I’ve had this question dozens of times when I talk about pre-auction inspection opportunities. That question is generally, “What if the seller is on one side of the country and the buyer is on the other side?”
In other words, say it’s a $500 item in an online or live auction with property located in Maine and an interested buyer is in California. It would cost more than the item itself to fly or drive to Maine to personally inspect, therefore constituting an unreasonable opportunity to inspect.
Unreasonable that is, not because reasonable inspection wasn’t offered by the seller/auctioneer but the bidder can’t reasonably take advantage of it.
The Supreme Court of the United States ruled in a case known as Smith v. Richards, 38 U.S. 26 (1839) where this issue was addressed:
Whenever a sale is made of property not present, but at a remote distance, which the seller knows the purchaser has not seen but which he buys upon the representation of the seller, relying on its truth, then the representation in effect amounts to a warranty; at least the seller is bound to make good the representation.
This may affect online auctions more than live, with bidders conceivably all over the globe. It may be when the bidder/buyer cannot take advantage of a reasonable opportunity to inspect (distance, cost, etc.) that the property’s representation is a warranty.
Of course, sellers and auctioneers are held to all expressed warranties, independent of the “as-is” disclaimer, however, an inspection can mitigate that warranty — possibly except at a remote distance.
What’s the implication? Could a buyer from a remote distance argue that if the property was misrepresented — as expressed or maybe even as implied (merchantability and fitness for a particular purpose) — he would have recourse independent of an “as-is” claim? It seems like a reasonable legal argument to me.
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, an Instructor at the National Auctioneers Association’s Designation Academy and America’s Auction Academy. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by the The Supreme Court of Ohio for attorney education.
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