Auctions are a common method to sell farmland, machinery, livestock or other assets. Auctions are an important part of our commerce system and provide the best means to determine the fair market value of an asset. Both auctioneers and auctions have specific rules and laws applied to them to ensure auctions are fair to both buyers and sellers.

The following are a few of rules and laws that help us have confidence that auctions are conducted equitably.

Ohio law provides that an auction is with reserve unless the terms and conditions of the auction expressly state that there is no reserve. That is, unless expressly stated otherwise, the auctioneer can withdraw the item being sold at any time up until the completion of the sale is announced. The reason for this law is to primarily help protect the seller from an unusual situation where the item being sold does not come close to receiving a bid close to its true value. For example, if a farm is being auctioned and the day of the auction only a few bidders show up because of a snowstorm, the auctioneer can conduct the auction but is not required to sell the farm. However, if the sale was advertised without a reserve (absolute auction), the auctioneer must sell the farm to the highest bidder regardless of the bid.

Auction advertising
Auction advertising will often include something to the effect of “announcements made the day of the sale take precedence over any printed material.” This provision is included to presumably allow for any changes of circumstances that occur after the marketing material is distributed and the date of the sale. However, Ohio law does not necessarily allow the terms of an auction to be changed after the terms are announced in marketing material. A Franklin County court stated, “A person responding to an advertisement that an auction sale will be held has a right to rely upon the representations made therein and that the advertisement is made in good faith.” Basically, the court said that the terms of an auction cannot be changed the day of sale by announcement.

Consider the following example, auctioneer and seller decide to announce an auction for a farm as an “absolute auction” but state that announcements the day of sale take precedence over printed material. They think that advertising as an absolute auction will attract more potential buyers. If enough buyers do not show up, they will simply announce that it is no longer an absolute auction. Ohio law probably will not allow the auctioneer and seller to do this. The seller either needs to cancel the auction or sell the farm as an absolute auction. It is critical the seller and auctioneer agree upon the terms of the sale before the auction is advertised, and they honor those terms.

Auctioneers are licensed and regulated through the Ohio Department of Agriculture. Before becoming a licensed auctioneer, a person must attend an approved auctioneer school, serve a one-year apprenticeship, act as a bid caller in 12 auctions, and pass a written and verbal exam. Anyone who has concerns about an auctioneer or auction can file a complaint with the Ohio Department of Agriculture. The complaint is required to be investigated by ODA. Buyers and sellers can also seek legal recourse if they believe an auction was conducted in such a way that cost them money.

Moore is an attorney with Wright & Moore Law Co. LPF. Email him at [email protected] or call 740-990-0750.