/. As we pointed out, even “liquidated damages” are usually limited by a reasonable estimate of damages — and necessarily not excessive.
Lastly, we mentioned our attorney/administrator earlier in this story, and with it likely this attorney may be a long-term client, it may be better to write this one off, and “see the forest for the trees.” We explored this all too often forgotten phrase here: https://mikebrandlyauctioneer.wordpress.com/2020/07/10/forests-trees-and-policies/.
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.