I’ve taught classes involving the UCC 2-328 for nearly 15 years.
In that time frame, I’ve talked to (and with) 1,000’s of auctioneers about the UCC 2-328.
I’ve noticed I keep hearing some of the same misunderstandings about the UCC 2-328 consistently.
Thus, we note here the 15 most misunderstood things about the UCC 2-328.
- “The UCC 2-328 is federal law.”
No it’s not.
The UCC 2-328 is state law in 49 of the 50 states in the United States, and used in court decisions in all 50 states.
- “We don’t have the UCC 2-328 in our state.”
Yes, you do (unless you live in Louisiana, and have it only by analogy.) The UCC 2-328 is not part of license law, so it doesn’t matter if your state licenses auctioneers or not.
- “The UCC 2-328 doesn’t apply to real estate auctions.”
Yes, it does.
Despite the UCC 2-328 being written only for “goods,” the courts nearly always apply these same rules to real estate auction cases.
- “The UCC 2-328 doesn’t apply to online auctions.”
Yes, it does.
Although few such cases have made it to court, without exception those courts have ruled the UCC 2-328 applies the same to online auctions as live auctions.
- “There are more than 2 types of auctions.”
No, there aren’t.
There are only 2 types: with reserve and without reserve.
The UCC 2-328 clearly says any auction is one type or the other.
- “An absolute auction is not the same as a without reserve auction.”
Yes, it is.
The courts have ruled universally that an absolute auction is analogous to a without reserve auction.
despite the UCC 2-328 using only the term without reserve.
- “I can always change the type of auction after I declare the auction open.”
No, you can’t.
A without reserve auction cannot be changed to a with reserve auction; a with reserve auction could be changed to a without reserve auction, but it is ill-advised.
- “There are ‘tie bids,’ and I can reopen the bidding.”
No, there aren’t.
There is no such thing as a tie bid.
The UCC 2-328 says you may only reopen the bidding if a bid comes in “while the hammer is falling,” but are not obligated to do so.
- “Our bidders are prohibited from retracting their bids.”
No, they aren’t.
Your bidders can indeed retract their bids so long as they do so before the “fall of the hammer.” Your terms cannot override the UCC 2-328.
- “We can have terms that our auction is not subject to the UCC 2-328.”
“No, you can’t.
Terms and conditions for buyers cannot override the UCC 2-328.
- “If a bidder retracts his bid, the previous bidder is back in.”
No, he isn’t.
Once a bidder is deemed the high bidder, all previous bids are void.
The UCC 2-328 strictly says there is no authority to unilaterally place a prior bidder back in as the high bidder.
- “After, ‘Sold!’ I can qualify to say ‘subject to seller approval,’ or the like.”
No, you can’t.
Once an auctioneer announces the word, “Sold!” or indicates the same in some other customary manner, nothing else uttered thereafter changes the status of the property from “Sold!”
- “The seller can’t bid.”
Yes, he can.
The seller can bid if the auction is a with reserve auction with disclosure, and can bid regardless of the type of auction if the auction is a forced sale.
If the seller bids otherwise, the UCC 2-328 dictates remedies for the high bidder.
- “I can always withdraw property so long as I don’t say, ‘Sold!'”
No, you can’t.
In a without reserve auction, if a bid is received within a reasonable time, the property may not be withdrawn; only in a with reserve auction, the property can be withdrawn up until the “fall of the hammer.”
- “Bidders must always conform to certain bidding increments.”
No, they don’t.
In a without reserve auction, minimum bidding increments are illegal.
In a with reserve auction, certain minimum bidding increments are permitted.
As I have told classes for over a decade that there is no other more important four paragraphs of auction law than the UCC 2-328, and the courts in the United States place the burden of knowledge upon all auctioneers.
