Amy lives in Springfield, and next door to her an auctioneer has been readying an estate auction for almost 2 weeks.
That staff have brought in boxes and totes, hauled over 200 bags of debris away, and stacked over 50 tables on the front porch.
The auctioneer herself has visited the home a dozen times, taking pictures, researching items, and checking the overall progress.
With the auction coming up Saturday, Amy is sitting on her front porch on the Thursday evening prior and overhears the auctioneer on her phone in the yard next door.
… Yes, and we’ve spent over 100 hours here, and I have to pay my staff, all the advertising, and I’ve lost work I could have contracted otherwise … I understand your circumstances, but I’m asking you to understand mine … you have a copy of our contract, and there is indeed a cancellation clause …
Amy surmises that the fiduciary for this estate is asking the auction be canceled. She wonders if a seller can do that, and what the issues are involving such an action.
As the auctioneer seemed to suggest to her client, there is some sort of cancellation clause in the auction contract. Amy wonders if a cancellation fee is enforceable?
We’re going to suggest cancellation fees are not enforceable — but it’s often prudent for the client to pay them, instead of costly legal fees necessary in attempt to avoid paying them.
Many auctioneers think that once a client signs an auction contract, that if the client demands the auction be canceled that there is a clear “breach of contract.” However, there is state law in effect here which the contract cannot likely supersede.
The UCC 2-328 (3) indicates that in a with reserve auction, the auctioneer may withdraw any item prior to declaring, “Sold!” and further in a without reserve auction, the auctioneer may withdraw any item that has yet to be “put up for auction” as well as any item that is put up for auction and no bid is received within a reasonable time.
Therefore, no matter the type of auction, the auctioneer may withdraw any item prior to it being put up for auction. And, in a fiduciary capacity, the auctioneer is to follow all legal directions of his or her client — including a direction to “withdraw all the items” from the auction if desired.
We wrote more about this particular issue here: http://mikebrandlyauctioneer.wordpress.com/2012/09/03/seller-withdrawal-or-auctioneer-withdrawal/
“Canceling an auction,” or “Withdrawing all the items from the auction?” Not really any material difference between the two …
However, it’s often not so simple.
Let’s say the auctioneer’s client demands the auction be canceled, and the auctioneer says the client must remit the cancellation fee per the contract.
If the two parties cannot come to agreement regarding this issue, it’s likely each will have to hire legal counsel to represent their position in court — and that costs each money.
How does the cost of the attorney compare to the cost of the cancellation fee? Certainly one can sue for damages (breach of contract, for example) and ask that attorney costs and fees be awarded. But, there is little certainty in such court rulings.
Here’s two perspectives to keep in mind:
Maybe it’s less expensive for a seller to pay the auctioneer cancellation fees than hire an attorney — and possibly have to pay both?
Maybe it’s less expensive for an auctioneer to forgive the cancellation fees than hire an attorney — and possibly have to incur both?
To answer Amy’s questions: Can the seller cancel an auction under contract with an auctioneer? Yes. Is a cancellation fee enforceable? Strictly speaking, no; but it often serves as incentive to avoid further expense.
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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