We were discussing a case with an attorney regarding the last two (2) sentences of the UCC 2-328 [basically section 4] where the question was, “In a so-called ‘forced sale’ are any bids which are merely puffery considered bids in bad faith?”
Said another way, in a forced sale where most hold that anyone can bid including the seller, can any bids be considered in bad faith? My answer was “possibly” if a bid was made “without the genuine intent to purchase” — in a forced or non-forced sale circumstance.
Bids made without the genuine intent to purchase are in essence fictitious bids and would be nothing other than puffery. For instance, if an auctioneer said: “I have $500,000 who’ll bid $550,000? $550,000? $550,000? Alright, I have $250,000 who’ll bid $275,000?” Here the bid for $500,000 was mere puffery in that it only remained for want of a higher bid; lacking that, it was retracted.
We’ve previously written about this particular bid calling technique here:
Otherwise, could any party to a forced sale bid merely and solely to induce other bidding? A secured party? The court? The seller? It would seem any such bid would be considered disingenuous (fictitious) and thus in bad faith.
The counterargument this attorney is hearing is: “The UCC 2-328 (4) says that at a forced sale, the previous sentence allowing for damages (void/last good faith bid) does not apply. Since this is the only sentence that mentions remedies for bad faith bids … you don’t have a valid claim.”
I reminded my client that this eighth sentence of the UCC 2-328 (4) only regards the seller bidding and associated remedies. Additionally, the Supreme Court of the United States ruled that auctioneers cannot take fictitious bids and that a remedy of voiding the sale or taking at the last good faith bid was provided.
This attorney continued … “So you’re telling me a seller can bid in bad faith in a forced sale?” I told him that if the seller was bidding with the genuine intent to purchase (keep, retain) then those would be bids in good faith. Otherwise, just bidding to induce other bids are bids in bath faith, regardless of the identity/status of the bidder.
It would appear this case may well go to court as the two sides are far apart regarding their interpretation of the UCC 2-328 and the related issues. Nevertheless, this attorney invited me to write about the case from an academic standpoint (without the party names, etc.) and thus I’m able to share [part of] our conversation here.
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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