With any type of agency relationship, the agents should always disclose to others their status as someone’s agent before engaging them in any discussions regarding a subject property.
For example, suppose you’re an auctioneer selling a real property for Sarah, and Fred approaches you about buying this property. In that case, Fred should know you represent Sarah before you discuss anything else.
If the reason is not apparent, in our example above, Fred may unknowingly provide you with information that would be beneficial to Sarah lacking the knowledge you’ll provide that same information to her, and may benefit your client (principal) accordingly, possibly to Fred’s detriment.
Of course, you want this information from Fred that benefits your client — or you at least should — so how do you get it? Disclose to Fred that you represent Sarah and then hope he keeps talking. For highly material transactions, this agency disclosure should probably be in writing.
If you properly disclose your agency, then as an auctioneer when you say, “Sold!” the contract you are forming is between your seller and the high bidder:
§ 6.01 Agent for Disclosed Principal When an agent acting with actual or apparent authority makes a contract on behalf of a disclosed principal, (1) the principal and the third party are parties to the contract; and (2) the agent is not a party to the contract unless the agent and third party agree otherwise. The Restatement (Third) of Agency
Importantly, if you as the auctioneer fail to make clear you are acting on behalf of your seller, you the auctioneer may be deemed the party in contract with the high bidder:
§ 6.02 Agent for Unidentified Principal However, when an agent acting with actual or apparent authority makes a contract on behalf of an unidentified principal, (1) the principal and the third party are parties to the contract; and (2) the agent is a party to the contract unless the agent and the third party agree otherwise. The Restatement (Third) of Agency
This is paramount for auctioneers to comprehend. Without adequate disclosure, you the auctioneer may be viewed as the seller — especially in cases where there are multiple sellers (consignment auction house, for example.)
We’ve also written about auctioneers describing property by noting essentially, “This is what our seller told us” hoping to waive any responsibility for inaccuracies and/or omissions.
It may be the seller’s burden regardless, but certainly questionable practice in our opinion: https://mikebrandlyauctioneer.wordpress.com/2021/07/05/can-auctioneers-disclaim-what-they-tell-you-their-sellers-said/.
As a side note, it is prudent to identify with certainty who the (bidders) buyers are as well so that the ultimate contract denotes exactly who the buyer and seller is — a person, partnership, limited liability company, corporation, trust, or other entity.
Lastly, who’s the agent? Is the auctioneer acting as a sole proprietorship, partnership, limited liability company, corporation, or other entity? Such should be clearly denoted in the contract with the principal as well as any other paperwork.
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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