Auctioneers often inquire if one can sell “as-is” (AS IS) without offering the bidders/buyers the opportunity to inspect the property prior. In this writing (and in an upcoming court case,) attorneys I’m working with contacted me because they wanted my opinion regarding UCC § 2-316.
First of all, per the UCC § 2-316 (1) one cannot create an expressed warranty and disclaim it at the same time. Auctioneers cannot say “This is a U.S. Industrial Machinery 200 Ton x 10′ Hydraulic Press Brake USHB200-10HM” and [maybe] not a “U.S. Industrial Machinery 200 Ton x 10′ Hydraulic Press Brake USHB200-10HM” at the same time.
Often the more material question is if an auctioneer can disclaim implied warranties concerning merchantability or fitness. The UCC § 2-316 (2) suggests using terms like, “There are no warranties which extend beyond the description on the face hereof” in conspicuous print would allow such a disclaimer.
Yet, the UCC § 2-316 (2) is subject to UCC § 2-316 (3) which qualifies the circumstances when these such disclaimers hold effective. We’ve noted here UCC § 2-316 (3) in total:
- (a) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like “as is”, “with all faults” or other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty; and
- (b) when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and
- (c) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.
Regarding (a): If we look at the above in detail, we’ve written before about the words “Unless the circumstances indicate otherwise” noted in (a) and memorialized that here as a result of some prior litigation: https://mikebrandlyauctioneer.wordpress.com/2020/10/27/unless-the-circumstances-indicate-otherwise/. It would appear those “circumstances” may involve if a preview was offered or not.
Regarding (b): When looking at (b) above, this qualifier notes specifically about the opportunity for preview to disclaim implied warranties. As such, it alone would at minimum require a preview offering to substantiate an implied warranty disclaimer.
Regarding (c): The third qualifier (c) deals with course of dealing, course of performance, or usage of trade. The important issue here an auctioneer doesn’t know who the buyer is until after the auction (lot) has been sold: https://mikebrandlyauctioneer.wordpress.com/2021/09/08/as-is-and-whos-the-buyer/.
So, if UCC § 2-316 (3) (a) could be invalidated lacking the opportunity for preview, and UCC § 2-316 (3) (b) deals with the opportunity for preview, and UCC § 2-316 (3) (c) at auction is at best a guess, and otherwise indiscernible, isn’t an opportunity for preview at auction required to possibly waive any implied warranties?
This case involves a buyer of a high-value item sold “AS IS” with no opportunity to preview, despite his written request. The subject property is non-functional — something that wasn’t disclosed in any advertising. This buyer wants a refund or otherwise to be made whole.
We would ask the auction company — why not refund his money or make him whole? Wouldn’t that be better than spending time in court, even if the ruling goes your way? At the cost of litigation, it’s not really a question that requires an answer. Yes, staying out of court is better and almost always less expensive.
We’ve also suggested that it’s better to not disclaim any implied warranties — and if you’re implying something, you should stand behind it. More here: https://mikebrandlyauctioneer.wordpress.com/2022/11/21/can-an-auctioneer-disclaim-an-implied-warranty/
So a lot is selling at auction “AS IS” and a bidder (buyer) wishes to examine. He’s of course told he cannot … which wouldn’t meet with “as fully as he desires.” In this case, does this buyer have a remedy? These attorneys think so citing UCC § 2-718 and UCC § 2-719.
Obviously, another question for auctioneers generally involves when a bidder cannot reasonably inspect. The Supreme Court of the United States ruled in a case known as Smith v. Richards, 38 U.S. 26 (1839) where this issue was addressed as follows:
Whenever a sale is made of property not present, but at a remote distance, which the seller knows the purchaser has not seen but which he buys upon the representation of the seller, relying on its truth, then the representation in effect amounts to a warranty; at least the seller is bound to make good the representation.
By auctioneers behaving better (not disclaiming expressed nor implied warranties,) more people will engage in the auction process to bid and buy — helping our sellers realize more in proceeds. It’s just about that simple.
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.