7.3 Breach, Default, Remedies, and Recovery-Fund Claims

7.3 Breach, Default, Remedies, and Recovery-Fund Claims

Match the remedy to the wrong: Buyer nonpayment, seller failure to deliver, undisclosed bidding, and auctioneer failure to remit trigger different rules.

Buyer Default and Resale

When a buyer wrongfully rejects, revokes, fails to pay, or repudiates, Article 2 gives the seller several remedies. Under § 2.706, the seller may resell the goods and recover the difference between the contract price and resale price plus permitted incidental damages, less expenses saved.

The resale must be made in good faith and in a commercially reasonable manner. Required notice depends on the type of resale and goods. A deliberately depressed insider sale will not support the same deficiency as a fair, documented resale.

Example: contract price $25,000; commercially reasonable resale $18,000; allowed storage and advertising $1,200; deposit credit $1,000. The net claim is $7,200: $7,000 deficiency + $1,200 incidentals − $1,000 credit.

The contract can define deposits and additional remedies, but an excessive penalty may not be enforceable. Keep invoices and mitigation evidence.

Seller or Auctioneer Breach

If the seller cannot transfer rightful title, refuses delivery, or repudiates, the buyer may have Article 2 remedies including cancellation, cover, damages, or specific remedies for identified goods.

An auctioneer who fails to safeguard or remit another's money can face a contract claim, fiduciary claim, TDLR discipline under § 1802.251, and—when the required mental state and elements exist—criminal exposure. Do not label every accounting delay as theft automatically; analyze the facts and statute.

Rule 67.70 requires seller payment within 15 banking days unless another statute or the written contract provides otherwise. The rule also requires trust handling and record retention. It does not impose the obsolete 15-business-day accounting/30-calendar-day payment pair.

Undisclosed Seller Bidding

Under § 2.328, if the auctioneer knowingly receives a bid on the seller's behalf, or the seller makes or procures such a bid, without notice that seller bidding is reserved, the buyer may:

• avoid the sale; or
• take the goods at the price of the last good-faith bid.

The forced-sale exception and disclosed seller-bidding rule matter. A fake bid attributed to a nonexistent bidder is not a lawful reserve-management tool.

Recovery-Fund Process

A person who dealt with a licensed auctioneer and was aggrieved by an action resulting from breach of a contract with the auctioneer may file a complaint with TDLR under § 1802.202. The auctioneer must have been licensed when the transaction occurred.

TDLR investigates and determines the amount owed. If disputed, the matter goes to the State Office of Administrative Hearings. Eligible actual damages exclude attorney fees, speculative damages, and lost profits.

Current limits are:

• $15,000 to one aggrieved party for claims from one auction; and
• $100,000 total for claims against one auctioneer from one auction.

A payment creates reimbursement duties. The auctioneer must repay the fund and any remaining amount due under the statutory process, with 8% annual interest beginning when TDLR pays. TDLR is subrogated to the claimant's rights to the extent of payment.

The Commission may revoke the license and may probate the order. Revocation is not automatic. A new license is unavailable until fund payment and interest are repaid.

Dispute Prevention

A complete file contains:

• signed seller contract and inventory;
• bidder terms and acceptance record;
• advertisement and corrections;
• audio, video, clerk, and platform logs;
• invoices and payment records;
• trust deposits and settlement;
• title and lien evidence; and
• communications about default and mitigation.

Send notices through the contractually required method, preserve proof, and avoid destroying records when a dispute is foreseeable.

Choosing an Answer

If the question describes buyer default, look for commercially reasonable resale and measured damages. If it describes secret seller bids, use the buyer's two § 2.328 choices. If it describes a contract loss involving a licensed auctioneer, consider the TDLR complaint and current fund caps. If it claims automatic revocation or $10,000/$20,000 limits, reject the obsolete answer.

Preserve and Mitigate

After default, preserve the goods, give any required notice, and take commercially reasonable steps to reduce loss. Do not increase storage or advertising charges merely to punish the bidder. A clean timeline showing notice, reasonable resale exposure, bids received, final resale price, and credits makes the damages calculation testable. If title, fraud, or competing ownership is disputed, keep the proceeds segregated while qualified counsel determines distribution.