Absentee bids left with an auctioneer are generally seen as an accommodation to bidders who are unable to be physically present at an auction. The acceptance of absentee bids can also benefit the seller by providing a starting point for bidding, and by potentially increasing the hammer price achieved on a lot. It is important, however, for auctioneers to recognize that bidders and sellers may bring their own expectations to absentee bidding, and that those expectations may be inconsistent with industry standards. As such, in order to educate the parties, manage their expectations, avoid disputes, and reduce the risk of liability, auctioneers who accept absentee bids should clearly establish the nature of absentee bidding and the procedures employed by the auctioneer.
As a starting proposition, the auctioneer is the seller’s agent. This means that the auctioneer acts on behalf of, and for the benefit of, the seller. Notwithstanding this essential truth, when an auctioneer agrees to accept and execute an absentee bid, two questions arise:
First — What, if any, relationship and potential liabilities are established between the absentee bidder and the auctioneer?
and
Second — How, if at all, is the relationship between the auctioneer and the seller affected by the auctioneer’s acceptance of an absentee bid?
Like so many issues confronted by auctioneers, the answers to these questions should be found in the auctioneer’s bidder terms and conditions and in the written contract between the auctioneer and the seller.
The bidder terms and conditions provide the auctioneer with the opportunity to establish rules applicable to the auction and to describe the contractual relationship between the auctioneer and the bidders. The bidder terms and conditions should clearly state that the auctioneer is the seller’s agent, and that, under no circumstances (including the acceptance of absentee bids), will the auctioneer act as, or be deemed, an agent of a bidder. Additionally, the bidder terms and conditions should indicate that if absentee bids are accepted, they will be accepted in the auctioneer’s sole and absolute discretion. Absentee bids are, thus, a ministerial accommodation — not an obligation.
Should an auctioneer be willing to make the accommodation of accepting absentee bids, he or she must determine, as a matter of policy, whether an absentee bid will be executed at its full amount or whether it will be executed competitively (i.e., initiated at a lower opening amount that is typically a percentage of the maximum bid established by the absentee bidder and only executed up to the amount necessary to constitute the high bid, or until exhausted (whichever comes first)). In this regard, note that there is a world of difference between a $500 maximum bid and a bid that will be executed at $500. Once this determination is made, it should be stated clearly in the bidder terms and conditions so that there are no surprises. Next, the bidder terms and conditions should recognize the possibility that — given the hectic nature of an auction — it is entirely possible that an absentee bid may not be executed. Here, the bidder terms and conditions should inform bidders that, while the auctioneer will make reasonable efforts to execute absentee bids, there are numerous circumstances that may result in such a bid not being executed, and that there will be no liability for the failure to execute a bid. This is important to reduce the risk of an absentee bidder claiming damages based on the bargain he or she might have gotten had the bid been executed (for example, an absentee bid of $500 is not executed because the runner holding the bid was distracted, the lot sells for $100, and the bidder claims that the lot was a sleeper worth at least $1000). Essentially, the risk of a failure to execute rests on the absentee bidder, and, if the lot is important to the absentee bidder he or she should take steps to attend the auction in person, through an agent, or by telephonic or electronic means. Each absentee bidder should also be advised, and acknowledge, that a lot subject to an absentee bid may be sold to another bidder for the maximum amount of the absentee bid based a bidding sequence that causes another bidder to reach that amount first (for example, the maximum amount of the absentee bid was $100, the absentee bidder was in at $90, and the lot sells to another bidder for $100). Additionally, the bidder terms and conditions should address how an absentee bid will be handled if its execution would be for less than a full bidding increment established by the auctioneer. By clearly articulating the rules for handling absentee bids in the bidder terms and conditions, the auctioneer can manage the bidder’s expectations and reduce the risk of liability.
Having established the rules for absentee bidding in the bidder terms and conditions, the auctioneer must also address absentee bids in the written contract between the auctioneer and the seller. This is particularly important with respect to the possibility that an absentee bid may go unexecuted. Just as the auctioneer wants to avoid exposure to liability to an absentee bidder because of the failure to execute a bid, the inadvertent failure to execute an absentee bid should not expose the auctioneer to a claim for damages by the seller (for example, the hammer price on a lot is $100, but there was a $500 unexecuted absentee bid). For this reason, the contract between the auctioneer and the seller should clearly state that, an auctioneer taking absentee bids may do so in the auctioneer’s sole and absolute discretion, that the handling of absentee bids will be in accordance with the auctioneer’s bidder terms and conditions, and that the auctioneer will have no liability to the seller for the failure to execute an absentee bid.
By properly addressing absentee bids in the bidder terms and conditions and in the contract between the auctioneer and the seller, the auctioneer gets everyone on the same page, manages the expectations of all parties, and will reduce the risk of a courtesy becoming a nightmare.
