MISREPRESENTATION & EXPECTATIONS

Reasonable Expectations. Unconscionability. These are two terms that have gained increased usage in and by our courts over the years. The concepts have application in the antique industry as well, as I will illustrate using a question that was posed by one of our readers in response to my last column, and a case involving a coin dealer purchasing a number of rare stamps and coins from an elderly woman.

Our reader believes that when the bidding stops, and the auctioneer then reveals a higher absentee bid, the item should be deemed sold and no further bids should be accepted. She has witnessed an auctioneer allowing the item to be sold for $1.00 more than the absentee bid, to the "loser" whose bid was preempted by the absentee bid.

What are the reasonable expectations of the bidders in attendance, the absentee bidder and the consignor? Should an absentee bidder have any greater rights than other bidders? If the bidding stops with her bid, then those in attendance are precluded from being able to bid for and purchase the product by offering more than anyone else. Should the consignor be denied the opportunity to sell the item for the highest price anyone who took notice of the auction is prepared to pay?

The auctioneer controls the event. He is not required to accept any particular bid. He is, however, obliged to "work the crowd", for his consignors. Should an auctioneer accept a bid which is $1.00 more than that of the absentee bidder? He can, according to the law, or probably should not. Why not? If the bidding began at, let us say, $250.00 increments, and ended after a couple of $50.00 increments, it seems reasonable that the auctioneer should offer the item for $50.00 more than the absentee bidder's figure. Anything less may be indicative of the auctioneer not doing his best for the consignor and illustrative of a lack of respect for the absentee bidder's serious wish to purchase the item. It would likely adversely impact upon the legitimacy of the session and create a negative perception by the public of the auctioneer and the process.

What about the absentee bidder? She probably would not expect the auctioneer to accept a $1.00 increase on her bid. On the other hand, her bid is the maximum she is prepared to pay (we must assume) and accordingly she cannot expect the auctioneer to gratuitously increase that sum. If the auctioneer does do so, he cannot enforce the "contract" because the absentee bidder has not agreed to anything more than the maximum as disclosed in the sealed envelope. The consignor would be left with a highest bid that cannot be enforced.

I would be leery of an auctioneer who accepts the $1.00 increase. This is the same type of auctioneer who would lower the hammer on the absentee bidder's $5,000.00 bid when the highest live bid based on $250.00 increments was $3,750.00. Fairness dictates that the auctioneer should sell the product to the absentee bidder for $4,000.00.

Our reader "silently objected" to the $1.00 increase. I would verbalize my displeasure as soon as the $1.00 bid is tendered, or quietly do so at the conclusion of the auction. I would then gain a better understanding of the rationale and philosophy of the auctioneer and then be able to use this knowledge to govern my attendance and conduct at future auctions.

It is generally understood that pickers are under no legal obligation to pay individuals from whom they purchase items "fair market value". And in any event, determining such a price is difficult in the antique business given the number of hands that frequently touch many "finds". What about the following scenario: A woman in her mid 70's has been purchasing stamps and coins from a storefront dealer for many years, asking no questions respecting value, and simply trusting that she is purchasing at fair market value. She takes a number of stamps and coins that she has accumulated over, let us say, half a century, many of which have been in her family for a lot longer, to the same trusted dealer. Her son helps her carry the bags of coins into the premises of the dealer, and then leaves her to do her business. The dealer spends some time reviewing the items and then with very little said, makes out an invoice and a cheque for $350.00. The woman takes the receipt and the cheque, without paying attention to any particulars, and reunites with her son who is shocked at what his mother had done. They do not return to the store. Instead, the woman ponders the matter. Eventually she demands justice. The dealer cuts a cheque for a further $750.00. Justice is still not deemed to have been done and accordingly a further demand is made. A further sum of $500.00 is paid to the woman by the dealer. The woman now realizes that she has, in her opinion, been taken advantage of. She subsequently sees an article in a local newspaper with a photograph of a different dealer holding up one of her sold coins and commenting that it may very well fetch $50,000.00 or more at auction.

Does the woman have a case? If so, how strong a case does she have, and what are the principles at play?

The standard within the antique and rare coin industry is not based upon a requirement that a dealer pays to a vendor fair market value, but rather, it appears to be based upon the simple principle of offer and acceptance, without there being any representations built into the transaction that the offer represents wholesale value, fair market value, retail value, or anything else.

For well over 100 years our courts have been willing to intervene to help people who have fallen prey to the unscrupulous. Judges exercise what is known as their "equitable jurisdiction" to remedy injustices. But what about a case such as this, where the dealer is simply following the standard within the industry and is not guilty of any fraud or misrepresentation?

The doctrine of unconscionable transactions became widely accepted and used to frame lawsuits after a 1975 English Court of Appeal decision was released. Courts, more frequently than before, were being asked to reopen transactions where an individual, deemed to be in need of some type of special care or protection, was "exploited" by another far stronger party, resulting in the latter getting the property of the former grossly under value. Courts have therefore been willing to intervene where there exists a combination of inequality of bargaining power and improvidence; where the bargain is unfair and the parties were not equally vigilant of their interests.

The woman in this case trusted the dealer and assumed she was getting a fair price, since for several years she had been dealing with him, and purchasing items without questioning value. She reasonably assumed that she would be treated fairly when it came to selling to the dealer. Therefore, the history of the dealings between these two individuals becomes important and lays the groundwork for the woman's case. Did the dealer prey on the woman? Perhaps not. However, given the relationship between the two, a court may very well determine that the woman should now be paid a more realistic price, finding that the dealer was under an obligation to advise the woman that she should investigate the value first by getting another offer or to require that she come back with her son. After all, the dealer must have known that something was amiss if the woman didn't react at all when presented with the invoice and the paltry sum of money. The court even has jurisdiction to award the woman fair market value based upon expert opinions.

I'm not suggesting that dealers should now alter their buying practices, nor that unsophisticated vendors should never trust dealers. Nondealers should, however, recognize that it is best to get at least a couple of offers, even if they've been dealing with certain individuals for an extended period of time, and then, certainly if the offers are very different, seek out an appraiser and/or a prominent auctioneer specializing in the particular type of antique.

How can dealers better protect themselves? Explain to the vendor that he is being offered a price which doesn't necessarily represent the best price that may be available in the market place. Create and use a special receipt form to be used when making such purchases, that spells out in bold print that the vendor understands that the price is not being represented as fair market value or anything other than a price that has been negotiated between two parties and that the vendor is agreeing to sell for the amount after having considered the offer carefully.., have the person read and sign the form. If the dealer in our case had followed this advice it would have been much more of an uphill battle for the woman in court.

I recognize that if all dealers adopted such practices they would hardly ever be able to purchase for the prices that they do. This is simply a warning that our courts do, not infrequently, make rulings that certain transactions, in particular involving unsophisticated, feeble and elderly individuals, are unconscionable and ought to be set aside based upon principles of fair play. The case I've referred to is real, and is still pending before the court. The woman has a reasonable likelihood of succeeding, of course depending on how the evidence at trial unfolds.

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