Withdrawal Three Days Out
Marla is the licensed auctioneer for a June 14 consignment auction at a Delaware County fairgrounds. Her written agreement with the consignor lists 180 lots, a 20% commission on the hammer price, a 10% buyer's premium retained by the auctioneer, and advertising billed at actual cost up to $2,500. One lot, a 1965 Mustang convertible, carries a $40,000 reserve. The contract adds: "Consignor may not withdraw any lot within 14 days of the sale. If consignor withdraws any lot, consignor shall pay the commission that would have been earned on that lot plus all expenses." On June 11 the consignor calls: a collector has offered $52,000 cash for the Mustang today and wants it pulled. Marla has already committed $2,100 of advertising, 140 bidders are pre-registered, and her auctioneer friends tell her the car "should bring sixty."
1. What must Marla do with the $52,000 offer, and how does her agency duty constrain the advice she gives?
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Marla's first obligation is to get on the phone and tell the consignor, in writing, exactly what she was told: a $52,000 cash offer, from whom, on what terms and contingencies, and what she recommends.
Agency frames the advice. Marla is the consignor's agent and owes loyalty and full disclosure of material information, including offers. She may advocate - she can point out that the car is under-reserved at $40,000, that 140 bidders are registered, that competitive bidding can exceed a single private offer, and that the contract bars withdrawal within 14 days. What she may not do is shade the advice to protect her commission, hide the offer so the auction can proceed, or tell the consignor the car "will bring sixty" when her basis is a friend's opinion. If she says it, she should say what it rests on and let the consignor decide.
She should also lay the options out in numbers: sell privately at $52,000 net of closing costs; sell at auction at an unknown price above the $40,000 reserve, less 20% commission and $2,500 of advertising; or negotiate a withdrawal settlement. A consignor who is shown those three lines chooses with his eyes open, and Marla's advice is defensible whichever way he goes.
One more thing: her commission is 20% of the hammer, and a $52,000 private sale earns her nothing unless the contract says otherwise. That is precisely why the disclosure conversation has to be documented.
2. If the consignor withdraws the Mustang, what is Marla entitled to recover, and how should she compute it? Is the clause enforceable as written?
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Start with what she has actually lost and what she has actually saved.
Actually incurred and unrecoverable: $2,100 of committed advertising; staff and facility costs that cannot be called back; the value of the June 14 slot if it cannot be refilled.
Lost profit: the commission she would have earned. The clause says "the commission that would have been earned on that lot plus all expenses." Clauses like this are enforced when they are a genuine pre-estimate of loss and struck down as penalties when they produce a windfall. A clause that pays a commission on a hypothetical price and also reimburses the expenses she would have paid out of that commission is vulnerable on two counts: the price is speculative, and the total may exceed her actual loss.
Practical approach:
- Quantify. Use the reserve ($40,000) or the private offer ($52,000) as the reference price, not a friend's guess. Commission at 20% of $40,000 is $8,000; on $52,000 it is $10,400.
- Deduct costs saved. She does not incur the cost of cataloguing, clerking, and selling that lot, and she still gets the benefit of the $2,100 of advertising for the other 179 lots. A court will net those out.
- Mitigate. Re-book the slot, re-sell the advertising, and document the effort. Failure to mitigate reduces the claim.
Then negotiate. A signed release paying documented expenses plus a negotiated fee is worth more than litigating a clause that may not survive a penalty analysis.
3. The consignor says, "Fine, I'll pull it - but the private buyer wants you to handle the paperwork, so just take your 20% out of his payment." What issues does that raise?
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Several, and none of them disappear because the consignor is being agreeable.
Who is Marla working for? If she takes 20% out of the private buyer's payment, she is being paid by the buyer while under an agency contract with the seller. That is dual payment and potentially dual agency, and it requires written disclosure to and consent from both sides before she touches the money. She should also confirm in writing what the 20% is calculated on and who pays it - "just take it out of his payment" is not a fee agreement.
Does she have a claim at all? If the collector came forward because of her marketing and pre-registration, there may be a procuring-cause argument, but procuring cause lives in the contract. Her contract bars withdrawal within 14 days and fixes a remedy; that clause is the basis for a claim, not the fact that a buyer appeared.
The transaction itself. Closing a private sale she was not engaged to handle adds liability and muddies the record of the auction. If she does it, it should be under a separate written engagement with a stated fee.
The clean resolution is a written withdrawal settlement with the consignor - documented expenses plus an agreed fee - and a separate written agreement if she is to close the private sale.