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  • Writer's pictureMike Brandly, Auctioneer

Auctions and intelligent competition

Are bidders held to whatever the auction terms and conditions are, no matter if they are in one point type, written in Latin, spoken in Koro, or otherwise clearly not understandable? I would offer maybe not — probably not — especially in a court of law in the United States.

A recent case (Oak Ledge Properties, LLC v. HUB Realty Company, Inc. TL 20-000268, November 16, 2020) cited this below case from 1874 (for those who claim old cases such as this aren’t referenced,) which held in part:

Such a sale is supposed to be made with full understanding between auctioneer and bidders, and when such is not the case intelligent competition, which auction sales are supposed to invite, cannot be had. Ives v. Tregent, 29 Mich. 390 (1874)

Full understanding? Really? In other words, do the bidders have to know the terms? While we’ve had numerous cases in the United States more recently holding bidders are held to “announced” terms even if they don’t hear or understand, would that apply in all circumstances?

Previously we noted this stunning list of cases that refers (with one exception) to “announced” terms and with that exception differentiating between published versus announced, noting “neglected to read,” rather than comprehension:

Nevertheless, here we are likely being retained yet again where the auction company is clearly hiding, disguising, concealing the terms of the auction so bidders bid unaware. Then, when the buyer complains, the auction company pulls out the otherwise unseen/unheard terms to argue the bidder is bound.

It would seem to us that auctioneers should clearly and unmistakably disclose the terms and conditions of the auction in prominent, unmistakable, conspicuous language — preferably in writing. If not, a lawsuit you win or lose is still a lawsuit.

Why would auctioneers be hiding — concealing — terms and conditions, and more specifically, only some of them? What they are doing is completely shrouding the bad news, so bidders bid with more confidence that all is well.

Yet, we know the full disclosure is always a better strategy so that bidders don’t hesitate to bid worried about the “winners curse.” Full disclosure, good or bad, is the best strategy:

We have even offered a fairly good argument for disclosing stigmatizations, such as murder, haunted, and the like: In other words, with more disclosure, you help your seller realize more in proceeds and avoid costly litigation.

We’ve even noted that disclaimers such as “AS IS” and “WHERE IS” should be conspicuous to be truly enforceable. Here again, it’s all about adequate disclosure and not hiding, disguising nor concealing important terms and conditions:

Relatedly, we’ve consistently held that auctioneers should (adequately) disclose “all known material facts” regarding what they are putting up for auction. Material facts are widely considered facts about the subject property that would cause a buyer to make a different decision regarding the same:

Of course, auctioneers want bidders/buyers to make a “different decision” if that choice is to bid again and must advocate for their sellers and clients otherwise. Could a non-material (insignificant/known) fact be withheld (or not actually disclosed) from bidders in light of the goal to maximize the seller’s position? Auctioneers have successfully made that argument for decades.

Those who attend auctions in search of (and in exchange for) the “prospect of a deal” know to expect sales talk, pressure, and traditional auctioneer techniques which tend to encourage bidding — most notably that fast-talking and related which can [sometimes] suspend bidders’ ability to think clearly … it’s a more than an equitable trade that continues to benefit the auction industry for all involved.

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, and an Instructor at the National Auctioneers Association’s Designation Academy and Western College of Auctioneering. He is 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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