Auction Rights and Obligations Clarified, Expanded

How can a bison auction possibly be relevant to antique collectors?

A 2007 Saskatchewan Court of Appeal decision broadened the liability of auction houses regarding their obligations to purchasers, and summarized the law concerning the three main legal relationships within the auction context.

In Saskatoon Auction Mart v. Tkachuk, Taras Tkachuk bought 31 bison through Saskatoon Auction Mart (SAM). Within 2 months several animals died from disease caused by a virus contracted while they were at the auction premises. Three days lapsed between when the bison arrived at SAM, healthy, and their removal by Mr. Tkachuk, highest bidder. Tkachuk sued SAM. The judge concluded SAM did not take reasonable care housing the bison so as to prevent infection, and awarded Tkachuk $26,225. SAM appealed, but the appeals court upheld the decision.

SAM was exploring the possibility of a new venture, bison auctions. It hired Mr. Wojciechowski, an experienced bison producer, to supervise animal handling. Wojciechowski cautioned SAM’s president, Mr. Blacklock, that mixing sheep and bison could cause a deadly disease in bison. A virus which resides in sheep, while not fatal to them, is lethal to bison. SAM kept sheep in a different part of its premises from where it housed the bison. Blacklock either didn’t heed the advice he received, or thought that physical separation was enough. Nor did he consult a veterinarian to determine the warning’s validity or about available protective measures. Between when the bison were brought to SAM by their owners, and when Tkachuk removed them, they became infected. The plaintiff’s expert testified that the virus is transmitted through the air, and that when bison and sheep are corralled within 1,000 feet of each other, the result may be fatal.

The first relationship within the auction context is between the owner of goods and the highest bidder. The owner agrees to sell, and the purchaser agrees to pay a price. The auctioneer is merely the vendor’s agent. The second is the contract between the owner and the auctioneer, stipulating terms including commission, no buy-backs, etc. The third is the contract between the auctioneer and the purchaser, the auctioneer agreeing to release the goods once paid for. Each relationship has nuances and is marked by a series of rights and obligations of each party.

In this case, the third relationship was puzzling. We know that once the bison had been sold, a contract existed between the auctioneer and the purchaser, called bailment for hire. SAM had an obligation to Tkachuk to ensure that the bison were appropriately looked after until he removed them, in exchange for which SAM earned a commission. But it was never determined if the bison developed the disease after purchase by the plaintiff or before the fall of the hammer. If it was before, there was no bailment relationship between the auctioneer and Tkachuk because Tkachuk didn’t own the animals yet.

The appeals court reasoned it didn’t matter when the former high priests of the plains became ill. Between when an auctioneer receives goods, and when they are picked up by their purchaser, the auctioneer must take reasonable care. SAM argued that the judge set the standard too high, based on a practice neither widely accepted nor published (the evidence of the veterinarian and Mr. Wojciechowski). However the court said the auctioneer had enough knowledge to do more than it did (merely separate the species). Generally speaking, an auctioneer of a particular commodity is presumed to have an exacting knowledge of it, and know about its care while in his possession, unless he expressly states otherwise (i.e., “as is, where is, no warranty as to use or condition”).

According to the Court of Appeal, SAM had a duty to heed Wojciechowski’s warning, investigate further, and seek professional advice. This was an implied term of the contract between SAM and Tkachuk, the reasonable care to be taken. In a contract, written or oral, it’s not always possible to confine the terms to those expressly stipulated. There are circumstances where a court may conclude that everything agreed by the parties which appears to constitute the contract, is not only contained in their documents or statements. Sometimes additional terms must be implied. While some courts favour a restrictive approach to implying terms, it’s often necessary to give business efficacy to agreements.

Tkachuk wouldn’t have succeeded suing the vendors of the bison because they did nothing wrong. Nor would he have prevailed against the sheep owners, because the virus is common in sheep, and their owners didn’t have knowledge of SAM’s practices or procedures. His only recourse was against the auctioneer, even though there was no express term about what steps SAM would take to ensure Tkachuk received healthy animals.

This case is rare because not often are goods damaged as a result of an auctioneer’s negligence. Usually bidders learn of defects through visual inspection or the auctioneer’s disclosure when an item is put on the block. The auctioneer’s statements at the beginning of this auction, and terms contained in his flyers about “no warrantees,” could not be binding on a purchaser such as Tkachuk. Why: The most careful bidder’s eye could never have detected this problem. Sometimes you have to rely on your auctioneer to have been doing the right thing. Nothing he says or does can reduce or over-ride his liability if a judge determines that the auction rules contain a contrary implied term.

Parallels exist within the antiques context: What is the reasonable care of a particular class of collectible within an auctioneer’s temporary care, which he must take? Would any buyer bid on an item knowing that the auctioneer had not taken proper care of it? The standard, and therefore the implied term, will vary depending on the nature of the antique, and the particular auctioneer and his reputation in the community.

A decoy auction advertises a rare J.R. Wells mallard in exceptional condition, pictured in the catalogue. It’s the annual Schmidt-Guyette sale at St. Charles, Illinois, attended by continent-wide collectors. The consignor delivers the decoy and all is well, until a new employee places the bird, pending auction, beside a furnace. A crack develops, not noticed by the auctioneer’s staff. Auction attendees see the crack and bid accordingly. However a phone bid takes the decoy. Gary Guyette and Frank Schmidt are expert North American decoy auctioneers and appraisers. Are they liable for failing to ensure the decoy was not exposed to extreme heat? Would the crack have developed regardless? Any different if it was a contemporary decoy which had not already been cured through decades of temperature and humidity fluctuations? What if the auctioneer was John Simpson who conducts sporting collectible auctions and usually sells a few decoys? What about an auctioneer specializing in urban and rural estate auctions? Knowing John, Gary and Frank, no doubt each practices proper employee training procedures, and in the unlikely event that something untoward occurred, they would do the right thing. In fact a somewhat similar incident happened to me years ago at the Illinois auction, and management rectified the problem on the spot. This hypothetical with its permutations illustrates the difficulty in stating hard-fast rules. But we now know some factors used to determine the standard of care to which an auctioneer may be held accountable.

An auctioneer’s duty of care is one of a number of obligations in the auctioneer – purchaser relationship. To whet the appetite for future auction articles, let’s conclude with another example: Our estates auctioneer sells a cranberry epergne. There’s an article on the internet about contemporary versions of Victorian glass. By chance the winning bidder reads it and has a glass expert confirm his suspicions: It’s a reproduction. Should “buyer beware” govern? What if the auction was advertised as Smith’s Monthly Antique Auction? Is Smith protected by his boilerplate limitation of liability in his advertisements?

AUTHOR’S NOTE: Taras Tkachuk, our winner in this case, is the same Taras Tkachuk who lost against Ritchie Bros.

- Alvin Starkman, M.A., LL.B, Oaxaca

Alvin Starkman received his Masters in Social Anthropology in 1978. After teaching for a few years he attended Osgoode Hall Law School, thereafter embarking upon a successful career as a litigator until 2004. Alvin, a good-standing member of the Law Society of Upper Canada, now resides with his wife Arlene in Oaxaca, Mexico, where he writes, leads small group tours to the villages, markets, ruins and other sights, is a consultant to documentary film production companies, and operates Casa Machaya Oaxaca Bed & Breakfast.

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