Auctions where buyer won’t pay; seller won’t convey
As auctioneers, two distinct situations arise periodically in regard to property being sold:
- A bidder becomes the buyer and he refuses to pay for his purchase.
- A seller refuses to convey the property after a bidder becomes the buyer.
The immediate thinking typically is that in either situation there is a breach of contract. Indeed there is a breach. Today’s topic is what recourse does either party have?
For a buyer to successfully sue a seller, or a seller to successfully sue a buyer, that lawsuit must denote the desired damages — how the plaintiff was harmed. Generally speaking “no harm, no [foul] lawsuit.”
Looking at our two situations above, how are damages assessed?
- When a bidder refuses to pay the seller could cite that he hasn’t received the money for the purchase — but if the seller still has the subject property — there’s likely little or no damage.
- When a seller refuses to convey the property, the buyer could cite that he’s paid for that [unique] property and that his damages are that he lacks possession without a suitable alternative.
So our conclusion is, generally, the buyer could force a seller to sell but a seller can’t typically force a buyer to buy. However, when can a seller sue for damages?
Let’s say, for example, an auctioneer is selling a client’s (seller’s) car and says, “Sold!” to a buyer $37,000. In the event the buyer refuses to pay the seller authorizes the auctioneer to resell the car at the next auction where it demands $31,000.
In such a situation, the seller can now denote his damages — $6,000 in sales price plus possibly other holding costs (insurance, maintenance, depreciation, additional costs of sale, attorney fees …) and thus his lawsuit can show how he was damaged.
Are there exceptions to our overview above? Possible irregularities include that the subject property is not unique — and rather a readily available and accessible commodity. If the buyer can secure a like-kind substitute with little or no effort, it would be difficult to characterize damages for a particular seller not selling … not conveying.
Finally, every lawsuit is [in theory] unique and obviously sellers sue buyers just as buyers sue sellers. The important issue remains damages — and if you can’t characterize any loss [harm] due to a breach of contract, you likely have no case [foul.]
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, RES Auction Services and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College of Business, Executive Director of The Ohio Auction School and Faculty at the Certified Auctioneers Institute held at Indiana University.