We have written extensively about the UCC 2-328 and in regard to how important these four paragraphs are for auctioneers.
And with only four paragraphs, there are many subtleties which are less obvious. For example, our topic today.
Our scenario is a situation where an auctioneer is having a without reserve (absolute) auction.
There is a material part of without reserve auctions here:
In an auction without reserve, after the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time.
The result of this statute is that once the auctioneer calls for bids and a bid is made within a reasonable time, the lot cannot be withdrawn.
What if a bid is received within a reasonable time, and then auctioneer asks for more bids for another minute? Two minutes? Five minutes? All okay? Our question today regards as the delay increases, when might it be considered a withdrawal of the property?
The courts have used the term, “material” delay suggesting a meaningful delay. However, how long is a material or meaningful delay?
For that matter, why do we ask this question? Mostly, we ask because of a situation where the auctioneer has that high bid, but is dissatisfied with it, or for whatever reason, the auction cannot continue — thus desiring to withdraw the property.
Since withdrawal is not an option, is delay an option?
Could an auctioneer have a high bid and then ask for more bids for an hour? Two hours? A week? A month? Could an auctioneer keep asking for six months, hoping for another bidder to show up for or a computer problem to be fixed to allow others to bid? Probably not.
Another way to look at this same issue is for an absolute auction, the seller (via the auctioneer) and high bidder are in contract with only two contingencies. Those are a ‘higher bid’ or ‘seller withdrawal.’
And while there are no strict time limits on either, the courts have concluded that the amount of time before those contingencies expire are commensurate with the amount of time otherwise utilized when they are satisfied. In other words, if the last item sold after not receiving a bid within 20 seconds, then 20 seconds is reasonable.
Can there be some variation? Sure; one item at 20 seconds, another at 30 seconds, maybe one at one minute … but not one item at 20 seconds, another at 30 seconds and then one at 24 hours.
The cause of action by the high bidder — in a scenario like this — is likely “specific performance.” As such, the high bidder wants his position to be elevated to buyer and the seller to convey title. A court would likely be an advocate, noting the high bidder’s equity position and the unreasonableness of any prolonged delay.
For online-only auctions, this becomes even more important. We wrote about the imprudence of having an absolute online-only auction here: http://mikebrandlyauctioneer.wordpress.com/2013/08/14/can-you-have-an-absolute-online-only-auction-should-you/
Given that an online-only auction could stop due to a computer problem, could the delay be considered a withdrawal? It would appear that if the delay was material (in excess of established protocol) that it could indeed be, and the high bidder would have a cause of action.
A somewhat famous case recently dealt with an online auction being canceled, and the concept of “online ownership” was explored with a live auction scheduled to follow: http://mikebrandlyauctioneer.wordpress.com/2012/01/01/online-ownership-prior-to-auction/
Maybe a good rule of thumb is that an absolute auction cannot be canceled if a bid is received within a reasonable time, and that the property must sell within a reasonable time, if no higher bid is received.
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.
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