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UCC § 2-328 (Sale by Auction) only has nine sentences, but they all are widely misunderstood. Here we take a look at sentence #5, shedding some light on what it means. Here is this fifth sentence:
In an auction with reserve the auctioneer may withdraw the goods at any time until he announces completion of the sale.
Our fifth sentence here is … quite frankly … not terribly misconstrued compared to the others. What it dictates is that for any lot (property) put up for auction, the auctioneer/seller reserves the right to withdraw the property from the auction (even if there are bids on this subject property) up until, but before, the fall of the hammer.
In other words, a seller can put up a property for auction, but decide not to sell if the bids are viewed as insufficient (or for whatever reason.) However after, “Sold!” this right of withdraw disappears. Further, of course, any property can be withdrawn anytime prior — the day before, a week before … anytime before, “Sold!”
Some argue that this right of withdrawal only exists for the auctioneer (as this fifth sentence says the auctioneer may) but of course as an agent for the seller, the auctioneer is bound to follow any legal directions. If a seller directs an auctioneer to withdraw a particular lot in a with reserve auction, and he does not, the auctioneer would be violating his fiduciary duties.
We wrote more about auctioneer withdrawal versus seller withdrawal here: https://mikebrandlyauctioneer.wordpress.com/2012/09/03/seller-withdrawal-or-auctioneer-withdrawal/ Too, we have seen courts lean towards this right being vested in the seller as much as the auctioneer.
Lastly, and maybe most importantly, how does the public view this right of withdrawal? We think unfavorably — and maybe said best, “If you’re going to sell it, sell it,” https://mikebrandlyauctioneer.wordpress.com/2014/12/05/if-you-going-to-sell-it-sell-it/
Not everyone is well suited to sell without reserve and so this with reserve option is the other choice. Yet, another consideration would be to not sell at auction at all. However, if this right of withdrawal is only used in cases of a perceived disaster or anomaly, and otherwise property is sold to the highest bidder, this largely mitigates bidders’ disdain for this auction type.
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, RES Auction Services and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College of Business, Executive Director of The Ohio Auction School, an Instructor at the National Auctioneers Association’s Designation Academy and Faculty at the Certified Auctioneers Institute held at Indiana University.
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