Fiduciary Duty of an Auctioneer

November 15, 2007

An auctioneer’s fiduciary duty is to the seller. This means the auctioneer is an agent for the seller and must act in the best interests of the seller.

This falls back on the basis of general law, widely accepted in all courts of law throughout the U.S.:
(1) “Fiduciary” means an agent, trustee, partner, corporate officer or director, or other representative owing a fiduciary duty with respect to an instrument (i.e. “contract”).
(2) “Represented person” means the principal, beneficiary, partnership, corporation, or other person to whom the duty stated in subdivision (1) is owed.

In addition, the field of real estate is usually quoted in many examples because they are basically the only industry that allows for “dual agency”. However, to completely understand this “agency”, you must understand that the Broker has ultimate responsibility for all transactions by any salespersons working under the supervision of the Broker’s license, therefore the actual Broker is undertaking the role of dual agency (not the individual salespersons, as I will explain). In other words, the Broker can not be a direct party in the transaction (in any way and must remain neutral, or without specific directions to either salesperson) and will appoint two different salespersons to work for the seller and the buyer, since an individual agent cannot represent a fiduciary to both. On the same basis of law, if a RE salesperson has not specifically contracted to act as a buyer’s agent, then it is automatically assumed that the salesperson is acting on behalf of the seller, therefore is the fiduciary only for the seller.

To support that last statement, the Federal Trade Commission (FTC) speaks of this in numerous publications, one of which is:
http://www.ftc.gov/os/comments/realestatecompetition/518795-00391.htm
Fiduciaries are held to a higher standard under common law. Upon visiting, for example, a store, a consumer does not expect, or have any right to expect, the store’s salesperson to be looking out for the consumer’s best interest. But in hiring a trusted lawyer or real estate agent or investment trust company (you may also add “auctioneer”) to act for him, a client expects full fiduciary responsibility, including undivided loyalty, with no undisclosed conflicts of interest. Consumers are more easily misled when, as clients, not just customers, they are giving their trust to their own professional fiduciary.

In addition, you can find additional commentary on the basis of fiduciary duties at:
http://en.wikipedia.org/wiki/Fiduciary
Conflict of duty and duty
A fiduciary’s duty must not conflict with another fiduciary duty. Conflicts between one fiduciary duty and another fiduciary duty arise most often when a lawyer or an agent, such as a real estate agent (also add “auctioneer”), represent more than one client, and the interests of those clients conflict. This usually occurs when a lawyer attempts to represent both the plaintiff and the defendant in the same matter, for example. The rule comes from the logical conclusion that a fiduciary cannot make the principal’s interests a top priority if he has two principals and their interests are diametrically opposed; he must balance the interests, which is not acceptable to equity. Therefore, the conflict of duty and duty rule is really an extension of the conflict of interest and duty rules.”

Also see:
http://en.wikipedia.org/wiki/Conflict_of_interest

In other words, as a sole individual/entity, you can not have a conflict of fiduciary duties between the parties, or you are subject to a dereliction of duty to one or both parties. Therefore, under the basis of general law, it basically means that when an auctioneer signs a contract with a seller (the principal), the auctioneer has a fiduciary duty to the seller to act as their primary agent on their behalf and in their best interests or “as they would act”.

Now, this does not mean that if the seller misrepresents something, that the auctioneer doesn’t have a “duty” to the buyer to correct the problem. However, the auctioneer and the seller are both responsible for providing a reasonable duty to provide said goods in the condition stated for the agreed upon price/trade, as this falls under the Fair Trade Agreement statutes (that you can also search for under the FTC’s website). However, this does not create a fiduciary duty to the buyer, but only serves to treat the buyer fairly under the FTC’s Fair Trade Agreement.

The primary point is regarding the auctioneer’s fiduciary duty to act on behalf of the seller. The difference between the Fair Trade Act regarding buyers and fiduciary duty to the client (seller) is the same, regardless of whether it is a real estate transaction or the sale of any other type of property.

A Fiduciary can not represent two different parties with opposing intents. The primary fiduciary is to the client that has contracted the auctioneer to sell (act on their behalf for the sale of) their goods.

Some have attempted to imply that the Terms and Conditions of Sale implies a fiduciary duty. This is not the case, as the FTC’s Fair Trade Act specifically demonstrates that it is only an agreement for the terms of the sale and creates no other duty upon the seller (or their agent) as a representative of the buyer, as they are opposing parties until the final agreement has been reached. The Terms & Conditions (terms of their agreement) for an auction are only the conditions of finalizing the transaction, which both, the buyer and the auctioneer (seller’s fiduciary agent) are agreeing to as part of the sale, with only price being the final factor and determined upon the call of “Sold”. Therefore, the auctioneer has only “perfected a sales agreement” (that’s how a lawyer would state it) with the buyer on behalf of the seller (the principal fiduciary).