Tags

, , , , , , , , , , ,

We have held that bidders register with the auctioneer (and/or seller) to earn the right to participate in an auction. This registration is a contract, with competent parties, consideration, and a meeting of the minds.

Relatedly, and generally speaking, all contracts contain an implied duty of good faith and fair dealing. As such, neither party can be the cause the other party does not receive the agreed-to benefits of that contract. Courts routinely analyze specific circumstances to determine injury in particular cases.

It seems clear to us (and many others) that the Supreme Court of Appeals of West Virginia appropriately held that Mr. Leach was injured by Alex Lyon & Son, Sales Managers and Auctioneers, Inc. by allowing a bidder with different-than-advertised terms to bid against Mr. Leach to his detriment (injury.)

The Court noted the following:

Finally, as a general principle, all the bidders at an auction must stand upon an equal footing. Accordingly, an auctioneer cannot vary the announced terms of the sale as to some bidders, or any one bidder, to the detriment of the other bidders.

Alex Lyon & Son, Sales Managers and Auctioneers, Inc. v. Leach, 844 S.E.2d 120 (W.Va. 2020)

It would appear obvious that Mr. Leach would expect (by registering and noting the requirements) that all other bidders would have to comply with the same terms and conditions (10% down, bank letter) and he would only have to outbid bidders with the same qualifications.

However, in this case, Mr. Leach was bidding against another bidder (Lerch) lacking the 10% and bank letter, allowing this bidder an unfair advantage, and causing Mr. Leach to have to bid against someone else lacking the constraints of this 10% and bank letter.

Typically, I hear “Well, what if ‘some wealthy person’ showed up … I can’t register him without 10% down and a bank letter?” or, “What if my softball buddy shows up whom I’ve known for 25 years … I can’t register him without 10% down and a bank letter?”

As a follow-up, the argument goes, “The seller is willing to assume more risk” with this wealthy person or softball buddy. That’s fine, but it injures our aforementioned Mr. Leach by necessitating him to bid against people without the 10% and bank letter.

For that matter, what are actually the odds bidders show up without the 10% nor bank letter and will benefit the seller? We previously wrote about anomalistic auctioneers who plan their lives around very unlikely events, injuring their clients accordingly: https://mikebrandlyauctioneer.wordpress.com/2021/06/07/anomalist-auctioneers/.

However, by allowing other bidders to bid who are not conforming to the registration requirements, we are injuring our aforementioned Mr. Leach’s opportunity to buy (by making him bid more against others who should not be bidding) — part of his consideration (expected benefits) per his registration contract.

Let me ask you: You register for an auction with the required 10% and bank letter, and the auctioneer then takes bids from bidders who need no such 10% nor bank letter … and can put nothing down and still buy … don’t you feel disadvantaged? Injured? You do because those other bidders don’t have the same prerequisites.

Otherwise, isn’t advertising that 10% and bank letter are required and then allowing others to register without either untrue, misleading, deceptive … and as such false advertising? I would suggest that’s obviously not okay whether or not it benefits the seller.

In fact, such unadvertised terms may have injured your seller with others not showing up given they thought 10% and a bank letter were required. Those worried about shrinking the bidder pool by sticking to the pre-set terms and conditions should rather worry the undisclosed ulterior terms weren’t advertised thus causing fewer bidders.

Speaking of “fair” is it fair when other bidders don’t register assuming the terms of registration are fixed (as they rightly should) and don’t participate, only to later realize the buyer purchased under other terms they too could have met or exceeded?

It reminds me of an auctioneer early in my career holding “with reserve” auctions, with published minimum bids. At one such auction, with no bidders offering the minimum, he lowered it to secure an opening bid. The court overseeing this auction voided the transaction for obvious reasons.

We would again offer that there are far fewer cases (maybe none) where a bidder sues for being refused — because he doesn’t satisfy the registration requirements — than the number of cases (two we’ve assisted with as the expert witness) where terms and conditions were capriciously and selectively modified.

Maybe those who remain in opposition to this principle wouldn’t mind if the auctioneer took bids of the chandelier or doorknob against you … as they didn’t have to have 10% nor a bank letter either? Maybe auctioneers should be allowed to take bids out of thin air — so long as it benefits the seller?

As we noted at the start of this analysis, “fair dealing” is implied when there’s a contract. Is an auctioneer/seller being “fair” with one bidder by allowing other bidders (or the light switch) to bid against him who are not similarly qualified? https://mikebrandlyauctioneer.wordpress.com/2021/06/03/unnecessary-risk-really-bad-advice/.

Want an attorney’s perspective? An attorney who specializes in auction law? One who wrote “Waiting for the Hammer to Fall: A General Overview of Auction Law,” 2002. Co-Authored: “Uniform Auction and Auctioneer Licensing Act (“UAALA”) 2006. Co-Authored: “Waiting for the Hammer to Fall: A Guide for Auctioneers,” 2008? In summary, Mr. Bachman said:

[This case] highlights the importance of setting clear auction terms and conditions that the auctioneer will follow. Auctioneers must exercise caution and make sure they follow the terms of the auction to avoid liability.

Kurt R. Bachman, Attorney At Law & Partner, Beers Mallers, LLP, Attorneys At Law

Can you falsely advertise and register bidders capriciously and arbitrarily? That’s what Alex Lyon & Son, Sales Managers and Auctioneers, Inc. apparently thought until two Courts told them otherwise. You don’t have to be the next auctioneer in court being told you can’t do what you just did and there’s an easy solution: Register those who meet or exceed your established terms and don’t register anyone else.

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.