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Writer's pictureMike Brandly, Auctioneer

The auction starts and then …

We wrote in 2013 that auctioneer/seller contracts are “agency contracts” and as such would typically end if the auctioneer or seller died. That analysis addressed death prior: https://mikebrandlyauctioneer.wordpress.com/2013/05/13/auction-is-scheduled-and-then/.

However, what if the auction has started (the auctioneer has “called for bids” or software is accepting bids) and then the auctioneer or seller died? Since contracts between the seller and bidders (buyers) are not agency contracts but rather equity contracts, we hold they might survive.

Online auctions are more susceptible to this matter, while live auctions rarely encounter this issue given their abbreviated length. If property is currently up for bid, and there are bids, it seems any property selling absolute couldn’t be withdrawn. With reserve property could probably be withdrawn given the auctioneer’s lack of authority (or obligation) to complete the sale.

Kurt Bachman and I hold this view, as we both have said in a without-reserve (absolute) auction, the auctioneer makes an irrevocable collateral contract (promise) to sell to the highest bidder — so long as a bid is made within a reasonable time. In a reserve auction, there is no such promise.

Of course, any property noted as sold (where the hammer has fallen, and the bid is not reopened) would survive regardless of auction type, as the buyer and seller are now in a (largely) non-contingent contract. Yet, we see that it is difficult to force a dead buyer to buy, and rather the seller can mitigate his loss by selling to someone else.

All this can be somewhat remedied by the auctioneer (and/or seller) contracting as a business entity rather than a sole proprietor. In that case, the auctioneer dying (personal contract) is different than an auctioneer dying while his or her company (impersonal contract) is bound by contract. Mostly the same for the seller side of the transaction.

Also, in 2013, we noted that many auctioneer agency contracts held the contract was binding upon heirs, administrators, executors, agents, assigns, attorneys, beneficiaries, devisees, legatees, representatives, and successors in interest … https://mikebrandlyauctioneer.wordpress.com/2013/08/06/auction-contract-binding-upon-who/.

We wonder today — just as we did years ago — if your contract can bind others not aware nor consenting to your contract? Our attorney at the time held these provisions would likely be unenforceable. Of course, you could start out claiming they are enforceable?

For most auctioneers, doing business as a business is a good idea. Further, it’s a good idea to consider what might happen if the seller/owner becomes incompetent or dies while the auction is underway, especially if either appears imminent. Consulting your attorney prior is yet another good idea.

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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