In a recent case before the Supreme Court of Virginia, parties discussed when an auction is with reserve and when it is without reserve, also known as absolute.
As all auctions are with reserve (except in Louisiana) unless explicitly denoted as without reserve (absolute,) one side argued there should be a bright line such as using the word, “absolute,” or “without reserve” and the other side essentially argued that any expressions [clearly] suggesting absolute should be enough.
However, is “selling to the highest bidder” explicit? The Appellate Division of the Supreme Court of New York, Fourth, said in Drew v. Deere Co. 19 A.D.2d 308 (1963) that such didn’t explicitly denote a without reserve auction.
So, what about these other similar phrases?
- It all has to sell
- We’re selling it all today
- Everything here will sell today
- Complete liquidation
- We’re not taking anything with us
Based upon Drew v. Deere Co. and a significant amount of other case law, these phrases wouldn’t be held explicit either. Yet, what do bidders think when they see such terms? What do too many auctioneers do knowing they can deceive bidders with such phrases? Maybe that’s why we have case law to reference?
Without question, the most interesting part of the testimony in this case was given in the last 90 seconds or so. The Court asked a fairly simple question as you can see below, and the defendant’s attorney/witness bared the unfortunate truth about the dangers of a bright line philosophy in this regard:
As a practical matter — we’ve been debating this now for however long we’ve been debating it — wouldn’t it make more sense for the default rule in most of the jurisdictions to apply in Virginia unless they absolutely say that it is an absolute auction, the default rule applies so that we don’t have this type of uncertainty?Virginia Supreme Court
I believe that that rule is too rigid Your Honor, and that would afford sellers of property to glean the benefits of auctions without reserve and to tiptoe around those specific words but still otherwise convince participants at the auction that they would be able to walk away with that property on that day provided they tendered bids and to otherwise lend in their mind that a contract would be formed upon by doing so. However, they would be able to avoid liability as long as they didn’t use those specific words.Defense counsel/witness
This suggesting “it’s selling without reserve” or “it’s selling absolute” without using those specific words and then holding a with reserve auction has been going on for years. There’s no question auctioneers know without reserve/absolute auctions draw more attention, but want to hold a with reserve auctions.
Given the “bright line” philosophy, auctioneers can simply say, “It all sells today to the highest bidders …” so that the bidders think it’s a without reserve auction, and then withdraw items after bids are placed, take seller bids, have bids for the seller, etc. Disgruntled bidder? “Well … we weren’t having a without reserve/absolute auction” … as I clearly led you to believe.
Courts would do better to not look at just the specific words, and rather the intent of those words and public perception — what’s explicit to bidders/buyers? A few courts have but if the “bright liners” win out, we’ll have more and more bait (it’s definitely selling) and switch (it’s maybe selling.)
The irony of the Court suggesting specific words to explicitly denote selling without reserve/absolute would decrease uncertainty — when actually such rulings vastly increase uncertainty — demonstrates a substantial regrettable misunderstanding of the auction industry.
If any other words — no matter how persuasive, clear, or unambiguous (explicit) to bidders — don’t count, and intent doesn’t matter, we can certainly expect more of the same … https://mikebrandlyauctioneer.wordpress.com/2020/08/18/absolute-or-other-expressions/.
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, Brandly Real Estate & Auction, 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 has served as faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.