Auctions are by default “with reserve” unless explicitly denoted as “without reserve” in 49 states. In Louisiana, it’s the opposite, as all auctions are “without reserve” by default.
So, in these 49 states, an auction with no notation whatsoever as to with or without reserve is “with reserve” and the seller can withdraw the property (lot) up until the completion of the sale (fall of the hammer.)
There is rarely anyone who debates the aforementioned. The Uniform Commercial Code that addresses this issue has been state law in every state except Louisiana (which uses it by analogy) since the early 1960s.
In a treatise written in 2017, a writer argues that even though the contract notes the auction is “with reserve” but, that condition is not denoted in sales materials and/or is not announced prior … the auction is a “no reserve” auction.
The author cites Johnson v. Haynes, Court of Appeals of Tennessee, Western Section, 532 S.W.2d 561 (1975), however, this case does not proclaim this. This case concerns marketing and advertising different from announced terms at auction commencement.
The record, in this case, indicates that once the hammer falls, the seller cannot reject the bid or withdraw the property. We would note this is accurate, whether the property is “with reserve” or “without reserve.”
In summary, this alternate reality article suggests all auctions are absolute by default (which they are only in Louisiana) and that Johnson v. Haynes supports this contention. Neither is true.
This is likely the result of a “quick read” of the cited case, or possibly a misunderstanding of the difference between a bid-calling contingent contract versus a “fall of the hammer” contract.
We wrote about the former recently here: https://mikebrandlyauctioneer.wordpress.com/2023/03/28/yes-auction-bid-calling-or-online-creates-contracts/ and first noted bid calling created contracts here: https://mikebrandlyauctioneer.wordpress.com/2014/08/11/bid-calling-is-just-numbers/.
Nevertheless, it is well established in 49 states that if the auction is not explicitly denoted as “without reserve” then it is “with reserve” What does explicit mean? It, unfortunately, continues to be discussed in court: https://mikebrandlyauctioneer.wordpress.com/2022/10/03/courts-interpreting-explicit/.
Importantly, we believe any auction where the auctioneer strongly implies or suggests the auction is absolute should be conducting an absolute (without reserve) auction.
I’ve advised auctioneers around the United States to use explicit language to denote an absolute auction and use no such related words if the auction is with reserve. In other words, don’t suggest in any way your “with reserve” auction is “without reserve.”
If you are contracting with a seller to sell absolute, it is malpractice to not advertise that auction as absolute. We discussed this in more detail here: https://mikebrandlyauctioneer.wordpress.com/2019/02/22/is-your-absolute-auction-being-advertised-conducted-as-such/.
Lastly, every auctioneer needs to know why bidders respond to any auction. The key ingredient is the “prospect of a deal” which we’ve analyzed numerous times including here: https://mikebrandlyauctioneer.wordpress.com/2022/12/12/what-makes-any-auction-work/.
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 formerly at 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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