We have written numerous times about without reserve (absolute) auctions coupled with minimum opening bids or minimum bid increments. Fortunately for the auction community, Kurt Bachman, Attorney, and Auctioneer in LaGrange, Indiana has also written about such issues.
In one of Mr. Bachman’s recent National Auctioneers Association‘s articles, he concludes with some excellent advice for auctioneers:
Therefore, auctioneers should avoid utilizing minimum opening bid requirements for absolute auctions unless they are certain that the state in which they are operating expressly permits the same.
In other words, auctioneers who say, “I can use minimum opening bids with absolute auctions because there is no law prohibiting it …” should rather determine if they can use minimum opening bids with absolute auctions because there is a law permitting it.
However, Mr. Bachman also notes in this same article that he finds no case law supporting the combination of a minimum opening bid and an absolute auction; more evidence it is bad practice in any jurisdiction. Further, it does appear from any reasonable view that an absolute auction cannot have any limiting conditions such as minimum bids.
We wrote about this issue only a few months ago here: https://mikebrandlyauctioneer.wordpress.com/2020/08/26/absolute-over-500000/ and our well-read treatise on absolute auctions is here: https://mikebrandlyauctioneer.wordpress.com/2015/11/27/genuine-intent-to-transfer-to-the-highest-bidder-regardless-of-price/.
It may be worth stating again, this is not necessarily a license law issue. For those auctioneers in license states, your license law may address this issue, but all auctioneers in the United States have other state law that is independent of license law, which may well address (or as we’ve suggested, not address) this issue.
Additionally, with courts including the Supreme Court of Appeals of West Virginia in regard to Alex Lyon & Son, Sales Managers & Auctioneers, Inc. v. Leach, 844 S.E.2d 120 (W.Va. 2020), stating that “In an absolute auction, the property is sold to the highest bidder regardless of the bid amount and the seller’s notion of the value of the property” it seems even more clear what an absolute auction is, and isn’t.
The National Auctioneers Association glossary describes an absolute (without reserve) auction as follows:
An auction where the property is sold to the highest qualified bidder with no limiting conditions or amount. The seller may not bid personally or through an agent. Also known as an “auction without reserve.”
For those still struggling with this concept, it might be as easy as the word, “reserve.” Isn’t a minimum opening bid a reserve? So how does one combine a reserve with a “without reserve” auction? Wouldn’t a reserve require a “with reserve” auction?
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, RES Auction Services, 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 is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.
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