We’ve written before that denoting an absolute auction requires the use of “absolute” or “without reserve” — and no other words do so — is dangerous to the auction industry.
Those writings include the following:
The Virginia Supreme Court ruled on October 20, 2022, that in a particular auction, it remained “with reserve” despite some announcements suggesting to the high bidder it was selling “absolute.” We concur with the ruling but find the final footnote the most newsworthy of the court’s decision:
6. That is not to say that the specific terms “absolute auction” or “without reserve” must be stated to create an absolute auction. Rather, the advertisements or pre-auction announcements must indicate an unequivocal commitment to convey the property to the highest bidder as opposed to merely indicating the seller’s intention to seek bids for the property. Golfinopoulos v. Padula, 218 N.J.Super. 38, 526 A.2d 1107 (Ct. App. Div. 1987), is illustrative of this principle. In Golfinopoulos, the court determined that a written invitation to bid that provided a minimum price and stated, “Contract will definitely be awarded on Friday, May 30, 1986 to the highest responsible bidder,” was sufficient to create an auction without reserve because “the offer was in writing” and contained “definite award language.” Id. at 1110-11. The court explained that, under those circumstances, the invitation to bid was raised “from a solicitation for offers from prospective purchasers to a firm offer to sell upon the particular terms, to be accepted by the act of bidding and declaration that the bid is the highest received. Supreme Court of Virginia. David O. WILLIAMS, et al. v. John M. JANSON, Record No. 210972
I’m on record testifying more than once that there are many different words — at minimum, in the mind of bidders and buyers — that can “explicitly” change an auction from with reserve to without reserve. I’m also on record noting auctioneers can and do take advantage of this muddle.
For instance, “We’re completely liquidating, going out of business, and it all sells …” suggests to virtually every potential bidder that such an auction is absolute. The auctioneer argued in court these words were not explicit, yet, the court [rightly] disagreed.
This hasn’t always been the case, as some courts have ruled the contrary. The most famous of those is Drew v. Deere Co., 19 A.D.2d 308, 241 N.Y.S.2d 267 (N.Y. App. Div. 1963) which concluded that “Selling to the highest bidder” was not an absolute auction.
The successful argument, in this case, included that there should be a “bright line” that needs to be crossed to make an auction absolute (except in Louisiana) such as “absolute,” “without reserve” or “no reserves.” The court appears to have disagreed with this ancillary opinion based on the #6 footnote above.
There’s hope the legal system continues to take notice that this “Look, this is almost assuredly an absolute auction” when it is not will not withstand further scrutiny. Our advice? If you want to have a “with reserve” auction, don’t suggest otherwise to bidders. Do you want even better advice? Have an absolute 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, 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.
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