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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 #6, shedding some light on what it means. Here is this sixth sentence:
In an auction without reserve, after the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time.
As written, this sixth sentence is fairly clear. In a without reserve (absolute) auction, any particular property can be with withdrawn from the auction prior to being put up for sale, or if put up and no bid is made within a reasonable time. Therefore, once a property is put up for sale, it must remain up for sale open to offers for (just less than) a reasonable time.
However, any law which uses the word “reasonable” is often misinterpreted. How long is a reasonable time? two seconds? five seconds? 30 seconds? The courts typically couch the words “given the circumstances” with the word reasonable to conclude “reasonable given the circumstances …” If an auctioneer has been receiving bids within five seconds for like-kind lots, then is waiting five seconds for a bid (and not receiving one) and then withdrawing reasonable? Probably.
As well, a curious question came to us several years ago from an attorney litigating an auction case. Essentially she asked if the right to withdraw remained after a reasonable time even if it wasn’t exercised — and possibly even if a bid was received “after a reasonable time.”
We concluded the UCC 2-328 likely suggests that once a bid is received in an absolute auction the property cannot be withdrawn, no matter when. But, we also note that technically the UCC 2-328 says that after a reasonable time, the property can be withdrawn. We detailed this quandary here: https://mikebrandlyauctioneer.wordpress.com/2014/11/10/auctioneers-absolute-right-of-withdrawal/
Additionally, and maybe most importantly, this sixth sentence uses the phrase “bid is made” and necessarily not received nor accepted. This would mean that if a lot (property) was put up for auction and someone made a bid (made an offer — within a reasonable time) that the property could not be withdrawn despite you as the auctioneer not acknowledging nor accepting. Otherwise, if the offer wasn’t communicated (not received) one could argue there was no offer tendered.
Too, auctioneers often ask me if they can put up property for bids (for example, online) prior to a live absolute auction to start several days later but reserve the right to withdraw any property prior to the live event? The answer to this question likely depends if the property was put up for bids prior or put up for bids to be executed at the live event — in other words, are any bids considered pre-auction bids or actual bids?
And while we suggest that pre-bids may not be considered bids — it is in our opinion equally likely a court would ask, “So, you put up property on an online platform and provided a place for bidders to place bids … and you now claim you weren’t ‘calling for bids?’“ This continues to suggest to us that any online auction is better suited for a with reserve format — for a variety of reasons. https://mikebrandlyauctioneer.wordpress.com/2013/08/14/can-you-have-an-absolute-online-only-auction-should-you/
Lastly, once a bid is made within a reasonable time in an absolute auction, how long could an auctioneer ask for another bid, in light of this current bid being viewed as insufficient? Could the auctioneer ask for another higher bid for a few minutes, hours, days? We think it likely a court would view any extraordinary (unreasonable) delay as maybe not actual withdrawal but constructive withdrawal.
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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