The NSF Check and the Settlement That Would Not Balance
Valley View Auctioneers settled a 312-lot consignment sale. The clerk's hammer sheet totals $128,750, which includes lot 214, a zero-turn mower knocked down at $3,900 to a bidder whose check was returned NSF. The mower was re-offered at the next sale and brought a $3,300 hammer from a new bidder, again with the 12% buyer's premium. The consignment contract provides a 15% commission to the auctioneer on the hammer price, a 12% buyer's premium retained by the auctioneer, and reimbursement of actual expenses: advertising $1,850, facility $900, ring labor $1,400, and online platform fees $1,150. The seller has not yet been paid and has written twice asking for the numbers, complaining that "the premium is my money too" and that he should not lose anything because a bidder's check bounced. Any sales tax is handled on a separate return and is not part of this settlement.
1. Compute the seller's net proceeds and the auctioneer's total compensation, and show a reconciliation that proves the numbers.
Read the worked answer
The settlement is built off valid hammer, not the clerk's sheet.
- Correct the hammer. Clerk's sheet $128,750 − $3,900 voided lot 214 = $124,850 actually collected. Add the resale at $3,300 = $128,150 valid hammer.
- Commission. 15% × $128,150 = $19,222.50.
- Expenses. $1,850 + $900 + $1,400 + $1,150 = $5,300.
- Seller's net. $128,150 − $19,222.50 − $5,300 = $103,627.50.
- Auctioneer's compensation. Commission $19,222.50 + buyer's premium (12% × $128,150 = $15,378.00) = $34,600.50.
- Reverse the dead invoice. The premium on the voided $3,900 sale ($468) was never earned and must come off the books; the resale premium ($396) replaces it.
- Cross-check. Buyers were billed $128,150 × 1.12 = $143,528. That splits as seller $103,627.50 + auctioneer $34,600.50 + third-party expenses $5,300 = $143,528. It balances.
Two presentation notes. The settlement should show lot 214 twice - original sale voided, then resale - because otherwise the consignor sees a $3,900 item simply vanish. And every expense line should carry the invoice; a lump $5,300 invites the argument that the platform fee belonged to the auctioneer's own online business rather than to this sale.
2. Who bears the loss on the bounced check, and how should the default and resale be documented?
Read the worked answer
Start with the shortfall numbers, because they are smaller than the argument.
Original lot 214 invoice: $3,900 hammer + 12% premium = $4,368. Resale: $3,300 + 12% premium = $3,696. The $672 difference breaks down as $600 of hammer and $72 of premium. Of the $600 hammer, 15% ($90) was the auctioneer's commission, so the seller's net loss is $510 and the auctioneer's lost revenue is $162.
Who bears it depends on the terms of sale and the consignment contract, so read both before deciding.
- If the bidder terms allow it, the defaulting bidder owes the deficiency plus the auctioneer's costs, and both the seller and the auctioneer should be made whole from that recovery. Send a written demand, retain any deposit or right to it, and never release merchandise before funds clear.
- If the contract is silent, the auctioneer as agent must pursue the defaulting bidder on the seller's behalf and account for whatever is collected. The auctioneer cannot silently absorb the $162 or silently charge the seller $672 - either move needs contractual authority.
Documentation to keep: the registration card and signed terms, the returned check and bank notice, a redeposit attempt or written notice, the resale invoice identifying the same lot, and a written explanation in the settlement file. That file is what answers the consignor's complaint.
3. Does the seller have any claim to the 12% buyer's premium? Explain how the fee structure works and where his complaint has merit.
Read the worked answer
Unless the written agreement says otherwise, the premium is not his.
The contract splits the money two ways: the seller is paid the hammer price less commission and expenses; the auctioneer is paid the commission plus the buyer's premium. Those are two different revenue streams for two different services - the commission is the seller's payment for selling the goods, and the premium is the buyer's payment for the privilege of bidding. Both are disclosed to buyers in the advertising and terms, and the seller agreed to both when he signed.
Look at the arithmetic he is objecting to: on a $100 hammer, he receives $85; the auctioneer keeps $15 commission plus $12 premium; the buyer pays $112. The buyer's $112 is irrelevant to the seller's calculation, and the seller's 15% is 15% of $100, not 15% of $112.
Where the seller has a real point is disclosure and clarity. If the contract's fee language is ambiguous about who keeps the premium, a court may construe it against the drafter - the auctioneer. If the premium was never disclosed in the ads, the seller has a stronger complaint about how his property was marketed. The fix for next time is a one-page fee summary signed at intake: commission rate, premium rate, who keeps what, expense authorization, and settlement timing.
For now, respond in writing with the contract paragraph, the ad copy, and the arithmetic - and get the settlement out the door.