Reserve Not Met but Auctioneer Declares 'Sold' After Seller Nods
Cole auctions an 80-acre tract under a written reserve auction contract. The reserve is $850,000. The high bid is $820,000. Cole says, 'We're close; let me see the seller.' The seller, standing nearby, nods and says, 'Go ahead.' Cole announces 'sold' at $820,000. The buyer signs a sale contract and pays a $25,000 deposit. The next day the seller refuses to close, arguing the reserve was not met and a nod cannot modify a written contract. An online bidder had entered a $840,000 maximum proxy, but the platform showed only $820,000 because of a software error.
1. Was the reserve met, and what is the legal effect of the seller's oral waiver and Cole's 'sold' declaration?
Read the worked answer
At $820,000 the stated reserve was not met, so Cole had no automatic authority to sell. A reserve is a minimum price set by the seller; the auctioneer cannot ignore it. The seller may waive the reserve, and an oral waiver can be effective if the seller has authority and the auctioneer reasonably relies on it, but it is risky. The seller's nod and 'go ahead' are evidence of waiver; the written contract does not necessarily require all modifications to be written unless it says so. Cole's declaration of 'sold' may bind the seller as her agent if he acted within apparent authority. The buyer's signed contract and deposit strengthen the buyer's position. The seller's later refusal may be a breach, but a court would look at the seller's words, Cole's authority, and the written terms. Best practice: get the waiver in writing before declaring sold.
2. What should Cole have done when the bid fell below reserve?
Read the worked answer
Cole should have stopped the bidding at $820,000, told the crowd the reserve was not met, and consulted the seller privately. If the seller wanted to drop the reserve, Cole should have obtained a signed written waiver or a recorded announcement authorized by the seller, then reopened bidding or accepted the high bid with clear disclosure. He should not have announced 'sold' based on a nod. He should document the time, words, and witnesses. If the seller refused, Cole should announce 'passed' or 'not sold' and preserve the high bidder's information.
3. How should the online proxy error be handled?
Read the worked answer
The $840,000 proxy error is a separate platform problem. A maximum proxy does not mean the bidder bid $840,000; the platform should bid only enough to beat the next bid. If software prevented the proxy from executing, the bidder may have a claim against the platform or auctioneer, but the auction result is not automatically $840,000. Cole should preserve server logs, notify the bidder and seller, and consult counsel. If the error materially affected the result, the fair remedy may be to rescind and re-auction or negotiate, not to silently ignore it. He should also test the platform before the next sale.