All auctioneers probably have high bidders (buyers) who refuse to pay. What is an auctioneer to do? It appears the solution is vested in Uniform Commercial Code (UCC) § 2-706.
We memorialized that exact statute here on our platform: https://mikebrandlyauctioneer.wordpress.com/auction-treatise/%c2%a7-2-706-sellers-resale-including-contract-for-resale/.
Let’s use an example. Billy is an auctioneer and puts up for sale a 1964 Chevrolet Corvair Convertible. The auction concludes with a high bid from Mr. Hanley for $11,500. However, Mr. Hanley doesn’t pay nor take possession of the vehicle.
What matters here is when Billy “Sold!” this “Corvair” (see below) to Mr. Hanley, did title pass at that time, or would title only pass upon payment (or some other time?) If title did pass at “Sold!” Mr. Hanley would own the Corvair without paying for it. In that case, a contract with him might be necessary to sell as he’s the new owner — unless there’s abandonment upon the part of Mr. Hanley.
Importantly, we might note for vehicles and the like (UCC § 2-401(3)) title likely (unless otherwise explicitly agreed) only passes with the delivery of document(s) such as a title. The more general case, however, would involve if title (ownership) transferred at the close of the auction, or sometime subsequent.
Nevertheless, the UCC § 2-706 says Mr. Hanley must pay if he accepted the vehicle, the vehicle was lost or stolen after the risk passed to Mr. Hanley, or Billy has no reasonable prospect of reselling to some else (unlikely given this is a 1964 Chevrolet Corvair Convertible.)
However, our auctioneer has some responsibilities as well. Billy must:
Hold the vehicle for Mr. Hanley in case he decides to pay for it and take possession.
Really try to sell the vehicle at a reasonable price. If at public auction, Billy must give Mr. Hanley reasonable notice of the time and place of the event.
Satisfy #2 above to potentially recover any difference between the subsequent proceeds and the original contract price.
Keep Mr. Hanley informed of his efforts to sell the vehicle so that Mr. Hanley can make an offer to buy (and complete the transaction.)
One question that might follow this analysis is, “What constitutes notice to Mr. Hanley?” There’s actual notice where we tell him, constructive notice where he would know to look for that information and inquiry notice which is information that would lead him to further inquire.
Certainly, actual notice would be the best. However, even with actual notice, do we email, phone, text, mail …? What’s the best way to actually notice Mr. Hanley? Does he read his email? Does he receive mail? Does his smartphone receive texts?
Further, if constructively noticing him, is newspaper appropriate? Social media? A large sign at the auction site? A hot air balloon? It may depend upon Mr. Hanley’s age and preferences. Lastly, we think inquiry notice is likely not sufficient.
Finally, the word “reasonable” is used in regard to “price” and “notice.” What is “reasonable” after all? We wrote about the word “reasonable” here, where the circumstances matter: https://mikebrandlyauctioneer.wordpress.com/2020/06/21/auctioneers-and-whats-reasonable/.
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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