When I speak to auctioneer groups, I often start with a math quiz to calculate all of the contracts involved in a single auction. Let’s say you have a consignment sale with 23 consignors, 132 registered bidders, and 317 lots (all of which are struck off). How many contracts are there? The simple answer is 472 – just counting the auctioneer, the sellers and the bidders. There is a contract between the auctioneer and each consignor (23 seller contracts), there is a contract between the auctioneer and each registered bidder in the form of the auctioneer’s bidder terms and conditions (132 contracts, whether they bid or not), and because each lot that is struck off is a separate sale (UCC Section 2-328(a)) there is a separate contract formed between a seller and a buyer each time the hammer falls (317 sales contracts, even if a bidder buys multiple lots from the same consignor) – for a grant total of 472 contracts. And, that’s just the start. What if you add 557 registered online bidders? That’s 1029 contracts; but, don’t forget, when we have an online auction there is a contract between the auctioneer and the online platform provider, plus a user agreement between each registered online bidder and the online platform provider, bringing the total up to 1587. Additionally, there are often related services contracts with affiliates of the online platform provider. Finally, there are contracts for online and traditional advertising, and contracts with bid callers, ringmen, runners, clerks, insurance companies, printers, sign companies, food vendors, etc. . . . . and, now I’ve just lost count.
Suffice it to say that there are a lot of moving parts that make up an auction, and at each juncture – in each contract – there is a liability risk. Therefore, it is important to be aware of, and to understand, all of those moving parts and the way they work together (or the way they should work together) so that you can properly assign rights and duties, identify and allocate risks, manage expectations, avoid conflicts, and reduce exposure to potential liability. I will address these various contracts and liability risks in a series of future discussions. With all those moving parts, the goal is to avoid getting caught up in the gears. Stay tuned . . . .