7.1 Written Auction-Service Contracts and Itemized Inventory

7.1 Written Auction-Service Contracts and Itemized Inventory

Correct citation: Occupations Code § 1802.121 is the written-contract statute. Section 1802.151 creates the Auctioneer Education and Recovery Fund.

The Written Contract

When an auctioneer agrees to provide services, § 1802.121 requires the auctioneer to provide the client a written contract with the terms of the agreement. Each contract must include information required by Commission rule.

The statute does not support conducting first and documenting later. A written agreement gives both parties a common source for authority, fees, property, advertising, proceeds, and risk decisions.

Useful terms include:

• parties and licensed auctioneer identity;
• scope and date or method of sale;
• reserve, minimum-price, and seller-bidding instructions;
• commission, buyer's premium, fees, and reimbursable expenses;
• possession, inspection, insurance, and security;
• advertising approvals and factual representations;
• collection, trust deposit, settlement, and payment terms;
• tax and regulated-property responsibilities;
• unsold or withdrawn property; and
• default, termination, and dispute provisions.

Some of those terms may be required by rule or necessary for the engagement; others are prudent drafting. Do not memorize an unsupported “six universal clauses” list in place of the current statute and rule.

Itemized Inventory

Before any auction, the auctioneer and client must agree in writing to an itemized inventory of the property to be sold or offered. An amendment must also be in writing and signed by both parties.

The inventory serves multiple controls:

1. proves what the auctioneer was authorized to take and offer;
2. supports catalog and lot creation;
3. records reserve or special instructions;
4. reduces substitution and loss disputes;
5. supports seller accounting; and
6. helps identify titled, liened, or regulated property.

Describe high-value property specifically enough to distinguish it. Use serial numbers, VINs, quantities, photographs, condition notes, or identifying marks as appropriate. A phrase such as “all miscellaneous items” may be inadequate when ownership or settlement depends on identifying a lot.

If property is added, removed, or corrected, create a written amendment and obtain both signatures. An auction-day text from only the client does not satisfy the signed-both-parties requirement.

Authority and Ownership

The contract should identify the client's legal capacity: owner, executor, trustee, secured party, business officer, guardian, or other authorized principal. Obtain documents supporting that capacity.

Possession is not proof of clean title. Search and resolve:

• UCC financing statements and blanket liens;
• motor-vehicle titles;
• manufactured-home ownership records;
• tax and judgment liens;
• probate or trust authority; and
• bankruptcy stays or court orders.

A UCC search hit is not itself a payoff. Obtain written authorization, release, or settlement instructions. If the seller cannot establish authority, withdraw the property rather than promise clear title.

Compensation and Expenses

State how commission and premiums are calculated. If a commission applies to gross proceeds, define whether that means hammer price or hammer plus buyer's premium. List which expenses can be deducted and whether approval or a cap applies.

Secret profits and undisclosed rebates conflict with the auctioneer's duty to account. If a marketing vendor returns a credit, handle it according to the written agreement and disclose it rather than silently charging the client the unreduced amount.

Reserve Instructions

Record whether each lot or the auction is with reserve. If the seller may bid, document that authority and disclose it as law requires. Never accept a confidential minimum and advertise the sale as absolute.

Specify who can accept a high bid below reserve and how that decision will be documented. For real property, ensure the licensed real-estate team and written contract handle any negotiation.

Settlement Terms

The contract can set lawful payment and accounting terms. Separately, Rule 67.70 requires payment to the seller within 15 banking days after the auction unless another statute or the written contract provides otherwise. It does not create a default “15 business days to account and 30 calendar days to pay” rule.

Proceeds must be handled through the required trust process, and records are retained at least two years. Tax records may require four years.

Example

An estate contract lists a tractor but not its attached loader. Before cataloging both as one lot, the auctioneer confirms ownership and adds the loader through a signed inventory amendment. A lender then supplies written payoff instructions. The contract, amended inventory, lien instruction, clerk record, and settlement now tell a consistent story.

Exam Rule

Contract first, itemized inventory before the sale, signed amendment for every change.