Introduction to Auction Law

The intent of this blog is to help others understand the laws that govern auctions and the standards of ethics that must also be held by those in this profession. I decided to use this as a way to dispel myths, misunderstandings and other false perceptions that plague the auction profession.

Auction Law may be a little beyond my actual scope, as I’m not a lawyer, so nothing on this site is intended to be legal advice, but is for informational purposes only (That’s my disclaimer and I’m sticking to it). However, I am an auctioneer. One thing many people don’t understand is the vast range of laws that auctioneers must keep up with and abide by, so as an auctioneer, I do have a pretty fair knowledge of many laws. Your questions are definitely welcome and I’ll do my best to give accurate and honest answers. But remember, it is only my opinion or understanding of the law and is not considered legal advice. If you need legal advice, consult a lawyer (and no, I won’t recommend one, even though I have two in my family).

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12 Responses to Introduction to Auction Law

  1. Mahadevan says:

    Can I get some links from where i can get materials on Auction Laws for an academic project? Thanks

  2. auctionlaw says:

    In America, there is no federal law regulating auctions. Regulation is left up to individual states. States have differing requirements on licensing, education, bonding, fees and other aspects of conducting an auction. While, not all states require licensing, the Uniform Commercial Code is the basis for auction laws in most states:
    http://www.law.cornell.edu/ucc/2/2-328.html

    Keep in mind, this is just a general “code of commerce”, but has no legal significance, except that most states have drafted most of the UCC into their own laws and each state may have their own additional laws or administrative rules that govern auctions.

    Auction Law has a good updated list of States that have their laws posted on the web:
    State Auction Laws & Auctioneer License Requirements.

  3. Robert says:

    What good is the law if nobody cares.?

    Recently my family was a victim of a theft and illegal auction of yacht. To my surprise i contacted auctioneer associations with ” there nothing we can do” one would think if a group has broken the law in any specialty license area such as auctioneer the groups and auctioneers themselves would be outraged. not only outraged after putting all the time required to get their license legitimately one would think those people would raise all kinds of hell wanting an example made out of the people that illegaly auctioned something off. Anyone wanting to discuss this with me personally please e mail me direct and leave phone number

    wheezy9870@aol.com

  4. auctionlaw says:

    Robert,
    I agree it’s sad that no matter what the profession, you will find those that will take advantage of others for the sake of money. Of course, there are also two sides to every story, so before agreeing that the auctioneer did something wrong, more information would be needed to substantiate the claim. However, I do have a little information I could offer… your course of actions that you could take and I’ll also give my two-cents worth about auctioneer associations.

    First… auctioneer associations are not a legal body and they don’t really any authority to do anything about such things. Yes, they could “kick the auctioneer out” of the association, but unless he has been found guilty of something, that is not likely. There is no requirement that an auctioneer has to belong to an association, yet it doesn’t mean that he/she is a good or bad auctioneer. I joined the NAA and the Texas Auctioneers Association when I first became licensed, but after two years, I didn’t see any real benefit from being a member. It seemed to be mostly a “Good-Old-Boys-Club”. In any case, complaining to the auctioneer association isn’t going to do you much good.

    If you have a complaint against an auctioneer AND you live in a state that requires an auctioneer to be licensed, then you need to seek out the department that handles the licensing of auctioneers. You can usually file a complaint with that agency and they will investigate. If the auctioneer has done something illegal, the licensing department will take legal action against the auctioneer.

    Your other recourse is to get a lawyer and file a lawsuit against the auctioneer. The auctioneer is legally responsible (but not necessarily, solely responsible) for the sale of any goods. This means that the person that ‘held them self out to be the owner’ would also be responsible, so you might also file a suit that includes that individual (if there was one).

    You indicate that theft was involved. This is a criminal offense and should be reported to the police. Of course, they will investigate the claim and if evidence proves that theft has occurred, the individuals will be prosecuted for criminal activity. However, if the auctioneer did his “due diligence” then he normally wouldn’t have to worry. But, if the auctioneer did not check the title on a vehicle or craft and sold it, he could also be held responsible, as well as the individual that held themselves out to be the rightful owner. This is where I have to ask… how could he have sold a yacht without providing a transfer of title?

    The final suggestion I would make to you is: Be careful. While I’ll leave your post intact, be careful of what you tell others about someone. If you make false claims against someone, then you could find yourself in court for things like “defamation of character” or “slander”. If you have been wronged, you should follow the legal channels to get the problem resolved.

    There is one other problem… putting your email address on ANY blog, chat-room or other public forum. You could subject yourself to spammers that harvest those emails and sell them to other spammers. Use the email field in the comments area and it will provide a way for others to contact you through the particular blog (or other forum) without you having to reveal your email address.

  5. Auction Law says:

    Update to Robert’s comments:
    It appears that Robert was complaining about an auctioneer and auctioneer associations, when there was no auctioneer involved in his claim to begin with.

    See the following thread that he posted on this forum:
    http://forum.freeadvice.com/showthread.php?t=377217

    It was actually a lawyer that conducted the sale… not an auctioneer.

    It’s always best to be sure of your facts before you start making statements. As I stated above, you could end up finding yourself in trouble for making erroneous statements and possibly slandering the wrong person. That’s why it’s usually best to find a lawyer and let them do the talking, when you’re in a situation like this.

    Here’s Robert again in another forum… note the last comment in the post:
    http://www.topix.com/forum/city/mercer-island-wa/T91EE04JROJIRNDQ2
    And a follow-up post from the “other side of the story”:
    http://www.topix.net/forum/business/hotels/T9UFF3KGJM66MNH95

    Not to mention, he’s in the RipOff Report, also:
    http://www.ripoffreport.com/reports/0/262/RipOff0262329.htm

    This guy IS all over the place (on the web):
    http://www.city-data.com/forum/florida/49643-florida-wildlife-conservation-police-give-yacht.html
    http://www.indeed.com/forum/job/yacht-broker/05390c183c137e18737b4603

    So, this just seems to substantiate a couple of old adages… “Don’t believe everything you read” and “There’s two sides to every story.”

    Since he has left his email address in almost all of his posts, I’ll leave it here in case someone does wish to contact him. Although I would suspect that the spammers have it by now. So, if you receive an email from him, don’t open it! It’s probably a spammer using his email address and some of those also contain viruses. Just Delete!

  6. Brian says:

    Can you let me know in general what the auctioneer’s obligation is to represent the items he’s selling as accurately as possible and not mislead people in an attempt to garner more bids? I was recently duped at an auction (I feel stupid about it) into buying a painting suposedly from a valuable artist only to find out later that it was not. In this case, the auctioneer’s homepage posted all the items for sale and had the artist’s name and year the painting was done. On his “gallery” page, he posted the painting twice along with other expensive paintings with the artists name underneath. The first picture had just the artist’s name, the second picture had a copy of his signature with a question mark beside it. The day of the sale, he said that he was told by a colleague that it was probably the work of the artist in question. I along with several others bid it up and I won, only to find out several days later from an art dealer that not only was it not from the artist in question but it wasn’t even close and in his opinion, anyone attempting to pass it off as geniune or possibly genuine was deliberately attempting to mislead. Is this a situation where I should have been smarter about it or does some/most of the blame lie with the auctioneer? During the auction we were led to believe these items came from estates in the area but in an email exchange yesterday before I was made aware that it was a fake, he revealed one of his colleagues picked it up at a local flea market

  7. Seth says:

    If a loan balance is owed to the bank on a vehicle seized by the IRS, if you buy that vehicle at auction does the bank loose its lien on the vehicle?

  8. Auction Law says:

    Great question, Seth. Also a great topic for a new post on the forum. See my post “Government Siezed Property Auctions” for the answer.

    Thanks.

  9. […] Siezed Property Auctions By Auction Law In one of the comments, Seth asks “If a loan balance is owed to the bank on a vehicle seized by the IRS, if you buy that […]

  10. Bob says:

    Hi:

    The UCC says “A sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner.”, also saying, “Such a sale is with reserve unless the goods are in explicit terms put up without reserve. In an auction with reserve the auctioneer may withdraw the goods at any time until he announces completion of the sale.”

    If personal property is consigned for auction and the Consignment Contract states a reserve, and the highest bid never reaches the reserve, can the auctioneer hammer the goods ‘sold’ to the high bidder anyway and transfer legal title for the property to the buyer despite a consignment contract which makes no provisions for doing so?

    While the UCC states “a sale is complete when the auctioneer so announces”, does the auctioneer declaring ‘sold’ beneath the contract reserve price abrogate the consigning seller’s prior existing contract reserve terms with the auctioneer and transfer the consignor’s title to the property in question to the buyer, despite failing to meet the reserve?

    Does the auctioneer’s fiduciary duty to the seller and the consignment contract terms disappear with the hammer’s declaration of ‘sold’ or nullify the consignor’s inherent title and rights to their consigned property when the reserve price is not met?

    Assume the auctioneer ‘mistakenly’ fails to bid up to the reserve and fails to withdraw the lot on behalf of the seller when the reserve is not met, and instead, declares the property sold to the highest bidder under the reserve price, can/must the auctioneer, on recognizing that the ‘sale’ failed to meet the consignor’s reserve, act to cancel the sale and return possession of the property to the consignor if the consignor demands it?

    Under the same conditions above, can the auctioneer refuse to cancel the sale on the grounds that under the UCC he can not reverse or cancel a sale once he hammers ‘sold’ as his defense for failing to act on the consignor’s behalf to prevent the property from leaving his possession, or later act to recover the property ‘sold’ from the buyer?

    Under the same conditions above, does the buyer actually have good legal title to the property sold?

    Does the UCC specifically say any auction sale must first be in compliance with the consignor’s contract with the auctioneer (i.e. at or above the reserve price) to be a valid sale before transferring title to an acknowledged buyer? Or, is the auctioneer’s power to sell arbitrary and entirely at their discretion? (I would have thought the UCC’s conception of the auctioneer’s hammer of ‘sold’ being the last word was presumed to mark a sale that was already in compliance with the prior agreed terms of consignment, not in spite of them. That the hammer does not negate the contract that went before it.)

    An auctioneer’s fiduciary duty is to act on behalf of the seller in accordance with the consignment contract and other disclosed terms. Typically the better part of the auctioneer’s revenue comes from the commission buyer’s pay. If the auctioneer fails to act on the consignor’s behalf during the auction to enforce the reserve before he hammer’s ‘sold’ and sells the consignor’s personal property at a price under the reserve price, could it be construed that the auctioneer is acting out of a clear conflict of interest in that he is manufacturing a sale in defiance of his obligations under the previously arranged consignment contract’s terms in order to benefit at his consignor’s expense?

    If you need more detail I have it.

    Does the auctioneer’s offer to pay the difference between the actual sale price and the stated reserve in any way compensate

  11. Auction Law says:

    WOW Bob
    I could write a book, in response to your questions. However, I think I get the jest of your problem and I’ll see if I can offer some sort of answers, without getting too detailed.

    First, the UCC is a “guide”, which was used by most states, in drafting their own laws. You may need to refer to your state laws for specifics, as some states may have variations and sometimes more stringent rules. But, for the sake of this discussion, we’ll stick to the basics outlined by the UCC.

    Now, we must also understand that the UCC section regarding auctions, is only targeting the basics of auction conduct. There are also laws governing contracts and this can make things a little ambiguous, without knowing the exact wording of the contract you signed. But, once again, I’ll assume that it was written as you have interpreted.

    The contract you signed, guarantees the obligations of both parties. So, if it states that the item can not be sold below a minimum amount, then the auctioneer has violated the contract and can be held liable. So, it would be assumed that the auctioneer owes you the full amount due, as if the item was sold at the minimum reserved amount.

    Can you get your item back, if it didn’t sell at the reserve? Yes and No. Technically, the contract with the buyer was not in good faith and you may be able to recover your property. Then the buyer may have a case against the auctioneer for a violation of contract. However, in either case, someone is looking at a lawsuit, in order to get satisfaction. By the same token, the buyer may not willingly give up the item… and regardless of whether the auctioneer or the seller returns their money, so this could still be a matter for a judge to decide (I think this auctioneer is going to be in a lot of trouble, either way).

    The best resolution, would be for the auctioneer to pay you for your item, based on the reserved minimum. If he/she is not willing to do so, then you will likely need the services of a lawyer, which will first send a letter demanding payment and then take further action, if necessary.

    If you are just wanting to get your item back, then you may ask the auctioneer to contact the buyer and request it to be returned. If the buyer refuses, you will still need that lawyer. However, your contract is with the auctioneer and the auctioneer has made a contract with the buyer… it could be a long, drawn out, messy situation. In most cases, if the auctioneer is willing to pay you what should have been owed, it will be the easiest resolution to the problem.

    Hopefully, this was just an “honest” mistake, with no ill intent by the auctioneer. If he/she is willing to pay the amount owed, then they are at least, trying to make things right and that’s all anyone can be expected to do.

    If he/she was reluctant to make things right, then I would take any action necessary to insure I was properly compensated or my property returned. Then again, that’s just me… I tend to let my principles lead me, sometimes… even if it costs me more money.

  12. Auction Law says:

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    If you have Questions or Comments, please post them on the Questions & Comments page.

    You will also find the link to the Questions & Comments page in the right-hand column.

    Thanks

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