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  • Writer's pictureMike Brandly, Auctioneer

Customary practice, industry standards and commercial reasonableness …

My phone rings — or I’m otherwise contacted — almost every day from either a seller, bidder/buyer, auctioneer and/or attorney. While the myriad of questions vary significantly, there are some general questions which are often the central issue:

  1. What is customary practice?

  2. What is the industry standard?

  3. What is considered commercially reasonable?

Today we discuss these three benchmarks which are used to grade auction and/or auctioneer performance. First, here’s what these terms mean:

  1. Customary practice is that which is usual and ordinary course or regular practice within the auction industry.

  2. The industry standard is established as being of the required standard or norm in the auction business.

  3. Commercially reasonable is an auction which is fair, done in good faith, and corresponding to commonly accepted commercial practices.

  1. Customary practice is gauged — more or less — by what most auctioneers do. Do most auctioneers have a website? Do most auctioneers utilize Facebook marketing? Do most auctioneers offer online bidding? Once we can gather information on what most auctioneers do, we have a feel for customary practice.

  2. Industry standards are usually promulgated by some higher authority — an auctioneer association for example. The National Auctioneers Association has published three (3) such industry standard documents:

    1. National Auctioneers Association Code of Ethics

    2. Official Statement of the National Auctioneers Association Concerning Proper Ethical Conduct for Absolute Auctions of Real Estate

    3. Official Statement of the National Auctioneers Association Concerning the Licensing of Businesses that Sell Property via Internet Auctions

  3. Commercially reasonable auctions must satisfy [a minimum of] four (4) tenets of obligation: Manner, time, place and terms. More about that here: were we cited the Wisconsin case Cook v. Public Storage, 2008 WI APP 155.

Certainly customary practice is the lowest bar, followed by more discrete baselines such as industry standards and even more so commercial reasonableness. Yet, frequently cases are evaluated on their own merits considering the particular circumstances, ultimately grading if the auctioneer, bidder/buyer and/or seller acted reasonable.

What is reasonable behavior you ask? We explored that somewhat fascinating question here:

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, an Instructor at the National Auctioneers Association’s Designation Academy and America’s Auction Academy. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by the The Supreme Court of Ohio for attorney education.

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