Absolute in the Ad, Reserve in the Room
An auctioneer signs a consignment agreement with the executor of a 180-lot estate. The newspaper ad and the auctioneer's website both read: 'ABSOLUTE AUCTION - everything sells to the highest bidder, no reserves.' The written agreement, signed after the ad was placed, contains a clause: 'Seller may establish reserves on any lot before the sale.' On auction day the auctioneer opens a restored 1957 tractor at $8,000. No one bids. He announces, 'The seller has authorized a reserve of $12,000, so we'll pass this lot.' Several bidders object that the sale was advertised as absolute. Later, a bidder asks whether the auctioneer may 'run the bid' for the seller on a lot that has no reserve. The executor says the ad was just marketing and the contract controls. The auctioneer has not yet sold any other lot and asks for guidance before continuing.
1. Classify the sale as advertised and as contracted, and explain which characterization should govern the auctioneer's conduct. Address 'absolute,' 'with reserve,' and 'subject to seller confirmation.'
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An absolute auction means the property is sold to the highest bidder regardless of price; the seller has no reserve and cannot reject the high bid merely because it is low. A with-reserve auction lets the seller reject bids below a stated minimum. 'Subject to seller confirmation' is a reserve mechanism and must be disclosed before bidding. Here the public advertisement promised absolute, while the later contract tried to insert a reserve. The auctioneer cannot let a private contract clause override the public terms without correcting the advertising before the sale. Under RSA 311-B and Board rules, advertising must be accurate and not misleading. Because bidders relied on 'absolute,' the auctioneer should conduct the sale as absolute or publicly announce the change and postpone. Passing the tractor at $8,000 because of an undisclosed $12,000 reserve is inconsistent with the advertised terms and exposes the auctioneer to discipline and a consumer claim.
2. Explain 'by-bid,' 'hammer price,' and 'seller's reserve,' and whether the auctioneer's $8,000 opening and $12,000 announcement were proper.
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A by-bid is a bid made by or for the seller to run up the price; it is generally prohibited because it deceives bidders, unless the sale is with reserve and the seller's right to bid is clearly disclosed. Hammer price is the final bid at the fall of the hammer, before any buyer's premium. Seller's reserve is the minimum acceptable price. The auctioneer may open bidding with a bona fide invitation, but he cannot use a fictitious bidder. Announcing a $12,000 reserve after advertising absolute was improper; it converted the lot to a with-reserve sale without notice. On a truly absolute lot the auctioneer may not run the bid for the seller. If no bid is received, the lot is passed or withdrawn only as the absolute terms allow.
3. What should the auctioneer do before the next lot, and what records should be made?
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Before the next lot, the auctioneer should stop, announce the correct status of the sale, and tell bidders whether he will sell absolute or with reserve. He should consult the executor in writing, preserve the ad, contract, bid records, and any announcements, and not accept any seller bids. If the seller insists on reserves, the auctioneer should suspend the sale and re-advertise as a reserve auction, with the reserve terms disclosed. He should document the correction and be prepared to show the Board how he protected bidders. Any lots already sold under inconsistent terms should be reviewed for rescission or adjustment. A written memo to the consignor explaining the conflict is prudent.