EBAY AUCTIONS OF REPOSSESSED MOTOR
VEHICLES)A TEMPLATE FOR COMMERCIAL
REASONABLENESS UNDER REVISED ARTICLE 9
Richard H. No...
282                      Southern Illinois University Law Journal                                 [Vol. 31

development gi...
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as a means of...
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choice is adver...
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compliance with A...
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            NOTIFIC...
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telephone numbe...
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collateral but ...
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specified group...
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persuade m...
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form reprodu...
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the eBay Motors...
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You are entitled ...
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deficiency, contact ...
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    A modified "safe harbor" form for a co...
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If you need more i...
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sale in orde...
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    The adverti...
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    If the go...
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seemingly would...
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vehicles. Na...
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auctioneer adve...
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“Featured Item...
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     Fifth is the ...
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conversations...
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language . . . ...
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selling its r...
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vehicle can ...
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duties is a ques...
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reasonableness of...
eBay Auctions of Repossessed Motor Vehicles„A Template for ...
eBay Auctions of Repossessed Motor Vehicles„A Template for ...
eBay Auctions of Repossessed Motor Vehicles„A Template for ...
eBay Auctions of Repossessed Motor Vehicles„A Template for ...
eBay Auctions of Repossessed Motor Vehicles„A Template for ...
eBay Auctions of Repossessed Motor Vehicles„A Template for ...
eBay Auctions of Repossessed Motor Vehicles„A Template for ...
eBay Auctions of Repossessed Motor Vehicles„A Template for ...
eBay Auctions of Repossessed Motor Vehicles„A Template for ...
eBay Auctions of Repossessed Motor Vehicles„A Template for ...
eBay Auctions of Repossessed Motor Vehicles„A Template for ...
eBay Auctions of Repossessed Motor Vehicles„A Template for ...
eBay Auctions of Repossessed Motor Vehicles„A Template for ...
eBay Auctions of Repossessed Motor Vehicles„A Template for ...
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eBay Auctions of Repossessed Motor Vehicles„A Template for ...

  1. 1. EBAY AUCTIONS OF REPOSSESSED MOTOR VEHICLES)A TEMPLATE FOR COMMERCIAL REASONABLENESS UNDER REVISED ARTICLE 9 Richard H. Nowka* I. INTRODUCTION Suppose you are a secured creditor with a perfected security interest in a debtor’s 2005 Dodge Stratus. The debtor has defaulted, you have repossessed the vehicle and you are planning for its sale. You contemplate using eBay Motors, the internet auto auction component of eBay, to sell the vehicle.1 Does Revised Article 9 of the Uniform Commercial Code validate such an auction? Not explicitly. It says no more about the validity of an internet auction disposition of collateral than did the previous versions of Article 9)all are silent. It appears the drafters of Revised Article 9 did not anticipate internet auctions as a means of selling repossessed collateral, although they show their awareness of electronic transactions in other sections of Revised Article 9.2 Of course there is nothing in Revised Article 9 that indicates such sales would not be valid. Notwithstanding the lack of direct statutory authorization, secured creditors are using eBay Motors to dispose of motor vehicle collateral after the debtor has defaulted.3 It is not a surprising * Professor of Law, Louis D. Brandeis School of Law, University of Louisville. I thank Michael Troutman, a third year law student at Louis D. Brandeis School of Law for the many hours he spent observing eBay Motors auctions and compiling data I used in this article. Contact Mike if you want to buy a vehicle on eBay Motors, he has watched many auctions. 1. eBay first dedicated an area of their internet site to automotive sales in August 1999. Press Release, eBay Inc., eBay and AutoTrader.com Create Internet’s Largest Auction-Style Marketplace for Used Cars, http://investor.ebay.com/releasedetail.cfm?ReleaseID=22615 (Mar. 7, 2000) (last visited Feb. 10, 2007). However, it was not until April 24, 2000, that eBay Motors was launched at the domain, http://www.ebaymotors.com. Press Release, eBay, Inc., eBay Motors and Autotrader.Com Announce Top Ten List of Used Cars, http://investor.ebay.com/news/releasedetail.cfm?ReleaseID=37538 (April 24, 2001) (last visited Feb. 10, 2007). 2. See, e.g., U.C.C. §§ 9–102(a) (7)(b), (31), (39), (69) (the sections defining “authenticate,” “electronic chattel paper,” “financing statement,” and “record,” respectively); 9–101, cmt. 4h; 9–102, cmt. 9 (2005). The definitions of “communicate” and “send” in sections 9–102(a)(18) and (74) respectively, link with “record” and thus also contemplate electronic transactions. U.C.C. §§ 9–102(a)(18) and (74) (2005). Unless otherwise indicated, all citations to the Uniform Commercial Code are to the 2005 edition. 3. I observed sales of motor vehicles on eBay Motors internet Web site for two, approximately six-week, periods in 2006: June 19 to July 31, and October 26 to December 3. I observed only sales that indicated the vehicles were repossessed. There were 160 such sales during that period. Eighty-four sales indicated clearly the seller was a secured party (data on file with author). 281
  2. 2. 282 Southern Illinois University Law Journal [Vol. 31 development given the popularity of eBay among buyers, and the simplicity of selling on eBay.4 The issue surrounding an eBay Motors auction is whether it will satisfy Article 9’s standards for disposing of collateral: notification and commercial reasonableness.5 I believe that there is nothing inherent in an eBay Motors auction of a repossessed vehicle that prevents it from satisfying Article 9’s requirements. Furthermore, the UCC drafters intended for the Code to be flexible in light of unforeseen commercial practices: The Uniform Commercial Code is drawn to provide flexibility so that, since it is intended to be a semi-permanent and infrequently-amended piece of legislation, it will provide its own machinery for expansion of commercial practices. It is intended to make it possible for the law embodied in the Uniform Commercial Code to be applied by the courts in the light of unforeseen and new circumstances and practices.6 Section 1–103 codifies this policy: “[The Uniform Commercial Code] must be liberally construed and applied to promote its underlying purposes and policies” which include “to simplify, clarify, and modernize the law governing commercial transactions . . . .”7 Validating an eBay Motors auction of a repossessed motor vehicle fits that policy. I have two objectives for this article. One is to present sample forms a secured party can use to help ensure that an eBay Motors auction of a repossessed vehicle satisfies Article 9’s standards for a disposition of collateral. My second objective is to discuss why an eBay auction complies with those standards.8 I cannot, however, guarantee that a court will concur with my opinions. A secured party could do everything right, yet a court might not validate an eBay Motors auction.9 An eBay auction is still emerging 4. In August 2006, eBay Motors announced it sold its two millionth passenger vehicle in the United States, just six years after the Web site began operation. Press Release, eBay Inc., Two Millionth Passenger Vehicle Sold on eBay Motors, http://investor.ebay.com/releasedetail.cfm?ReleaseID= 206868 (Aug. 8, 2006) (last visited Dec. 13, 2006). eBay Motors touts itself as the “Internet’s largest marketplace for buying and selling all things automotive.” Id. It also states it has ten million shoppers every month and sells a vehicle every 60 seconds. eBay Motors Why It Works, http://pages.motors.ebay.com/services/whysell.html (last visited Dec. 20, 2006). eBay Motors charges a $40 Insertion Fee and a $50 Transaction Service Fee. eBay Motor Fees, http://pages.ebay.com/help/sell/motorfees.html (last visited Feb. 10, 2007). 5. The commercially reasonable standard is at section 9–610(b), and the notification standard is at section 9–611(b). U.C.C. §§ 9–610(b); 9–611(b). 6. U.C.C. § 1–103(a)(1), cmt. 1. 7. U.C.C. § 1–103(a)(1). 8. I limit my analysis to motor vehicle collateral. My observations of eBay disposition sales were limited to sales of motor vehicles on eBay Motors. However, I believe that the procedure I propose in this article would provide sufficient notice and be commercially reasonable for eBay auctions of other types of collateral. 9. See, e.g., Matter of Britt, 78 B.R. 514 (Bankr. S.D. Ohio 1987) discussed infra p. 320.
  3. 3. 2007] eBay Auctions 283 as a means of disposing of repossessed collateral and who can say whether a court will embrace it as commercially reasonable. I present a process that I would uphold were I the arbiter of the issue. As I noted above, the Article 9 standards for every disposition of repossessed collateral are that every aspect of the disposition must be commercially reasonable, and the secured party must give reasonable notification of the disposition.10 Article 9 adopts the commercially reasonable requirement without elaboration by declaring that “[e]very aspect of a disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable.”11 The drafters intentionally left the commercially reasonable standard undefined.12 Case law and commentary provide much guidance on the question.13 Because of the general nature of the requirement, the question of whether a sale is commercially reasonable is decided ultimately by the trier of fact.14 Many “aspects” of the disposition of a motor vehicle are automatically and irrevocably set by the secured party’s choice to use eBay Motors as the means of disposition. The decision to sell through an eBay Motors auction sets the method, manner and place of the disposition. The sales price of a vehicle auctioned on eBay Motors is determined typically by the highest bid.15 However, an important aspect of commercial reasonableness not set by that 10. U.C.C. §§ 9–610(b); 9–611(b). 11. U.C.C. § 9–610(b). 12. “Part 5 of Article 9 [default] . . . opts for a loosely organized, informal, anything-goes type of foreclosure pattern, subject to ultimate judicial supervision and control which is explicitly provided for.” 2 GRANT GILMORE, SECURITY INTERESTS IN PERSONAL PROPERTY § 43.1, at 1183 (1965). Professor Gilmore was the primary drafter of the first official Article 9)the 1962 Official Text. BARKLEY CLARK & BARBARA CLARK, THE LAW OF SECURED TRANSACTIONS UNDER THE UNIFORM COMMERCIAL CODE, §1.01[2][c] at 1–6 (rev. ed. 2006). The commercially reasonable standard of Revised Article 9 is virtually the same as the standard of former Article 9, U.C.C. § 9–504(3) (1995). See infra note 170 for a comparison of those statutes. 13. See, e.g., R & J of Tenn. v. Blankenship-Melton Real Estate, Inc., 166 S.W.3d 195, 206 (Tenn. Ct. App. 2004); Westgate State Bank v. Clark 642 P.2d 961, 970–72 (Kan. 1982) ; Michael Korybut, Searching for Commercial Reasonableness Under the Revised Article 9, 87 IOWA L. REV. 1383 (2002); William Mark Rudow, Determining the Commercial Reasonableness of the Sale of Repossessed Collateral, 19 UCC L.J. 139 (1986); Richard C. Tinney, What Is “Commercially Reasonable” Disposition of Collateral Required by U.C.C. § 9–503(3), 7 ALR4TH 308. 14. Courts routinely hold that the question of whether a disposition is commercially reasonable is a question of fact. See, e.g., Union Nat. Bank of Wichita v. Schmitz, 853 P.2d 1180 (Kan. App. 1993); Gulf Homes, Inc. v. Goubeau, 602 P.2d 810 (Ariz. 1979); Hall v. Owen County State Bank, 370 N.E.2d 460 (Ind. App. 1977). 15. An eBay seller can set a “reserve” price; the minimum price at which the seller will sell the vehicle. eBay Reserve Price, http://pages.ebay.com/help/sell/reserve.html (last visited Dec. 28, 2006). Sellers can also opt to sell for a fixed price, select an “ad format” to locate interested buyers, or choose the “best offer” format, which allows sellers to consider the best offer without an obligation to sell the item at that price. eBay Selecting a Selling Format, http://pages.ebay.com/help/sell/formats.html (last visited Oct. 30, 2006).
  4. 4. 284 Southern Illinois University Law Journal [Vol. 31 choice is advertising the disposition.16 In Part III of this article I discuss commercially reasonable advertising in an eBay Motors auction and present a form for an advertisement for an eBay Motors auction.17 Article 9’s notification requirement is that the secured party must send “a reasonable authenticated notification of disposition” to the debtor, any secondary obligor, and, as specified by Article 9, other secured parties or lienholders.18 Unlike the openness of the commercially reasonable requirement, Article 9 lists the contents of a reasonable notification and also provides a “safe harbor” notification form that the secured party can properly complete to ensure that the notification document provides sufficient information.19 The Official Comment to section 9–613 states that a notification that includes the information in section 9–613(1) is “sufficient as a matter of law.”20 Moreover, Article 9 also includes a “safe harbor” for the time of the notification for all security interests that are not “consumer transactions.” A notification sent after default and at least ten days before the disposition time is sent within a reasonable time.21 Utilizing Article 9’s “safe harbors,” a secured party can fulfill the “reasonable authenticated notification” standard by modifying the Article 9 forms to fit a disposition of the collateral in an eBay Motors auction. In Part II of this article I present and discuss notification forms for a secured party to use when it elects to dispose of the vehicle using an eBay Motors auction.22 Parts IV and V discuss the commercially reasonable standard generally in the context of an eBay auction. Part IV proposes that a secured party and a debtor enter an agreement that sets the standards for the secured party’s 16. Although the “time” of the disposition must be commercially reasonable, it has not presented a litigated issue in the case law for sales of motor vehicles. Used cars are sold every day and thus there does not seem to be a time for such a sale that would not be commercially reasonable. 17. The advertisement form is reproduced infra p. 307. 18. U.C.C. § 9–611(b) (2005). Article 9 does not require the secured party to notify other secured parties or lienholders when the collateral is consumer goods. U.C.C. § 9–611(c)(3). Consumer goods are “goods used or bought for use primarily for personal, family, or household purposes.” U.C.C. § 9–102(a)(23). 19. See U.C.C. §§ 9–613 and 614. Section 9–613 establishes the required contents for a transaction other than a consumer-goods transaction, while section 9–614 does the same for a consumer-goods transaction. A consumer-goods transaction occurs when an individual incurs an obligation primarily for personal, family, or household purposes, and a security interest in consumer goods secures the obligation. U.C.C. § 9–102(a)(24). 20. U.C.C. § 9–613, cmt. 2. The parties to the security interest could agree that a sufficient notification requires additional information. Id. Section 9–603 authorizes the parties to agree on the criterion for fulfillment of the duties of a secured party. U.C.C. § 9–603. 21. U.C.C. § 9–612(b). Article 9 grants no safe harbor for the timeliness of notice in consumer transactions. However, it seems unlikely a court would find ten-days notice unreasonable in the absence of a legislative or judicial rule requiring otherwise. See cases cited in note 140, and CLARK & CLARK, supra note 12, § 4.08[7][c] at 4–218. 22. Notification forms are reproduced infra pp. 292 and 295.
  5. 5. 2007] eBay Auctions 285 compliance with Article 9’s commercially reasonable and notification requirements for a disposition of collateral when a secured party uses an eBay Motors auction. Article 9 explicitly authorizes this type of agreement.23 Additionally, I proffer a proposed form contract for such an agreement.24 Finally, Part V discusses my opinion that there is no inherent defect in an eBay Motors auction that prevents it from satisfying the standards of Article 9 for a disposition of a repossessed motor vehicle. II. THE NOTIFICATION “SAFE HARBOR” As I noted in the introduction, Article 9 furnishes a “safe harbor” form for notification of the disposition of collateral.25 A secured party who properly completes the form has created a reasonable authenticated notification. Of course the secured party must send the notification to the proper persons to fully comply with the notification requirement.26 With slight modification, the Article 9 safe harbor form can be used to fulfill the notification requirement of section 9–611(b) when the disposition is through an eBay Motors auction. The safe harbor notification form for dispositions under security interests other than consumer-goods transactions is found in section 9–613(5). The form provides for the insertion of all the information section 9–613(1) requires for a sufficient notification of disposition of collateral: a description of debtor and secured party; a description of the collateral to be disposed of; a declaration of the method of the disposition and the applicable time and place thereof; and a statement that the debtor is entitled to an accounting of the unpaid indebtedness and any charge for the accounting. Section 9–613(5) declares: “The following form of notification and the form appearing in Section 9–614(3) [consumer-goods transaction form], when completed, each provides sufficient information: 23. U.C.C. § 9–603(a). 24. The agreement form is reproduced infra p. 317. 25. See U.C.C. §§ 9–613(5) and 9–614(3). Section 9–613 establishes the notification requirements for all secured transactions other than consumer-goods transactions. Section 9–614 governs notification in consumer-goods transactions. A consumer-goods transaction occurs when an individual incurs an obligation for personal, family or household purposes, and a security interest in consumer goods secures the obligation. U.C.C. § 9–102(a)(24). Consumer goods are goods “used or bought for use primarily for personal, family, or household purposes. U.C.C. § 9–102(a)(23). 26. The persons who must be notified are listed in U.C.C. § 9–611(c), and include the debtor, secondary obligor, and, if the collateral is other than consumer goods, secured parties, lienholders and other claimants as specified by the section.
  6. 6. 286 Southern Illinois University Law Journal [Vol. 31 NOTIFICATION OF DISPOSITION OF COLLATERAL To: [Name of debtor, obligor, or other person to which the notification is sent] From: [Name, address, and telephone number of secured party] Name of Debtor(s): [Include only if debtor(s) are not an addressee] [For a public disposition:] We will sell [or lease or license, as applicable] the [describe collateral] [to the highest qualified bidder] in public as follows: Day and Date: Time: Place: [For a private disposition:] We will sell [or lease or license, as applicable] the [describe collateral] privately sometime after [day and date] . You are entitled to an accounting of the unpaid indebtedness secured by the property that we intend to sell [or lease or license, as applicable] [for a charge of $]. You may request an accounting by calling us at [telephone number]. [End of Form] Although the notification requirement of section 9–611(b) is “a reasonable authenticated notification,” the form does not require the signature of the secured party.27 That is because under Article 9, “authenticate” has a broader meaning than “sign.” “Authenticate” includes “to execute or otherwise adopt a symbol, or encrypt or similarly process a record in whole or in part, with the present intent of the authenticating person to identify the person and adopt or accept a record.”28 The "safe harbor" form satisfies the “authenticate” requirement because the secured party includes its name, address and 27. U.C.C. § 9–611(b) (emphasis added). 28. U.C.C. § 9–102(a)(7). The meaning of “authenticate” also includes “to sign.” Id. “’Signed’ includes using any symbol executed or adopted with present intention to adopt or accept a writing.” U.C.C. § 1–201(b)(37).
  7. 7. 2007] eBay Auctions 287 telephone number with the intent to identify itself and adopt the notification as its own.29 A. Public or Private Disposition Because the "safe harbor" notification form includes different information depending on whether the sale is public or private, a secured party must decide, before it completes the notification form, whether an eBay Motors auction is a public or private disposition. A notification of a public sale must include the time and place of the sale, while the private sale notification must state the time after which the private sale will occur.30 The public/private determination has other meaningful ramifications. One is that Article 9 authorizes a secured party to purchase the collateral if the disposition is public.31 However, eBay prohibits the seller from bidding in its own auction, thus the public/private distinction is irrelevant regarding the right to purchase.32 A second consequence of the public/private determination is the effect on the validity of the notification when the secured party sends notification of one method of sale, but actually sells via a different method. For example, suppose a secured party sends notification of a private sale of 29. A secured party who authenticates the notification with its signature at the bottom of the form does not block the safe harbor. Section 9–613(3)(A) authorizes inclusion of information not specified by the notification requirements. U.C.C. § 9–613(3)(A). 30. U.C.C. § 9–613(1)(E). The form notification provides for compliance with either type of disposition. U.C.C. § 9–613(5). 31. U.C.C. § 9–610(c)(1). The secured party can purchase the collateral at a private disposition only if the collateral is of a kind sold on a recognized market, e.g., a stock exchange market, or the subject of widely distributed standard price quotations. U.C.C. § 9–610(c)(2). Motor vehicle auctions do not satisfy this standard so it seems very unlikely courts would hold that an eBay auction would satisfy the standard. UCC § 9–610, cmt. 9. See e.g., Community Management Ass’n of Colorado Springs, Inc. v. Tusley 505 P.2d 1314, 1315 (Colo. Ct. App. 1973) (repossessed automobiles are ot collateral of a type sold on a recognized market within the meaning of 9–594(3)); Nelson v. Monarch Inv. Plan of Henderson, Inc., 452 S.W.2d 375 (Ky. 1970) (we do not have such a recognized market for repossessed automobiles as a class); Carter v. Rayburn Ford Sales, Inc. 451 S.W.2d 199, 202–03 (Ark. 1970) rev’d on other grounds, First State Bank of Morrilton v. Hallett, 722 S.W.2d 555, (Ark. 1987) (the NADA book is merely a guide to the price of a vehicle of that year, make and model in an average condition); but see, L. C. Arthur Trucking Inc. v. Evans, 13 UCC Rep. Serv.2d 623, 625 (Va. Cir. Ct. 1990) (because of the volume of tractor trailer truck traffic apparent from common observation, we presume there must be a recognized market where these vehicles are bought and sold). 32. eBay does not permit sellers to bid on their own items. eBay also prohibits family members, roommates and employees of sellers from bidding on a seller’s item, even if their sole intent is to purchase the item. While sellers may have more than one account with eBay, “there must never be any interaction between the accounts in the areas of bidding or feedback”. eBay Rules and Policies: Shill Bidding, http://pages.ebay.com/help/policies/seller-shill-bidding.html (follow “Additional Information” hyperlink) (emphasis in original) (last visited Aug. 17, 2006).
  8. 8. 288 Southern Illinois University Law Journal [Vol. 31 collateral but in fact sells the collateral in a public sale. Courts have been nearly uniform in finding the notification insufficient in the cases where a secured party gives notification of a public sale but sells via a private sale, and vice versa.33 An insufficient notification means that the secured party did not conduct the disposition in accordance with the provisions of Article 9.34 That failure can put the secured party’s recovery of a deficiency at risk because of Article 9’s “rebuttable presumption rule.”35 Because of the importance of the public/private determination I consider whether an eBay auction is a public or private disposition before I analyze the modifications to the form that are necessary for an eBay Motors auction. Article 9 does not define what the terms public or private mean. The Official Comment provides some enlightenment. Although the term is not defined, as used in this Article, a "public disposition" is one at which the price is determined after the public has had a meaningful opportunity for competitive bidding. "Meaningful opportunity" is meant to imply that some form of advertisement or public notice must precede the sale (or other disposition) and that the public must have access to the sale (disposition).36 Pursuant to this comment the essence of a public disposition is the public’s opportunity to participate.37 Courts considering the issue have focused on the premise that a public disposition means the public is invited to attend and bid and is informed when and where the sale is to be held.38 Surely “public” must connote “unrestricted” in the sense that the disposition is not limited to a 33. See, e.g., Ford Motor Credit Company v. Solway, 825 F.2d 1213, 1217–18 (7th Cir. 1987) (creditor’s notice, which described a private sale, was insufficient when disposition was by public auction); Gen. Elec. Credit Auto Lease, Inc. v. Paty, 776 S.W.2d 829, 830–31 (Ark. Ct. App. 1989) (creditor’s allegation that auction was private and dealer-only, as described in the notice, was without supporting evidence – the court found the auction public, and creditor’s deficiency action therefore failed). 34. U.C.C. § 9–611(b). 35. Section 9–626(a) establishes the rebuttable presumption rule. It operates when a debtor contests a secured party’s compliance with Article 9, and the secured party is unable to prove compliance. U.C.C. § 9–626 (a)(1). The rule presumes that the disposition of the collateral would have yielded proceeds equal to the sum of the secured debt, the expenses incurred by the secured party, and the secured party’s attorney fees had the secured party complied with Article 9’s requirements. U.C.C. § 9–626(a)(3) and (4) The secured party can rebut the presumption by proving the proceeds of such a disposition would be less than those amounts. U.C.C. § 9–626(a)(4). The rule does not operate in consumer transactions. U.C.C. § 9–626(b). 36. U.C.C. § 9–610, cmt. 7. 37. See 9 RONALD A. ANDERSON, UNIFORM COMMERCIAL CODE § 9–504:367, at 648 and § 9–610:7 at 936 (3d ed. 1999 rev.); Beard v. Ford Motor Credit Co., 850 S.W.2d 23, 27–28 (Ark. Ct. App.1993); Bank of Am. v. Lallana, 960 P.2d 1133, 1139 (Cal. 1998). 38. See Lloyd’s Plan, Inc. v. Brown, 268 N.W.2d 192 (Iowa 1978); John Deery Motors, Inc. v. Steinbronn, 383 N.W.2d 553 (Iowa 1986); Beard, 850 S.W.2d at 23.
  9. 9. 2007] eBay Auctions 289 specified group or groups.39 Agreeing with that contention are the many courts that have held “dealer only” auctions are private sales.40 An eBay Motors auction should be deemed a public disposition for several reasons. First, the public is invited to peruse the vehicles for sale on eBay Motors. A person need only have access to the internet to browse the items for sale. Access to the internet can be gained at most public libraries for free, at internet cafes for a nominal cost, and for many people from their home or office computer.41 There is neither a fee nor registration required for a person to view the items for sale on eBay. Thus, much like a physical auction, anyone can attend, inspect the item, and watch the bidding. Second, bidding is not restricted to specified members of the public; anyone can bid on eBay.42 However, in order to bid, a person must register with eBay.43 Registration simply requires the user to complete a form which allows the user to create a username and password. Of course the user must accept the terms of eBay’s user agreement.44 There is no cost to register. Nor does a user pay a fee to bid or buy. Third, the characteristics of an eBay Motors auction comport with case law definitions of a public sale. Courts note that the premise of a public sale is that it is accessible to all members of the community.45 An eBay Motors auction is accessible to all. The fact that a person must have access to the internet in order to “attend” the auction does not legitimatize an argument that an eBay Motors auction is restricted to a certain group. These reasons 39. Numerous courts and commentators agree. See, e.g., Beard, 850 S.W.2d 23; Garden National Bank of Garden City v. Cada, 738 P.2d 429 (1987); John Deery Motors, 383 N.W.2d 553. Note that these cases are interpreting section 9–504 of old Article 9. It authorized public or private dispositions of collateral, and, like Revised Article 9, included no definition of those terms. See also CLARK & CLARK, supra note 12 at, § 4.08[2] at 4–190; 9 RONALD A. ANDERSON, UNIFORM COMMERCIAL CODE § 9–504:367, at 648 and § 9–610:7 at 936 (3d ed. 1999 rev.). One of the definitions of “public” in the Merriam-Webster Online Dictionary is: “accessible to or shared by all members of the community.” Merriam-Webster Online Dictionary, http://www.m-w.com/dictionary/public (last visited July 25, 2006). 40. See, e.g., Beard, 850 S.W.2d 23; Garden National Bank, 738 P.2d 429; John Deery Motors, 383 N.W.2d 553; In re Estate of Sagmiller, 615 N.W.2d 567. 41. Online browsing at work has become so common with Kentucky state employees that the governor of Kentucky blocked certain internet sites from state employees. Tom Lofton, State Treasurer Fights Blockage of Internet Sites, LOUISVILLE COURIER-J., June 24, 2006 at B1. 42. eBay does not permit sellers or family members, roommates and employees of sellers to bid on a seller’s item, “even if their sole intent is to purchase the item.” eBay Rules and Policies: Shill Bidding, http://pages.ebay.com/help/policies/seller-shill-bidding.html (last visited Aug. 17, 2006). 43. Registration requires the user to enter their name, street address and telephone number. eBay Registering for the First Time, http://pages.ebay.com/help/newtoebay/durreg_ov.html (last visited Feb. 17, 2007). Users may also opt to register as a business. eBay Registering as a Business, http://pages.ebay.com/help/newtoebay/bizreg.html (last visited Feb. 17, 2007). 44. eBay Your User Agreement, http://pages.ebay.com/help/policies/user-agreement.html (last visited Oct. 30, 2006). 45. See Lloyd’s Plan, 268 N.W.2d 192; John Deery Motors, 383 N.W.2d 553; Beard, 850 S.W.2d 23.
  10. 10. 290 Southern Illinois University Law Journal [Vol. 31 persuade me that an eBay Motors auction should be classified as a public disposition. I could argue that Article 9 does not require explicitly that a secured party designate the sale as public or private and accordingly the public/private classification problem disappears. The section 9–613(1)(C) requirement for a sufficient notification is that it “states the intended method of disposition.”46 The section does not require that a secured party designate the sale as public or private. Accordingly, the following notification would be sufficient because it states the method of sale without labeling it public or private: “The secured party will sell the 2005 Dodge Stratus to the highest bidder in an eBay Motors auction to be held from August 1 to August 8.” Furthermore, it states the time and place of the sale (eBay Motors, August 1 to August 8), or the time after which the collateral will be sold (highest bidder on August 8) which should satisfy the requirements pertaining to “the time and place of a public disposition or the time after which any other disposition is to be made.”47 My point is that because there is no rule of Article 9 that requires a secured party to designate the disposition either public or private, a notification that clearly indicates the method of disposition should be sufficient.48 Of course it’s easy for me to make this argument because my client’s deficiency recovery is not in jeopardy. Caution dictates that a secured party designates the sale either public or private to facilitate compliance with the notification requirements of Article 9.49 B. Form and Notification Requirements for a Public Disposition Determining that an eBay auction is a public sale establishes that the notification requirements are those applicable to a public sale. The notification must contain the time and place of the disposition.50 To comply with these requirements a secured party should begin with the “safe harbor” notification 46. U.C.C. § 9–613(1)(C). Note that section 9–610(b), which adopts the commercially reasonable requirement, lists “public or private proceedings” among the types of authorized dispositions provided either is commercially reasonable. U.C.C. § 9–610(b). That could be construed as not requiring a choice of public or private, but rather as a reiteration that it is the commercial reasonableness of the disposition that is relevant, not the type. 47. U.C.C. § 9–613(1)(E). 48. One treatise agrees: “On the other hand, it should not be fatal if the notice does not expressly label the sale as public or private, as long as it indicates the precise time of a true public auction, or the time after which the collateral will be disposed of at a private sale.” CLARK & CLARK, supra note 12 at, § 4.08[2] at 4–190–91. 49. See Davis v. Huntsville Prod. Credit Ass’n, 481 So. 2d 1103, 1107 (Ala. 1985) (“Furthermore, the notice must identify whether the sale is public or private, in addition to meeting the time and place requirements; the law will not put the debtor in the perilous position of interpreting a vague notice.”) 50. U.C.C. § 9–613(1)(E).
  11. 11. 2007] eBay Auctions 291 form reproduced in section 9–913(5). The form satisfies the time-and-place requirements by listing the “Day and Date,” “Time,” and “Place.”51 A secured party holding an eBay Motors auction can choose the length of the auction from three, five, seven or ten days.52 The majority of auctions I observed on eBay Motors lasted for seven days.53 Accordingly, it is unlikely a secured party would properly complete the “safe harbor” form if it merely listed the day, date and time of the opening day of the eBay Motors auction. The notification must include the dates and times of the entire auction. For example, if the secured party chooses a seven-day auction to begin on March 1 at ten o’clock in the morning the notification should state: Day and Date: Wednesday, November 1, 2006 to Wednesday, November 8, 2006. Time: November 1, 2006, 10:00 a.m. to November 8, 2006, 10:00 a.m. Listing the entire time of the auction is certainly not a difficult task. The secured party simply determines the length, starting time, and ending time of the auction and enters the complete information on the form. The only other requirement of the "safe harbor" notification for an eBay Motors auction that differs from the ordinary auction is the “place” of the sale. The place of the sale is an internet site. Fortunately, even internet sites have an address)a Web address. Technically, the Web address is a URL, or uniform resource locator. The URL is a grouping of characters conforming to a standardized format. 5 4 The URL for eBay Motors is http://www.motors.ebay.com/. A person with access to the internet simply types in those characters in the address box of the user’s internet browser and the eBay Motors auction site will load.55 I would advise a secured party to use 51. U.C.C. § 9–613(5). Ostensibly the “safe harbor” form adds to the information required by section 9–613(1)(E) (time and place) by adding “day and date.” However, the Official Comment states that the “reference to “time of disposition means . . . not only the hour of the day but also the date.” U.C.C. § 9–613, cmt. 2. In any event, the “safe harbor” requirements are what a secured party wants to satisfy because the "safe harbor" form “provides sufficient information,” so a secured party should complete the form even if it seems to vary from the listed requirements. U.C.C. § 9–613(5). 52. eBay offers a variety of ways which sellers can list their items. The most common method of listing is the online auction, which offers sellers the choice to list their vehicle for 3, 5, 7 or 10 days (some auctions can be set to last one day, but not vehicle auctions). Sellers can also opt to sell for a fixed price, select an “ad format” to locate interested buyers, or choose the “best offer” format, which allows sellers to consider the best offer without an obligation to sell the item at that price. eBay Selecting a Selling Format, http://pages.ebay.com/help/sell/formats.html (last visited Oct. 30, 2006). 53. Of 160 auctions I observed in researching this article, 125 were seven day auctions (data on file with author). 54. See “Uniform Resource Locator” at Wikipedia, http://en.wikipedia.org/wiki/URL (last visited July 1, 2006). 55. Once at the eBay Motors page, the user can browse all vehicles for sale by clicking on the “Buy” link. That gives access to thousands of vehicles. More beneficial to the user is to search for a particular vehicle or to search under the terms “repo” or “bank repo” which show the user repossessed vehicles
  12. 12. 292 Southern Illinois University Law Journal [Vol. 31 the eBay Motors URL in its notification. It is the most specific address a seller can use for the “Place” of the sale.56 Note that a seller cannot send notification of the address of the specific Web page on eBay Motors where its vehicle will appear because eBay constructs its Web pages.57 Accordingly, the “Place” box on the "safe harbor" form should be as follows: Place: http://www.motors.ebay.com/ The above changes to the "safe harbor" form are the only changes the secured party need make. The revised form for an eBay sale, designated by the secured party as a public sale, appears below. I have underlined the changes I made that vary the section 9–613 form: NOTIFICATION OF DISPOSITION OF COLLATERAL To: [Name of debtor, obligor, or other person to which the notification is sent] From: [Name, address, and telephone number of secured party] Name of Debtor(s): [Include only if debtor(s) are not an addressee] We will sell the [describe collateral] [to the highest qualified bidder] in public as follows: Day and Date: [Include day and date for entire length of auction] [e.g., Wednesday, November 1, 2006 to Wednesday, November 8, 2006.] Time: [Include time of entire length of auction] [e.g., November 1, 2006, 10:00 a.m. to November 8, 2006, 10:00 a.m.] Place: http://www.motors.ebay.com/ offered for sale. Frequently the seller of such vehicles is the secured party. Of 160 auctions I observed in 2006, the secured party was the seller in 84 auctions. 56. Perhaps a notification that uses the basic eBay URL (http://www.ebay.com/) rather than eBay Motors’ URL would satisfy the "safe harbor" for “Place,” because the auction is taking place at a specific site on eBay’s comprehensive Web site. However, a secured party should not take the risk that a court might find that address insufficient when it is a simple matter to include the eBay Motors URL. 57. A seller can customize the eBay entry for its vehicle with colored bans, highlighting, etc. eBay offers a number of upgrades and customizations sellers can opt to purchase to aid in promoting their listing. The upgrades and customizations generally appear in search results to make the listing stand out from other auctions. Most of these upgrades are available for a flat fee, and include highlighting, borders and bold text, subtitles, and picture galleries. eBay Promoting Your Item with Listing Upgrades, http://pages.ebay.com/help/sell/promoting_ov.html (last visited Oct. 30, 2006).
  13. 13. 2007] eBay Auctions 293 You are entitled to an accounting of the unpaid indebtedness secured by the property that we intend to sell [or lease or license, as applicable] [for a charge of $]. You may request an accounting by calling us at [telephone number]. [End of Form] My modifications to the Article 9 "safe harbor" form should not prevent it from serving as a “safe harbor.” The variations from a typical auction notification are two. First, the day, date, and time span several days and times rather than a single day and time. Second, the place is a Web address rather than a street address. Obviously, the changes are minimal. In fact, one could reasonably conclude that the modifications do not change the form at all, but merely provide the information that is necessary to properly complete the form when the sale is an eBay Motors auction. Moreover, section 9–613 validates the contents of a notification that includes additional information if the notification provides “substantially” the information section 9–613(1) requires.58 The eBay Motors auction notification form with “additional information” provides “substantially,” if not entirely, the section 9–613(1) information. It includes all the information the section requires and indicates an expanded day and date, time, and place.59 C. Form and Notification Requirements for a Consumer-Goods Security Interest The preceding paragraphs pertain to notification of dispositions of motor vehicles under security interests that are not consumer-goods transactions.60 When the secured party uses eBay Motors to sell a motor vehicle that is collateral in a consumer-goods transaction, section 9–614 establishes the requirements and the "safe harbor" form. Section 9–614 incorporates all the section 9–613(1) information, and adds information relating to liability for a 58. U.C.C. § 9–613(3)(a). 59. If a secured party concludes that an eBay Motors auction of a motor vehicle is a private sale, the secured party can comply with the "safe harbor" requirements by substituting the following provision for the public sale paragraph: [For a private disposition:] We will sell the [describe collateral] privately at an auction on eBay Motors, located at http://www.motors.ebay.com/, beginning on [insert date and time] [e.g., November 1, 2006, at 10:00 a.m.] and ending on [insert date and time] [e.g., November 8, 2006, at 10:00 a.m.] 60. A consumer-goods transaction occurs when an individual incurs an obligation for personal, family or household purposes, and a security interest in consumer goods secures the obligation. U.C.C. § 9–102(a)(24). Consumer goods are goods “used or bought for use primarily for personal, family, or household purposes.” U.C.C. § 9–102(a)(23).
  14. 14. 294 Southern Illinois University Law Journal [Vol. 31 deficiency, contact information and the right to redeem the collateral.61 Section 9–614 makes what seems to be an inconsequential change from section 9–613 to the "safe harbor" form requirements for time and place. Where the form in section 9–613 uses “Day and Date,” “Time,” and “Place,” section 9–614 uses “Date,” “Time,” and “Place.”62 The Official Comment to the section is silent regarding the change.63 Omitting the requirement of “Day” seems more likely an oversight of the drafters. One would think the drafters would want more information on the consumer notification, not less. Perhaps the drafters assume “Date” means “Day and Date.”64 However, I would not advise a secured party to include the day. The "safe harbor" form does not require it. Including it provides another opportunity for the secured party to make a mistake, e.g., use the wrong day. And the “minor error” subsection of section 9–614, while its purpose is to save a notification with errors, operates “unless the error is seriously misleading,” thus raising the question of whether a mistake in the “day” is seriously misleading. It sounds slightly obsessive to advise a secured party to leave out the day, but my rationale is when the drafters give a "safe harbor," I sail into it using their coordinates. Section 9–614(4), like section 9–613(3), validates the inclusion of additional information on the "safe harbor" form. However, its authorization differs slightly from section 9–613: “A notification in the form of paragraph (3) is sufficient, even if additional information appears at the end of the form.”65 Apparently, a secured party can be protected if it adds information to the "safe harbor" form as long as it adds the information at the end of the form. The information a secured party adds to the "safe harbor" form when the sale is an eBay Motors auction “appears” in the middle of the form not “at the end of the form.” Nevertheless, that information should not block a secured party from the protection of the "safe harbor,” because the secured party is not truly adding information to the form. Rather, the secured party is properly completing the form to provide accurate information for an eBay Motors auction. Thus, the protection of section 9–614(4) is not engaged because there is no “additional information.” 61. “A notification of disposition must provide . . . the information specified in Section 9–613(1).” U.C.C. § 9–614(1)(A). 62. U.C.C. § 9–614(3) (emphasis added). 63. The Official Comment to § 9–613 notes that “time” means the date and hour of day, but is silent as to “day.” U.C.C. § 9–613, cmt. 2. 64. That would be contrary to the general definition of “date.” See Merriam-Webster Online Dictionary, http://www.m-w.com/cgi-bin/dictionary/date (last visited July 25, 2006). 65. U.C.C. § 9–614(4) (emphasis added).
  15. 15. 2007] eBay Auctions 295 A modified "safe harbor" form for a consumer transaction follows. My modifications are underlined. The modifications are minor and should not prevent the form from serving as a “safe harbor.” [Name and address of secured party] [Date] NOTICE OF OUR PLAN TO SELL PROPERTY [Name and address of any obligor who is also a debtor] Subject: [Identification of Transaction] We have your [describe collateral], because you broke promises in our agreement. We will sell [describe collateral] at public sale. The sale will be held as follows: Date: [Include dates of entire length of auction] [e.g., November 1, 2006 to November 8, 2006.] Time: [Include time of entire length of auction] [e.g., November 1, 2006, 10:00 a.m. to November 8, 2006, 10:00 a.m.] Place: http://www.motors.ebay.com/ You may attend the sale and bring bidders if you want. The money that we get from the sale (after paying our costs) will reduce the amount you owe. If we get less money than you owe you [will or will not, as applicable] still owe us the difference. If we get more money than you owe, you will get the extra money, unless we must pay it to someone else. You can get the property back at any time before we sell it by paying us the full amount you owe (not just the past due payments), including our expenses. To learn the exact amount you must pay, call us at [telephone number]. If you want us to explain to you in writing how we have figured the amount that you owe us, you may call us at [telephone number] [or write us at [secured party's address]] and request a written explanation. [We will charge you $ for the explanation if we sent you another written explanation of the amount you owe us within the last six months.]
  16. 16. 296 Southern Illinois University Law Journal [Vol. 31 If you need more information about the sale call us at [telephone number] [or write us at [secured party's address]]. We are sending this notice to the following other people who have an interest in [describe collateral] or who owe money under your agreement: [Names of all other debtors and obligors, if any].66 III. ADVERTISING THE SALE AS A COMPONENT OF A COMMERCIALLY REASONABLE SALE Without question, advertising is required for a commercially reasonable public disposition of collateral.67 Accordingly, the advertising must be commercially reasonable. The issue is what type of advertising will help a secured party produce a commercially reasonable sale. I first examine the components of a sufficient advertisement and then offer a form advertisement to be used for a disposition of collateral on eBay Motors. Article 9 does not explicitly make advertising the disposition a requirement of a commercially reasonable sale.68 However, the Official Comment establishes advertising as a component of a commercially reasonable public disposition although, like the section, it does not declare advertising a “requirement.” The comment defines “a public disposition” as “one at which the price is determined after the public has had a meaningful opportunity for competitive bidding.”69 It notes further that: “[m]eaningful opportunity’ is meant to imply that some form of advertisement or public notice must precede the sale . . . .”70 Accordingly, advertising functions to inform potential bidders of the 66. If a secured party concludes that an eBay Motors auction of a motor vehicle is a private sale, the secured party can comply with the "safe harbor" requirements by substituting the following provision for the public sale paragraph: We will sell the [describe collateral] privately at an auction on eBay Motors, located at http://www.motors.ebay.com/, beginning on [insert date and time] [e.g., November 1, 2006, at 10:00 a.m.] and ending on [insert date and time] [e.g., November 8, 2006, at 10:00 a.m.]. 67. See, e.g., R & J of Tenn., Inc. v. Blankenship-Melton Real Estate, Inc., 166 S.W.3d 195, 209 (Tenn. Ct. App. 2004); The Bank Josephine v. Conn, 599 S.W.2d 773, 775 (Ky. Ct. App. 1980). Part II of this article discusses why an eBay Motors auction is a public disposition. 68. The pertinent subsections of Article 9, sections 9–610(a) & (b), do not list advertising as a requirement of a commercially reasonable disposition. One could assert that advertising is a component of the “manner” of disposition. U.C.C. § 9–610(b). 69. U.C.C. § 9–610, cmt. 7. 70. Id.
  17. 17. 2007] eBay Auctions 297 sale in order to bring about vigorous bidding. Courts and commentators also have included advertising as a factor of a commercially reasonable sale.71 A Tennessee court, reviewing the commercial reasonableness of a public sale stated “advertising of some sort should be conducted in order to increase competitive bidding and maximize proceeds.”72 Barkley Clark, in his treatise on secured transactions, declares that advertising must be designed to “attract a ‘lively concourse of bidders.’”73 Accordingly, a secured party who elects to sell a vehicle at an eBay Motors auction, a public sale, should advertise the sale to achieve a commercially reasonable disposition.74 If the goal is to produce competitive bidding the advertising must be designed to inform the relevant public of what is being sold and when and where it is being sold.75 A secured party supplies that same information to the debtor when it sends the notification of sale. That notification includes a description of the collateral and the place and time of the auction.76 The secured party should simply reproduce that information in its advertising of the disposition. 71. R & J of Tenn., 166 S.W.3d at 209. See also Lister v. Lee-Swofford Inv., L.L.P., 195 S.W.3d 746, 752 (Tx. Ct. App. 2006) (Court notes advertising as a commercially reasonable factor and may involve advertising in trade publications.); The Bank Josephine, 599 S.W.2d at 775 (Court finds sale commercially unreasonable where secured party failed to introduce evidence how the sale was noticed or advertised to the public.). Barkley Clark states that “[O]ne of the most important elements of commercial reasonableness is the duty to surround the sale with publicity sufficient to attract a ‘lively concourse of bidders’”. CLARK & CLARK, supra note 12 at § 4.08[5] at 4–198; Tinney, supra note 13, at 369 (“Actions taken by a secured party to publicize an intended sale of repossessed collateral have been recognized . . . as important factors to be considered . . . in determining whether the secured party complied with the requirement of U.C.C. § 9–504(3) that all aspects of the sale be commercially reasonable.”); Korybut, supra note 13, at 1394 (“In their commercial reasonableness review under former Article 9, courts typically assessed a variety of aspects in determining a sale’s commercial reasonableness, including . . . the nature of advertising . . . .”). 72. R & J of Tenn., 166 S.W.3d at 209. See also, Ford Motor Credit Co. v. Price, 163 Cal. App.3d 745 (Cal. Ct. App. 1985); Foster v. Knutson, 527 P.2d 1108, 1114 (Wa. 1974). 73. CLARK & CLARK, supra note 12 at § 4.08[5] at 4–198. Courts have repeated the phrase. See Westgate State Bank v. Clark, 642 P2d 961, 970 (Kan. 1982). The phrase “lively concourse of bidders” seems to have originated from Professor Grant Gilmore in his 1965 treatise. His insight as to the possibility of attracting such bidders bears repeating here. At a “public sale” it may be hoped, there will be that lively concourse of bidders which will protect the secured party from his own weakness and drive the price up to those Himalayan peaks of fair value and true worth. It may be hoped but the hope will almost certainly be disappointed. The concourse of bidders at the typical foreclosure sale, be it ever so “public,” is apt to be about as lively as a group of mourners at a funeral. 2 GILMORE, supra note 12 at, § 44.6 at 1242. 74. The public/private determination is discussed at supra p. 287. 75. A commercially reasonable advertisement should identify the time and place of the disposition and describe the collateral. See, e.g., First Bank of S.D. v. Harberer Dairy & Farm Equip., Inc., 412 N.W.2d 866 (S.D. 1987). 76. See U.C.C. §§ 9–613(1) and 9–614(1).
  18. 18. 298 Southern Illinois University Law Journal [Vol. 31 The advertisement should also indicate when and where the vehicle is available for inspection. In the situation of an internet auction, it is likely there will be few persons wanting to inspect the vehicle physically because many potential bidders will not be located near the collateral.77 However, the burden on the secured party of allowing inspection is slight: it can simply make the vehicle available on a specified day at the current location of the vehicle.78 Courts have noted a secured party’s failure to offer inspection as a factor in finding a sale commercially unreasonable.79 Accordingly, even in an eBay Motors auction, a secured party should make the collateral available for inspection. The goal is to achieve a commercially reasonable sale and allowing inspection is an easy step to help attain it. A. Local or National Advertising A more difficult issue to resolve is whether advertisement of the sale should be national or local. An eBay Motors auction is national in scope.80 Does that require the secured party to advertise nationally? Although I think there are logical arguments for both sides of the issue, my opinion is that national advertising is not required for a commercially reasonable eBay Motors auction. The goal for a secured party should be to hold a commercially reasonable sale. Although, as I discuss below, I do not think that most national advertising aids in that quest, it does not hinder a commercially reasonable disposition, and thus if it is a reasonable expense, I would advise a secured party to advertise nationally.81 77. Many eBay Motors auctions held by secured parties included multiple pictures of the vehicle with their eBay entry (data on file with author). 78. Most secured party sellers on eBay Motors listed a place where an interested person could inspect the vehicle (data on file with author). 79. See Connex Press, Inc. v. Int’l Airmotive, Inc., 436 F. Supp. 51, 57. (D.C.D.C. 1977) (declaring secured party’s failure to show executive jet as a factor contributing to commercial unreasonableness); Gulf Homes, Inc. v. Goubeaux, 602 P.2d 810, 814 (Ariz. 1979) (citing fact that inspection of collateral was 125 miles from location of sale contributed to commercially unreasonable sale of a mobile home). Barkley Clark includes availability of collateral for inspection in his list of factors of a commercially reasonable disposition. CLARK & CLARK, supra note 12 at § 4.08[5][d] at 4–200. 80. An eBay Motors auction is actually international since anyone with access to the internet can browse and bid. However, it is more likely the bidders will be located in North America because the buyer is responsible for transporting the vehicle from the secured party’s location to wherever the buyer wants it. eBay Motors sites exist in Australia, Canada, France, Germany, Italy and the United Kingdom. eBay Motors, http://www.motors.ebay.com/ (last visited Jan. 15, 2007). 81. One type of national advertising is the advertising done by eBay. See infra p. 303.
  19. 19. 2007] eBay Auctions 299 If the goal of advertising is to supply competitive bidding, then the advertising required for a commercially reasonable disposition should be designed to attain the goal. National advertising should not be required because I do not believe it would be effective in reaching potential bidders. The potential bidders in an eBay Motors vehicle auction are an inhomogeneous group: persons with access to the internet who would be interested in purchasing a used vehicle. A motor vehicle is common, inexpensive, collateral that is used by a wide variety and extremely large number of persons.82 The same description applies to persons who use the internet. What cost-effective national media will reach such a group? NewsLink, a Web service, lists only six national newspapers: The Christian Science Monitor; The Los Angeles Times; The New York Times; The USA Today; The Washington Post; and The Washington Times; and I would add the Wall Street Journal to the list.83 Although such papers undoubtedly are widely read, it is unlikely that many readers of those papers are looking for online auctions of used vehicles, and hence advertising an eBay Motors auction in them is unlikely to help attract a lively concourse of bidders.84 On the other hand, almost any person who reads such a publication is a potential buyer of a used car. Thus, one could assert that such advertising reaches the target audience. Nevertheless, if such advertising does not help to attract bidders it should not be indispensable for a commercially reasonable disposition. Electronic media advertising, such as radio, television and the internet, would undoubtedly reach many potential bidders, but, in the case of radio and television, is most likely cost prohibitive in comparison to the value of the collateral.85 Internet advertising, however, is national advertising that 82. “Collateral that is common, widely used, and relatively inexpensive, such as an automobile, can be advertised locally to the general public.” CHRISTINE A. FERRIS & BENNETT H. GOLDSTEIN, DISPOSITION OF REPOSSESSED COLLATERAL UNDER THE UNIFORM COMMERCIAL CODE § 6.10, at 172 (1990). 83. NewsLink is an internet service that provides online links to various newspapers. NewsLink, http://newslink.org/--news.html (last visited July 5, 2006). The fact that the six newspapers cited have online editions does not, in my opinion, make it more likely they would attract national bidders. 84. The Audit Bureau of Circulations reports the following “Largest Reported Circulation” numbers: The USA Today, 2,528,437; The Wall Street Journal, 2,058,342; The New York Times, 1,683,855; The Los Angeles Times, 1,231,318; The Washington Post, 960,684. Audit Bureau of Circulations, Top 200 Newspapers by Largest Reported Circulation, http://www.accessabc.com/reader/top150.htm (last visited July 5, 2006). 85. Although I have no statistics on the cost of radio and television advertising, it seems reasonable to believe that such advertising is expensive, especially when viewed in comparison with the value of repossessed motor vehicles. In eBay Motors auctions held by secured creditors I observed, the Kelley Blue Book “trade-in” values for the vehicles ranged from a low of $500 to a high of $12,250. See infra note 190 for a discussion of Kelley Blue Book “trade-in” values. The $12,250 value is somewhat misleading because the next highest value was $5930 (data on file with author).
  20. 20. 300 Southern Illinois University Law Journal [Vol. 31 seemingly would fulfill the requirement of commercial reasonableness in that it produces competitive bidding, and is also cost effective.86 Advertising on the Web has the potential to reach interested potential bidders because the advertising can be placed on internet sites that interested buyers might visit. I viewed three Web auto sellers of used vehicles: AutoTrader.com, AutoExtra.com, and Cars.com. Each site allows a one-time seller or a dealer seller to list vehicles for sale using a description of the vehicle and listing a selling price. Advertising a vehicle for sale on such sites is inexpensive)ranging from $9.99 to $20 for a basic, two-week ad.87 The effect of advertisements on those sites is akin to a classified ad in a newspaper: the seller lists a vehicle for sale and an interested buyer contacts the seller directly. Although each Web site would seem to allow a seller to list its vehicle and indicate the vehicle is being auctioned on eBay, I found no seller who advertised a vehicle it was selling via an eBay Motors auction.88 Although it is possible to advertise an eBay Motors auction using Web auto sales sites, that type of use does not conform to the typical use or purpose of those sites. Thus it is questionable whether Web advertising would attract potential bidders. If electronic media national advertising does not fulfill the objective of advertising, it should not be required for a commercially reasonable disposition. Assuming that national advertising is not required, this does not resolve the question of whether a secured party who advertises nationally only has acted in a commercially reasonable manner. Because the auction is national in scope, national advertising seems as though it would satisfy the requirement that advertising be commercially reasonable. Of course that assumes the secured party chooses national advertising that reaches potential bidders and provides the relevant information about the collateral and time and place of the eBay Motors auction. As noted previously, however, it might be difficult for such advertising to attract potential bidders. Unless it does so, national advertising alone is not sufficient. Most national advertising simply does not seem likely to reach persons who are potential bidders for repossessed motor 86. See Michael Korybut, ONLINE AUCTIONS OF REPOSSESSED COLLATERAL UNDER ARTICLE 9, 31 Rutgers L. J. 29, 86–99 (1999) for a discussion of the problems of Web site advertising. He notes potential problems with identifying the relevant public and reaching the relevant public. 87. AutoTrader.com, http://sell.autotrader.com/consumer/sellyourcar/controller.jsp?zipcode=40207 &action=nav_used_car_classifieds&LNX=SPGOOGFYCBRAND&rdpage=atc&from_page=syc _bridge (last visited Dec. 18, 2006). Cars.com athttp://siy.cars.com/siy/zipEntry.jsp(last visited Feb. 10, 2007). CarsExtra.com at http://paa.services.traderonline.com/paa/seo/0/version/module/autoextra (last visited Dec. 18, 2006). 88. I did not peruse the used cars offered for sale for hours or days at a time. But I saw no listings that indicated the car was for auction on eBay.
  21. 21. 2007] eBay Auctions 301 vehicles. National advertising is advisable as a complement to local advertising, but not as the sole type of advertising. If national advertising is not required, that leaves local advertising as the alternative. When the sale is an eBay Motors auction, the location where to place the local advertising may be difficult to pinpoint. However, there is a location of the vehicle. The vehicle will be sold on eBay Motors, but delivered at its location; thus one could assert that the location of the sale is the same as the location of the vehicle, even though an eBay auction is virtual, and bidders might be dispersed across the nation.89 It is logical to advertise the sale in a paper of general circulation in the area in which the vehicle is located. Courts and commentators have cited favorably local advertising in finding a sale to be commercially reasonable.90 Of course none of those sales involved an eBay Motors auction, but courts are familiar with the view that local advertising is sufficient and thus should be amenable to finding it sufficient in an eBay Motors auction. The best strategy could be to advertise both locally in the area where the vehicle is located and nationally. That protects the secured party in case the adjudicator decides neither alone is sufficient. Although dual advertising increases the expenses a secured party incurs in selling the collateral, the secured party recoups its reasonable expenses from the sale proceeds before applying the proceeds to the secured debt.91 The goal is to have a commercially reasonable sale, and the secured party should consider advertising locally and nationally if both help attain the goal. B. eBay Advertising A current practice in some private, “dealers-only,” auctions of motor vehicles is for the secured party to delegate the responsibility for advertising the sale to the auctioneer. If this practice was followed in an eBay Motors auction, eBay would advertise the auction. Courts routinely hold that dealers- only auctions are commercially reasonable dispositions.92 Having the 89. In the sales I observed, the seller delivered the vehicle to the buyer at the seller’s place of business. Many sellers indicated they would arrange for shipment of the vehicle to the buyer at the buyer’s expense (data on file with author). 90. See, e.g., Lister, 195 S.W.3d 746; Massey-Ferguson Credit Corp. v. Bond, 335 S.E.2d 454 (Ga. Ct. App. 1985); Cantrade Private Bank Lausanne, Ltd, v. Torresy, 876 F.Supp. 564 (SDNY 1995). But see, Ford & Vlahos v. ITT Commercial Finance Corp., 885 P.2d 877 (Cal. 1994) (local advertising was not commercially reasonable for a sale of a multimillion dollar aircraft). 91. U.C.C. § 9–615(a)(1). 92. See, e.g., Ford Motor Credit Co. v. Mathis, 660 So.2d 1273, 1277 (Miss.1995) (holding disposition of debtor's automobile at dealers-only auction was not per se commercially unreasonable); Garden Nat'l Bank, 738 P.2d at 432 (concluding sale of collateral at automobile auction in which participation
  22. 22. 302 Southern Illinois University Law Journal [Vol. 31 auctioneer advertise the auction has not impeded a finding of commercial reasonableness.93 The important factor of commercial reasonableness is that the sale is advertised to potential bidders to produce competitive bidding. If the advertising is designed to reach that audience, it should be commercially reasonable regardless who provides it. The secured party would satisfy the requirement of commercially reasonable advertising if eBay’s efforts regarding content and broadcast of the advertisement were commercially reasonable. However, for the reasons discussed below, I doubt that the advertising eBay does presently is commercially reasonable. Thus, I would advise a secured party not to delegate responsibility for advertising an eBay Motors auction of a repossessed motor vehicle to eBay.94 eBay’s advertising consists presently of many different types. First is the advertising it does on its Web site home page. Accessing the eBay home page introduces the user to eBay’s “top-sellers,” “featured items,” and the “it” item.95 The home page also lists the various categories of items offered, including motor vehicles, and eBay’s specialty sites, including eBay Motors. That is the only advertising of vehicles eBay does on its home page. In my visits to eBay’s home page I have never seen a motor vehicle listed in these headline items. One could assert such advertising is commercially reasonable because the potential bidders for the collateral are a large and diverse group, and this advertising reaches that group because some of them will access eBay. However, one problem is that only persons who visit the site receive the information. More problematical is that the eBay home page gives no information regarding the motor vehicle to be auctioned, and provides no details of the specific auction. Consequently, that advertising is not likely to be commercially reasonable. Second is the advertising eBay does on its eBay Motors home page.96 It lists categories of vehicles by make, by “Theme,” e.g., “Corvettes,” by was limited to dealers was a private sale and commercially reasonable); Ford Motor Credit Co. v. Russell, 519 N.W.2d 460, 465–66 (Minn. Ct. App. 1994) (holding sale of collateral at auction for wholesale dealers was presumed to be commercially reasonable). 93. Ford Motor Credit Co. v. Mathis, 660 So.2d 1273, 1274 (Miss.1995) (auctioneer sends 3500 mail outs of sale, makes 300 phone calls, and 75 in-person contacts); Huntington Nat. Bank v. Elkins, 559 N.E.2d 456 (Ohio 1990) (auctioneer advertised the time and place of the vehicle's sale in local newspaper and mailed approximately 1,200 fliers announcing the sale); Wright v. Wells Fargo Auto Fin., Inc., 59 U.C.C. Rep Serv 2d 8 (Iowa Dist. 2005) (auctioneer advertised the vehicle in accordance with its ordinary business practices). 94. In conversations I had with employees of three secured sellers, all indicated they do not advertise the auction beyond what occurs on the eBay listing page for the vehicle. Interviews with Brad Piller, First State Bank, in Mendota, Ill. (June 19, 2006); John Monteiro, CarNow Acceptance Company, in Dartmouth, Mass. (June 19, 2006); and Tess Burkhardt, Peoples Credit Co. of Oregon, in Portland, Ore. (June 20, 2006) (data on file with author) [hereinafter Interviews]. 95. eBay, http://www.ebay.com/ (last visited Feb. 17, 2007). 96. eBay Motors, http://www.motors.ebay.com/ (last visited Feb. 17, 2007).
  23. 23. 2007] eBay Auctions 303 “Featured Items,” and a make-and-model vehicle “Finder.”97 At this time there is no category of “repo” auctions. However, a seller is able to list its motor vehicle as a “Featured Item” by paying a fee to upgrade its listing.98 eBay Motors home page advertising suffers the same defects as those of the eBay home page: lack of notice to potential bidders, and lack of specific information about the auction. However, a seller who chooses to upgrade its listing to a “Featured Item” does provide explicit notice of its motor vehicle auction. Third is eBay’s national advertising. eBay advertises its services in print, in television advertisements (both domestic and international), on radio, and, of course, via the internet.99 But in response to my email question regarding eBay Motors advertising, eBay stated it does not advertise eBay Motors auctions on national media.100 In October 2005, eBay embarked on a continuing, prime-time network television advertising campaign: “Whatever ‘it’ is you can get it on eBay.”101 This advertising would surely reach potential bidders since many bidders undoubtedly watch television. But similar with other eBay advertising, it does not indicate the specifics of a particular auction, motor vehicle or otherwise, and, at least from ads I observed, does not indicate motor vehicles as part of “it.” Accordingly, the only commercially reasonable aspect of such advertising is that it reaches potential bidders. Fourth is the advertising from a link to eBay found using an internet search engine. For example, if a computer user types “used car auctions” into the internet search engine “Google,” eBay is one of the links that appears.102 Such advertising has none of the aspects of commercial reasonableness other than reaching the potential bidder. 97. Id. (Specific vehicle listings are accessed by searching for a particular make, model or year of vehicle or by searching generally using search terms such as, “bank repo” or “repo.”) 98. The fee at this time is $19.95. eBay Motors Fees, http://pages.ebay.com/help/sell/motorfees.html (follow “eBay Motors Listing Upgrade Fees” hyperlink) (last visited Dec. 19, 2006). This upgrade lists the motor vehicle as a featured item on a rotating basis on eBay Motors home page that allows the user to access the vehicle auction by clicking on the item. The number of times an item appears and the place it appears is determined by the timing of the listing and the number of other featured items. eBay Listing Upgrade)Gallery Featured Example, http://pages.ebay.com/help/sell/gallery_featured.html (last visited Dec. 19, 2006). 99. e B a y 2005 Annual Report, p. 56, available at http://files.shareholder.com/downloads/ebay/75360119x0x43771/6D8B8042–3A58–4050–BF9F– 52D1F5BE5F06/AnnualReport2005.pdf. 100. “Please know that eBay is an online marketplace. So basically all eBay Motors advertisements are done online on all the eBay sites. eBay does not advertise its auctions on national media.” Email from eBay (Dec. 29, 2006) (o n file with author). 101. eBay Chatter Newletter, “Whatever ‘it’ is, you can get it on eBay,” http://pages.ebay.com/community/ chatter/2006January/insideebay.html (last visited Jan. 15, 2007). This advertising also appeared in daytime television and national print media. Id. 102. Google is found at http://www.google.com/. Google touts itself as “the world's largest search engine )an easy-to-use free service that usually returns relevant results in a fraction of a second.” Google Company Overview, http://www.google.com/intl/en/corporate/index.html (last visited Jan. 15, 2007).
  24. 24. 304 Southern Illinois University Law Journal [Vol. 31 Fifth is the specific advertising by eBay that targets individual bidders who have elected to receive notice of specified auctions. A registered user of eBay can elect to have eBay send the user an email message providing notification of auctions held by the user’s “favorite sellers” and auctions meeting criteria for the user’s “favorite searches.” Registered users can select and save favorite sellers: sellers who sell items on which the user wants to bid.103 Similarly, a user can save favorite searches: auctions of items that conform to categories or search terms selected by the user.104 A user who selects those options will receive an email from eBay whenever a favorite seller lists a new item for auction and whenever any seller lists an item for auction that conforms to the search terms. For example, a user who finds a seller who sells repossessed vehicles can elect to designate that seller as a “favorite seller,” and receive an email for every new listing by that seller. Likewise, a user can designate a “favorite search” using the search terms, “bank repo,” and receive an email any time an auction using the terms “bank repo” is listed. This type of advertising would seem to qualify as commercially reasonable. It notifies an interested potential bidder of the item to be auctioned and provides a link to the web page where the item is described and the auction is occurring. Thus, the potential bidder has all the information pertaining to the sale)time, place and description of the item. A deficiency of this type of advertising is that it is limited to bidders who have affirmatively registered with eBay, elected to save their preferences for sellers and types of sales, and further elected to have eBay email them with new listings. Accordingly, many potential bidders will not receive notice of the auction. However, those who do receive notice may be motivated bidders. Unfortunately, at this time eBay does not permit a seller to target the registered users who have expressed their preferences for sellers or searches. eBay does not release information about registered users to sellers.105 A seller can obtain contact information only about eBay users who are involved in the seller’s current or recent transactions, i.e., a person bidding on the item.106 Finally, there is the advertising of the vehicle to be auctioned found on the eBay Motors Web page listing. One of the benefits of an eBay Motors auction is that the eBay entry describing the goods offered for sale can include pictures of the collateral, extensive detail about the collateral, and the terms of sale. In 103. Tracking Favorites with My eBay, http://pages.ebay.com/help/myebay/track-favorites.html (last visited Dec. 19, 2006). 104. Id. 105. Contacting eBay Members, http://pages.ebay.com/help/tp/contacting-members.html, (last visited Dec. 18, 2006). 106. Id. For example, sellers can request contact information for all bidders in an active transaction and the winning bidder in a successful, closed transaction.
  25. 25. 2007] eBay Auctions 305 conversations I had with employees of three secured sellers using eBay Motors, all indicated they do not advertise the auction beyond what occurs on the eBay listing page of the vehicle.107 The information disseminated in this type of advertising is rich with detail about the collateral and sale. But it reaches only those persons who access the vehicle listing on the eBay Motors Web page. Accordingly, such advertising does not reach potential bidders beyond those who visit eBay, and seemingly would not alone be commercially reasonable. The foregoing discussion convinces me that advertising performed by eBay is not similar to that done by the auction company that provides specific advertisement about the auction in a dealers-only auction. Additionally, I question whether eBay advertising has the potential to produce the competitive bidding that is the goal of advertising. Another deficiency may be simply that disposing of repossessed motor vehicles on eBay is too new a practice for a court to hold advertising performed solely by eBay commercially reasonable.108 Accordingly, I think that advertising of the disposition by eBay alone would not fulfill the commercially reasonable requirement. The fact that the public has general knowledge about eBay and its operation as a public auction does not validate eBay’s advertising as commercially reasonable. C. Disclaiming Warranties Before I reproduce my form advertisement, I want to discuss the reason I include a warranty disclaimer in it. Revised Article 9 attaches implied warranties of title, possession, and quiet enjoyment in a default sale to the same extent that such warranties arise in a voluntary disposition.109 A secured party need not linger long on the aspects of the warranty because Article 9 authorizes a secured party to disclaim the warranty and a secured party will probably do so.110 One method of disclaiming is to convey through “specific 107. Interviews, supra note 94. It will be interesting to see if a court holds such advertising “commercially reasonable” if it is the only advertising done by a secured party seller on eBay Motors. 108. See Korybut, supra note 86, at 93. 109. U.C.C. § 9–610(d). Old Article 9 subjected a default sale to the “Article on Sales” and thus any applicable warranty arising under an Article 2 sale would apply to a default sale. U.C.C. § 9–504(1) (1995). However, with respect to a warranty of title, section 2–312(2) and Official Comment 5 thereto raise the argument that the seller in a default sale gave no warranty of title. U.C.C. § 2–312(2) (2001). The revisions to Article 9 included an amendment to section 2–312, cmt. 5, which explicitly applied the warranty to Article 9 disposition sales, unless the secured party disclaimed the remedy. See Timothy R. Zinnecker, The Default Provisions of Revised Article 9 of the Uniform Commercial Code: Part 1, 54 BUS. LAW. 1113, 1158–59 (1999). 110. Section 9–610(e) authorizes a disclaimer by any method that would be effective had the sale been voluntary or by communicating to the purchaser a record of the sale contract that includes the disclaimer. U.C.C. § 9–610(e). Besides including disclaimer language in the advertisement, a
  26. 26. 306 Southern Illinois University Law Journal [Vol. 31 language . . . which give[s] the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third person may have.”111 The words of my advertisement should suffice because it states that the secured party makes no warranty relating to title, possession or quiet enjoyment of the vehicle and also states the secured party makes no claim that it has title to the vehicle. Although the disclaimer provisions of Article 9 and Article 2 do not expressly require the disclaimer be conspicuous, my form makes the disclaimer conspicuous by using all capital letters. There is no reason a secured party should take the chance that a court might require the disclaimer to be conspicuous regardless of whether Article 9 expressly requires it. In addition, the secured party should include the disclaimer language in any record memorializing the contract of sale.112 A default sale might give rise also to implied warranties of quality: merchantability and fitness for a particular purpose.113 Although the warranty of title expressly applies to default sales, a warranty of quality will arise in a default sale only when the sale has the incidents required for an implied warranty under Article 2.114 The Article 2 implied warranty of merchantability arises when the seller is a merchant of the type of goods sold.115 Although the Article 2 definition of merchant is broad, most financial-entity type sellers of repossessed collateral are not merchants of the type of goods sold and thus the implied warranty of merchantability would not arise.116 However, the warranty could arise in the situation where the secured party is an automobile dealer and secured party should utilize the power to disclaim warranties in the record memorializing the parties’ contract. A sale where the warranty is not disclaimed might result in a higher sales price because the buyer is indemnified against the claim of a senior secured party whose security interest is not terminated by the disposition sale. See U.C.C. §§ 9–617(a); 9–610, cmt. 5. Professor Zinnecker raises the question of whether a disclaimer might be held commercially unreasonable. See Zinnecker, supra note 110 at 1159 (1999). See also, Robyn L. Meadows, Warranties of Title, Foreclosure Sales, and the Proposed Revision of U.C.C. §9–504: Has the Pendulum Swung Too Far?, 65 FORDHAM L. REV. 2419, 2444–49 (1997). 111. U.C.C. § 9–610(e); U.C.C. § 2–312(2) (2001). 112. U.C.C .§ 9–610(e)(2). 113. See U.C.C. §§ 2–314; 2–315 (2001). It is unlikely the implied warranty of fitness for a particular purpose would arise because the circumstances surrounding a typical eBay Motors auction do not satisfy the reliance requirements for such warranty. 114. See U.C.C. § 9–610, cmt. 11. 115. U.C.C. § 2–314(1) (2001). 116. “Merchant” is defined in section 2–104(1). "’Merchant’ means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.” U.C.C. § 2–104(1) (2001).
  27. 27. 2007] eBay Auctions 307 selling its repossessed motor vehicle collateral.117 Because a court might imply a warranty of quality, I have included a disclaimer of any warranty of quality. D. Advertisement Form My form for an advertisement of an eBay Motors auction is as follows. The footnotes contained in it are mine. NOTICE OF SECURED PARTY SALE Notice is hereby given that [name of secured party] intends to sell at public sale the following vehicle: [describe collateral using year, make, model and VIN number]. The sale will be an internet auction held on eBay Motors at http://www.motors.ebay.com/, and will begin on [include day, date and time for beginning of auction] and end on [include day, date and time for ending of auction]. Interested buyers should access eBay Motors at http://www.motors.ebay.com/ and search using the year, make and model of the vehicle. The vehicle will be sold to the highest bidder [with or without reserve].118 Terms of the sale are [include terms of sale, e.g., cash]119 with a deposit120 of [include amount] and the balance due within [include time].121 The buyer is responsible for all expenses for delivery of the vehicle from its current location at [include location of vehicle] and the vehicle can be seen prior to the sale at that location at the following time(s) [include time when 117. The implied warranty of merchantability arises in a contract of sale if the seller is a merchant of goods of the kind involved in the sale. U.C.C. § 2–314(1) (2001). 118. Most of the eBay sales I watched were sales without reserve. Of course the secured party can choose whether to set a reserve. eBay Reserve Price, http://pages.ebay.com/help/sell/reserve.html (last visited Dec. 28, 2006). 119. The secured party can choose whatever payment terms are acceptable to it. The disposition eBay sales I watched had payment terms including credit card, certified check, cash, and money order (data on file with author). 120. The secured party can choose whether to require a deposit. Most eBay auctions I observed had terms that required a deposit. If the secured party requires a deposit, the typical method the buyer makes the deposit is through PayPal. PayPal is a service designed to facilitate online payments between buyers and sellers. PayPal was founded in 1998; eBay acquired PayPal in 2002. PayPal allows users to send and receive payments through their email address. PayPal is free for buyers; sellers are charged nominal fees and percentages of the total sale on sliding scale. PayPal About Us, http://www.paypal.com/cgi-bin/webscr?cmd=p/gen/about-outside (last visited Aug. 17, 2006); see also , Press Release, eBay, Inc., eBay Completes PayPal Acq u isitio n , http://investor.ebay.com/releasedetail.cfm?ReleaseID=91641&FYear=2002 (Oct. 3, 2002) (last visited Aug. 17, 2006). 121. The secured party chooses the time by which the buyer must pay the balance. In the auctions I observed the typical time for payment was five to seven days (data on file with author).
  28. 28. 308 Southern Illinois University Law Journal [Vol. 31 vehicle can be inspected].122 [include name of secured party] reserves the right to withdraw the vehicle from sale at any time prior to the completion.123 [Include name of secured party] SELLS THIS VEHICLE AS IS, WHERE IS AND WITH ALL FAULTS. [Include name of secured party] MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, REGARDING THE VEHICLE, INCLUDING THE WARRANTY OF MERCHANTABILITY. [Include name of secured party] HAS REPOSSESSED THIS VEHICLE FROM ITS OWNER AND DOES NOT CLAIM OR WARRANT IT HAS TITLE TO THE VEHICLE. [Include name of secured party] MAKES NO WARRANTY RELATING TO TITLE, POSSESSION OR QUIET ENJOYMENT OF THE VEHICLE. If you have any questions contact [name, address, and telephone number of secured party or its representative] or visit eBay Motors at http://www.motors.ebay.com/ and search using the year, make and model of the vehicle. I believe the above advertisement, circulated nationally, locally, and on the eBay Motors listing, is commercially reasonable because it provides sufficient information of the particulars of sale to the public who might be reasonably expected to be interested in the collateral. It should facilitate a commercially reasonable sale. IV. AN AGREEMENT OF THE PARTIES THAT AN EBAY DISPOSITION AND NOTIFICATION SATISFY ARTICLE 9’S REQUIREMENTS As I have discussed throughout this article, a secured party selling the collateral must satisfy Article 9’s requirements that the sale be commercially reasonable and that the secured party send reasonable notification of the sale. Whether a secured party complies with its 122. The secured party can choose whether to allow inspection of the vehicle. Although an eBay auction may create little demand for inspection, the secured party should offer the opportunity as part of the strategy to achieve a commercially reasonable sale. See supra pp. 297–98. 123. The advertisement will appear prior to the start of the auction. However, the debtor has the right to redeem the collateral prior to its disposition per section 9–623 (“A redemption may occur at any time before a secured party . . . has disposed of collateral or entered into a contract for its disposition under Section 9–610”). U.C.C. § 9–623. Therefore, the secured party should provide notice of its right to withdraw the vehicle from the auction in case the debtor redeems the collateral. Redemption rights can be exercised by any secondary obligor and other secured party or lienholder. U.C.C. § 9–623(a).
  29. 29. 2007] eBay Auctions 309 duties is a question of fact.124 However, Article 9 provides a secured party with a tool to help ensure it achieves a commercially reasonable sale and send a reasonable notification.125 That tool is Article 9’s authorization of an agreement made by the parties that determines the standards that measure fulfillment of those duties. If the parties enter an agreement regarding standards, and the standards they adopt are “not manifestly unreasonable,” it will foreclose an attack by the debtor that the secured party did not comply with its Article 9 duties.126 Section 9–603 provides that the parties to a security agreement “may determine by agreement the standards measuring the fulfillment of the . . . duties of a secured party . . . if the standards are not manifestly unreasonable.”127 It tempers the rule of section 9–602 that the obligations of the secured party relating to disposition of the collateral cannot be varied or waived.128 Section 9–602 invalidates a debtor’s agreement to waive the duty of secured party to sell the collateral in a commercially reasonable manner.129 Section 9–603, however, validates an agreement that establishes “standards” to determine whether the sale is commercially reasonable.130 The “standards” adopted by the parties in agreements courts have approved relate to the time of sending notification to the debtor and the particulars of the sale.131 For example, in a case decided under Revised Article 9, the court rejected a challenge to the commercial 124. See, e.g., In re Estate of Sagmiller, 615 N.W.2d 567, 571 (N.D. 2000); Union Nat’l Bank of Wichita v. Schmitz, 853 P.2d 1180, 1184 (Kan. Ct. App. 1993); Daniell v. Citizens Bank, 754 S.W.2d 407, 410 (Tex. Ct. App. 1988); Gulf Homes, Inc. v. Goubeau, 602 P.2d 810, 812 (Ariz. 1979); Hall v. Owen County State Bank, 370 N.E.2d 460, 461 (Ind. Ct. App. 1977). 125. The “safe harbor” notification forms found in sections 9–613(5) and 614(3) are one step toward complying with the Article 9 requirements. U.C.C. §§ 9–613(5); 9–614(3). 126. U.C.C. § 9–603(a). 127. Id. Former Article 9 contained a similar provision. “[T]he parties may by agreement determine the standards by which the fulfillment of these rights and duties is to be measured if such standards are not manifestly unreasonable.” U.C.C. § 9–501(3) (1995). Among these “duties” are the requirements of disposition after default. U.C.C. § 9–501(3)(b) (1995). 128. U.C.C. § 9–602(7). 129. Article 9, however, authorizes the debtor to waive its right to notification of the disposition by an agreement entered into and authenticated after default. U.C.C. § 9–624(a). 130. U.C.C. § 9–603. 131. See, e.g., Ford Motor Credit Co. v. Solway, 825 F.2d 1213, 1216 (7th Cir. 1987); Wombles Charters, Inc. v. Orix Credit Alliance, Inc., 39 U.C.C. Rep.Serv.2d 599 (S.D.N.Y. 1999). Courts also have approved agreements that designate the time of sending notification of the sale to the debtor. See, e.g., Aetna Fin. Co. v. Culpepper, 320 S.E.2d 228, 232–33 (Ga. Ct. App. 1984) (finding ten days notice reasonable); Wippert v. Blackfeet Tribe of Blackfeet Indian Reservation, 695 P.2d 461, 465 (Mont. 1985) (finding five days notice not “manifestly unreasonable,” but secured party failed to give notification).
  30. 30. 310 Southern Illinois University Law Journal [Vol. 31 reasonableness of a sale where the debtors had agreed that a sale would be deemed commercially reasonable: [I]f notice thereof is mailed to them at least ten (10) days before such sale and advertised in at least one newspaper of general circulation in the area of the sale at least twice prior to the date of sale upon terms of 25% cash down and the balance within 24 hours and further agree that any private sale shall be deemed commercially reasonable if notice thereof is mailed to them at least 14 days before the sale date stated therein and credit given for the price stated.132 In a case relying on former Article 9, the Seventh Circuit Court of Appeals cited section 9–501(3), the predecessor of section 9–603, in validating an agreement that provided: Dealer further agrees that if Ford Credit shall solicit bids from three or more other dealers in the type of property repossessed by Ford Credit hereunder, any sale by Ford Credit of such property in bulk or in parcels to the bidder submitting the highest cash bid therefore also shall be deemed to be a commercially reasonable means of disposing of the same.133 Section 9–603 does not adopt any standards of fulfillment; it allows the parties to establish standards that are not manifestly unreasonable. Thus, the parties may set any reasonable standards of notification and disposition on which they agree. The section does not require that the agreement take the format of a record, so an oral agreement arguably suffices.134 However, a secured party striving to establish reasonable standards for sale should not risk the potential problems of proof associated with establishing standards through an oral agreement. Caution and forethought prescribe a written agreement. Section 9–603 impliedly authorizes a post-default agreement because it does not establish a temporal requirement for the agreement. A Minnesota federal district court approved a post-default agreement wherein the debtor acknowledged the terms of a proposed sale “as commercially reasonable” in exchange for the secured party’s agreement to postpone the default sale.135 Although the holding of the court is consistent with section 9–603, I would 132. Orix Fin. Serv., Inc. v. Thunder Ridge Energy, Inc., 2006 WL 587483, 15 (S.D.N.Y. 2006). 133. Ford Motor Credit Co. v. Solway, 825 F.2d 1213, 1215 (7th Cir. 1987). See supra note 127 for the text of U.C.C. § 9–501(3) (1995). 134. But see Walker v. Grant County Sav. & Loan Ass'n, 803 S.W.2d 913, 916 (Ark.1991)(holding that the only reasonable interpretation of “agreement” in section 9–501(3) is an agreement in writing). “Record” can be written or electronic. U.C.C. § 9–102(a)(69). 135. Beardmore v. Am. Summit Fin. Holdings, LLC, 47 U.C.C. Rep. Serv. 2d 708, 719–20 (D.Minn. 2002). The terms approved related to place, date, time, and notice to the public of a public sale. Id. at 711.

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