This is my tenth “aberrant auction law” find, and numbered as such. When I find more, I’ll attempt to number sequentially, although I hope my searching is generally unsuccessful.
Aberrant auction law refers to auctioneer licensing law (or other auction related law) that is abnormal, odd, bizarre, or otherwise unusual. The basis for determining if an auction law is aberrant is all the other auction law that is out there, which collectively is widely considered normal.
This blog stories two distinct Kentucky statutes regarding auctioneering:
355.2-328 Sale by auction. (http://www.lrc.state.ky.us/KRS/355-02/328.PDF) (1) In a sale by auction if goods are put up in lots each lot is the subject of a separate sale. (2) A sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner. Where a bid is made while the hammer is falling in acceptance of a prior bid the auctioneer may in his discretion reopen the bidding or declare the goods sold under the bid on which the hammer was falling. (3) 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. In an auction without reserve, after the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time. In either case a bidder may retract his bid until the auctioneer’s announcement of completion of the sale, but a bidder’s retraction does not revive any previous bid. (4) If the auctioneer knowingly receives a bid on the seller’s behalf or the seller makes or procures such a bid, and notice has not been given that liberty for such bidding is reserved, the buyer may at his option avoid the sale or take the goods at the price of the last good faith bid prior to the completion of the sale. This subsection shall not apply to any bid at a forced sale. Effective: July 1, 1960 History: Created 1958 Ky. Acts ch. 77, sec. 2-328, effective July 1, 1960.
330.220 Lots or parcels subjects of separate sales — When auction is complete — “Absolute auction” defined — Presumption of reserve auction — Bids by seller — Avoidance of sale — Prohibitions. (1) If real or personal property is offered in lots or parcels in a sale by auction, each lot or parcel shall be the subject of a separate sale. This subsection shall not preclude real or personal property from being offered for bidding individually or in some form or combination. (2) Unless otherwise provided in the conditions of sale for auctions regarding horses or any interests therein, a sale by auction is complete when the auctioneer so announces by the fall of the hammer, announcing the item sold, and the successful bidder’s identification or in other customary manner. If it becomes immediately apparent at the close of the bidding that the auctioneer and a bid assistant or ringman have acknowledged the same bid from different bidders, the auctioneer may continue the bidding between the disputed bidders. When a bid is made while the auctioneer is in the process of completing the sale by auction, the auctioneer may continue the bidding or declare the real or personal property sold under the bid on which the hammer was falling. (3) No auction shall be advertised as “absolute” nor shall any advertising contain the words “absolute auction” or the word “absolute” or words with similar meaning nor shall any licensee offer or sell any real or personal property at absolute auction unless: (a) There are no liens or encumbrances on the real or personal property, except property tax obligations, easements, or restrictions of record, in favor of any person, firm, or corporation other than the seller, or unless each and every holder of each and every lien and encumbrance, by execution of the auction listing contract, or otherwise furnishing to the auctioneer written evidence of a binding commitment therefor, shall have agreed to the unqualified acceptance of the highest bid for the property, without regard to the amount of the highest bid or the identity of the high bidder; or, alternatively, that a financially responsible person, firm, or corporation, by execution of the auction listing contract or by otherwise furnishing to the auctioneer written evidence of a binding commitment therefor, shall have absolutely guaranteed the forthwith and complete discharge and satisfaction of any and all liens and encumbrances immediately after the sale or at the closing, without regard to the amount of the highest bid received, or the identity of the high bidder; and (b) There is the bona fide intention at the time of the advertising and at the time of the auction to transfer ownership of the real or personal property, regardless of the amount of the highest and last bid, to the high bidder, that intent existing without reliance on any agreement that any particular bid or bid level must be made or be reached, below which level the real or personal property would not be transferred to the high bidder; and (c) The auction listing contract contains a binding requirement that the auction be conducted without reserve, and includes an acknowledgment that the seller, or anyone acting upon behalf of the seller, shall not bid at the absolute auction, or otherwise participate in the bidding process. (4) Compliance with subsection (3) of this section shall not prohibit: (a) A secured party or other lienholder who is not the seller from bidding at an absolute auction, providing that such bidding does not constitute, nor is it tantamount to the direct or indirect establishment or agreement to the establishment of a reserve price on the real or personal property by the seller or by the auctioneer, or by anyone aiding or assisting, or acting upon behalf of, the seller or the auctioneer; or (b) Any individual party to the dissolution of any marriage, partnership, or corporation from bidding as an individual entity apart from the selling entity, on real or personal property being sold at auction pursuant to that dissolution; or (c) Any individual party or heir of a deceased person’s bona fide estate from bidding as an individual entity, apart from the selling entity, on real or personal property being offered at auction pursuant to that estate settlement; or (d) The inclusion of nonmisleading advertising of certain real or personal property to be sold at “absolute auction” and the nonmisleading advertising of certain real or personal property to be offered at auction with reserve, within the same advertisement, or for sale at the same date and place, providing that advertisement shall make clearly apparent through equal or appropriate emphasis, which real or personal property is being offered by each method. (5) Any auction sale is, without requirement of announcement at any time, presumed to be with reserve unless the real or personal property is in explicit terms offered at absolute auction. An auction without reserve means an absolute auction. An auction with reserve means the real or personal property may be offered subject to the seller’s confirmation or subject to a certain reserve price. In an auction with reserve, the auctioneer may withdraw the real or personal property at any time until he or she announces completion of the sale. In an absolute auction, after the auctioneer calls for bids on an article, lot, or parcel, that article, lot, or parcel shall not be withdrawn unless no bid is made within a reasonable time. At both reserve auctions and without reserve auctions, the auctioneer may establish reasonable bid increments once an opening bid has been offered. (6) (a) The provisions of this chapter shall not prohibit any licensee from bidding on his or her own behalf at any auction sale, whether absolute or with reserve, if his or her option to do so has been fully disclosed, including disclosure to the seller. (b) Except as provided in subsection (4) of this section, the seller may not bid at an absolute auction, nor may anyone bid upon his or her behalf. No licensee shall knowingly receive a bid by or on behalf of the seller at an absolute auction. (c) Bids may be made by the seller, or upon the seller’s behalf, at any auction with reserve, provided that full disclosure has clearly been made that liberty for bidding is retained. No licensee shall knowingly receive a bid in the absence of full disclosure. If the auctioneer knowingly receives a bid on the seller’s behalf or the seller makes or procures a bid and notice has not been clearly given that liberty for bidding is reserved, the buyer may avoid the sale or take the real or personal property at the price of the last good faith bid prior to the completion of the sale. (d) There shall be no requirement that the reserve be announced when it is attained. (e) Nothing in this subsection shall be construed to alter or diminish the provisions of KRS 330.210. (7) (a) At any absolute auction, any advertisement or representation of a minimum or suggested starting bid is prohibited. (b) At any reserve auction, any advertisement or representation of a minimum or suggested starting bid is prohibited unless: 1. The minimum or suggested starting bid advertised or represented is sufficient to satisfy the auction listing contract stated reserve or confirmation amount; and 2. The auction listing contract contains a binding acknowledgment by the seller that permission has been granted for disclosure. Effective: June 25, 2009 History: Amended 2009 Ky. Acts ch. 70, sec. 20, effective June 25, 2009. — Amended 1992 Ky. Acts ch. 344, sec. 17, effective July 14, 1992. — Created 1990 Ky. Acts ch. 170, sec. 10, effective July 13, 1990.
You may recognize Kentucky Revised Statutes (state law) 355.2-328 Sale by auction as the UCC 2-328 adoption, dated July 1, 1960.
You might not recognize Kentucky Revised Statutes (state law) 330.220. This is law adopted July 13, 1990, which effectively modifies Kentucky Revised Statutes 355.2-328.
Here’s what we find aberrant:
In KRS 355.2-328, there is the familiar note that: A sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner. Where a bid is made while the hammer is falling in acceptance of a prior bid the auctioneer may in his discretion reopen the bidding or declare the goods sold under the bid on which the hammer was falling.
However, in KRS 330.220, this note is found: Unless otherwise provided in the conditions of sale for auctions regarding horses or any interests therein, a sale by auction is complete when the auctioneer so announces by the fall of the hammer, announcing the item sold, and the successful bidder’s identification or in other customary manner. If it becomes immediately apparent at the close of the bidding that the auctioneer and a bid assistant or ringman have acknowledged the same bid from different bidders, the auctioneer may continue the bidding between the disputed bidders. When a bid is made while the auctioneer is in the process of completing the sale by auction, the auctioneer may continue the bidding or declare the real or personal property sold under the bid on which the hammer was falling.
Kentucky law apparently finds that if an auctioneer says, “Sold!” and he and his ringman or bid assistant have two different bidders on for the same amount, the auctioneer may reopen (continue) the bidding between the disputed bidders?
We note that the word may is used, and it does not appear mandatory that the bidding be continued. We also note that this is in direct conflict with KRS 355.2-328 and that’s okay as it is, as often state laws conflict.
However, a much larger problem exists here with KRS 330.220. Breach of contract. Once an auctioneer says, “Sold!” and no bid came in as the hammer is falling, a contract is formed. The bidder for which the auctioneer denoted sold now has rights as a party to a contract. Yet, KRS 330.220 allows the auctioneer to unilaterally breach that contract in favor of another bidder who only thought they were in at that high bid price, but were not.
If KRS 330.220 holds up against a breach of contract claim, we ask:
What if more than one other bidder thought they were in at the time the auctioneer said, “Sold!” via several ringman?
What if every other bidder at the auction, possibly 100’s of bidders, all thought they were in at the time the auctioneer said, “Sold!” via either hundreds of bid assistants or ringman?
What if the other bidder that the ringman has in at, say, $10,000 refuses to increase his bid and the bidder who the auctioneer had refuses to increase his bid over the $10,000 bid he made? What happens now?
What if another bidder, other than the two or more involved in the continuance of bidding, wishes to bid now? Is the auctioneer unable to take a bid from someone other than who is involved in the reopen?
In this case of a continuance of the bidding, can the high bidder retract his bid?
We noted in our post Tie Bids – they don’t exist at an auction that tie bids don’t exist and for good reason.
We find KRS 330.220 aberrant.
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He is Executive Director of The Ohio Auction School.
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