Legal Definitions - with reserve

The term with reserve refers to a type of auction where the seller has set a confidential minimum price for the item being offered. This predetermined price, known as the "reserve price," must be met or exceeded by the highest bid for the item to be sold. If the highest bid does not reach the reserve price, the seller is not obligated to sell the item, even if bids were placed.

Here are some examples to illustrate this concept:

• Art Auction: Imagine a rare painting is being auctioned at a prestigious gallery. The auction catalog states that the painting is being sold "with reserve." This means the owner of the painting has privately informed the auction house that they will not part with it for less than a specific amount, say $500,000. If the highest bid received during the auction is $480,000, the painting will not be sold, even though it was the highest offer. The reserve price of $500,000 was not met, so the seller retains ownership.

• Real Estate Auction: A developer is auctioning off a prime piece of land, advertising it as an auction "with reserve." The developer has a minimum acceptable price of $1.5 million for the property. During the bidding process, the highest bid reaches $1.4 million. Since this amount is below the confidential reserve price, the developer is not compelled to sell the land, and it remains unsold, despite the significant offer.

• Classic Car Auction: At an annual classic car show, a vintage muscle car is put up for auction, explicitly listed as being sold "with reserve." The car's owner has a sentimental value and a financial expectation, setting a reserve price of $120,000. If the bidding concludes at $115,000, the auctioneer will announce that the reserve has not been met, and the car will not be sold at that price. The owner keeps the car, as the minimum acceptable price was not reached.