Withdrawal Before the Hammer
A licensed auctioneer is running an absolute auction of commercial restaurant equipment for a bankruptcy trustee. The terms announced at the start say 'absolute, no reserves, no minimums.' Midway through, a bidder asks whether a particular 12-burner range is 'really going' and the auctioneer confirms it is. Bidding reaches $1,800 when the trustee's representative whispers to the auctioneer that the range was mistakenly included and must be pulled because it is subject to a secured creditor's lien. About forty people are present, several have been bidding on the range, and the current high bidder has already arranged transport. The auctioneer has not yet called the hammer.
1. May the auctioneer withdraw the range at this point, and what should the auctioneer say and do?
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At an absolute auction with no reserve, once bidding has been invited and a high bid is pending, the seller's ability to withdraw is sharply limited. The auctioneer should not simply pull the item. The correct move is to stop the bidding, announce clearly that the lot is being withdrawn due to a title/lien issue outside the auctioneer's control, and state that no contract is formed on the withdrawn lot. The auctioneer should then document the withdrawal in the clerk's record with the time and reason. The auctioneer should also immediately confirm in writing with the trustee whether the lien claim is accurate; if the trustee was wrong and the item is unencumbered, the auctioneer should not have withdrawn it. Going forward, the auctioneer should exclude any lot with questionable title from an absolute sale rather than risk a misdescription claim.
2. The high bidder demands the range at his $1,800 bid or threatens suit. What is the auctioneer's best response and exposure analysis?
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The auctioneer should acknowledge the bidder's position but explain that title could not pass free of the secured creditor's lien, so performance is impossible without the lienholder's consent. The bidder's remedy depends on whether a contract formed; with the hammer not yet fallen, most authority treats the sale as incomplete, but an absolute-auction announcement plus reliance can support a claim if the withdrawal was unjustified. The auctioneer should preserve the bidding record, the announcement terms, and the trustee's written instruction. If the lien is later resolved, the auctioneer could offer the bidder a right of first refusal at the same price. The auctioneer should notify the errors-and-omissions carrier if a demand letter arrives and should not admit liability or pay the bidder from trust funds.