5.1 Contracts

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UNIT 1: Contracts:

Legalizing your relationship Copyright 2012 National Auctioneers Association MODULE FIVE UNIT 1: Contracts

What is a contract?:

A " contract " is an agreement between two or more entities which creates a legal obligation to do or not do a particular thing. What is a contract?

Contract Strategies:

Contract Strategies Utilize a good attorney Losing control of document Contain your liability No sale/production fee Cancellation/postponement fee Incentive bonus 3

The Agreement:

The Agreement Provide for obtaining releases – liens, heirs, etc. The advancing of the marketing and sales expenses The disclaimers (exclusions, restrictive covenants) Indemnification breach or negligence by seller (seller fails to close, property liabilities, title problems) Legal, terms, seller responsibility, fees, signed & dated Listing and post-auction listing Provision for signage Discussion... 4

Maximize Your Efforts:

Maximize Your Efforts Addition of properties Improving on number of absolute properties More liberal financing terms For every give -- take 5

Buyer’s Premium:

Buyer’s Premium In the contract… you may want to add: Do you charge it? Why you charge it? Where it goes? If you DO charge it… Have client understand it is collected from buyers and will be deducted from the auction proceeds prior to settlement with client. Have them understand it goes into YOUR account.

Sample Contract:

Sample Contract

Sample Contract:

Sample Contract -Identify parties -Terms: logistics CONTRACT FOR SALE OF PERSONAL PROPERTY AT PUBLIC AUCTION This agreement is entered into on the _____ day of ________________, 20___, by and between ______________________________ (hereafter "Seller") and ___________________________ (hereafter "Auctioneer"). In consideration of the mutual promises and undertakings of the parties, Seller and Auctioneer agree as follows: 1. Employment as auctioneer : Seller hereby employs Auctioneer to advertise, promote, and sell at public auction the property described below according to the terms contained in this agreement. 2. Date of auction or termination date of the agreement : _______________ 3. Location of auction : ___________________________________________

Sample Contract:

Sample Contract -Terms: Identify assets, determine title 4. Property to be auctioned : Lot No. Quantity Description (with reserve price if applicable) ______ ______ __________________________________________ ______ ______ __________________________________________ 5. Liens or encumbrances : [ check one as applicable] _____ Seller represents that the property is free and clear of all liens or encumbrances - or- _____ Seller represents that the property is subject to the following liens or encumbrances: Name of lien holder: ______________________________________ Address of lien holder: ____________________________________ Unpaid balance: _________________________________________

Sample Contract:

Sample Contract Terms: Title, Auction type 6. Good title : Seller represents that he/she is the sole owner of the above property and has good title and right to sell said property. The property shall be sold [check one] _____ free and clear of all liens and encumbrances; or _____ subject to the liens and encumbrances disclosed above. Seller assumes responsibility for delivering merchantable title to the property to the purchaser(s) and agrees to hold Auctioneer harmless from all claims against Auctioneer pertaining to the delivery of such title. 7. Absolute auction / reserve auction : The auction shall be conducted as follows [check one as appropriate]: _____ An absolute auction, which is an auction of real or personal property to which all of the following apply: (a) the property is to be sold to the highest bidder without reserve; (b) the auction does not require a minimum bid; (c) the auction does not require competing bids of any type by the seller or agent of the seller; (d) the seller of the property cannot withdraw the property from auction after the auction is opened and there is a public solicitation or calling of bids. Seller represents that he/she has a bonafide intention to transfer the property regardless of the price or identity of the high bidder. -or- _____ A reserve auction, which is an auction in which the seller or agent of the seller reserves the right to establish a stated minimum bid, the right to reject or accept any or all bids, or the right to withdraw the real or personal property at any time prior to the completion of the auction by the auctioneer. Reserve prices are noted in the above description of property.

Sample Contract:

Sample Contract Terms: Fees, Unsold Property resolution 8. Costs and fees : Seller agrees to pay the following costs and fees, as applicable: Commission to Auctioneer of _______% of gross sale proceeds Clerk and cashier charges of $______________ Labor charges at $_______ per hour, not to exceed a total of $____ Advertising costs not to exceed $____________ shall be paid by [check one] _____ Seller, or ______ Auctioneer Additional costs or fees, as follows: ________________________________ 9 . Unsold property : Unsold property is the responsibility of [check one]: ____Auctioneer . The unsold property shall be returned to Seller within 15 days of the date of the auction unless otherwise stated in this contract. -or- ____ Seller. The unsold property shall be disposed of at the discretion of Seller.

Sample Contract:

Sample Contract Terms: clerking and licensure, 10. Bad checks : Bad checks, debts, and unpaids shall be the responsibility of [ check one] ______ Auctioneer, or ______ Seller. Checks shall be made payable to ______________________________. 11. Absentee bidding : Seller [check one] ______ approves, or ______ does not approve, the use of absentee bidding. Auctioneer's policy on absentee bidding is as follows: ______________________________________________________ 12. Settlement : Settlement of the auction shall be made within 15 days from the date of the auction, unless otherwise stated in this contract. 13. Licensure : Auctioneer is licensed by the Ohio Department of Agriculture. Auctioneer is bonded in favor of the state, or an aggrieved person may initiate a claim against the auction recovery fund created in section 4707.25 of the Ohio Revised Code as a result of the licensee's actions (whichever is applicable). 14. Other Terms and Conditions: _________________________________________________________

Sample Contract:

Sample Contract Signature Block AGREED TO: __________________________________________________ Seller Date __________________________________________________ Seller Date __________________________________________________ Auctioneer Date

More Sample Contracts Available in Resources:

More Sample Contracts Available in Resources

Follow Up:

Follow Up Check state licensing laws for contract-specific information If not in a licensed state, check with attorney and/or state auctioneer association for state-specific guidelines. ALWAYS get it in writing! Keep signed copies on file – even for years after the auction

UNIT 1: Contracts:

COMPLETE. Copyright 2012 National Auctioneers Association MODULE FIVE UNIT 1: Contracts