Almost 2 months ago I won an auction at Sedo for TrademarkLawyer.com for just under $10K. This was one of 7 legal domains one seller put up for auction. The total winning bids for the 7 domains totaled almost $200K. (You can read the entire story here).
Shortly after the auction ended the Seller notified Sedo that he was not going to transfer the domains. After a cure period of 30 days Sedo declared the Seller in Default.
Since the Seller lives in the Tampa Bay area, I asked my long time and trusted attorney to look at Sedo.com contract and let me know what he thought.
My attorney works for a national law firm and he’s a guy you can trust to give you a straight answer even if it means less work for him.
So after consulting with an associate at his firm in Massachusetts (under Sedo’s contract Massachusetts law governs) here is his opinion:
There are two major problems with the Sedo.com contract.
The first is that the contract does not provide for specific performance.
Specific Performance is a legal remedy which allows a buyer to sue to force a Seller to sell you what you bought, as opposed to money damages.
This is very important to a Buyer since with Sedo as all escrow service if the Seller does not transfer the domain, he never gets paid and Sedo will just refund the buyer his money, meaning there would be no monetary damages.
Now Massachusetts is one of the few states that provides by law a right to sue for specific performance even though its not in the contract, but the buyer still has to prove that the asset being bought is one of a kind and can’t be replaced by another. While we all would assume a domain name would fall under this category, its an issue that has to be dealt with and we all know that judges can come to some pretty crazy decisions. Moreover anything that has to be dealt with in the court costs money and time. None of that would be necessary had Sedo just put an extra few lines in their contract allowing the Buyer to sue for Specific Performance.
The bigger and a killer problem is that Sedo’s contract does NOT provide that the winning party to a lawsuit is entitled to fees from the losing party.
Therefore if I was to sue the Seller for specific performance, I would have to pay my own attorney fees, which I could not recoup, which by the way my attorney estimated could run between $75K-$150K if the case went to trial.
Without the ability to collect your attorney’s fees from a non-paying buyer or a non-performing seller, the contract really takes away the option of legal action enforcement against the non-performing party.
Typically the only way a winning party get his attorneys fees back from the losing party is if the contract states so, and most contract provide this as a matter of course.
Law School 101.
The fact that Sedo’s contract fails to provide the prevailing party its attorney fees, is a fundamental flaw that is pretty shocking coming from a company that handles thousands of transactions a year.
This is not to be confused with Sedo.com right under the contract to collect its commission from a defaulting seller. Under that part of the contract Sedo provides that it has a right and can collect its attorney fees if it sues for its commission and is the prevailing party.
So Sedo protects itself in its contract but fails to protect either the Seller or Buyer’s right to sue and recover their legal fees.
Horrible.
I expected more from Sedo and we all deserve more.
We are talking about big money and valuable assets.
The contracts governing these transactions should be airtight to protect all parties.
This is not to excuse in any way this seller conduct, who failed to transfer domains to the winners of the auctions
The contract simply makes it impractical to sue someone when you have to pay an attorney and have no opportunity to recoup those costs.
Upon receipt of my attorney’s opinion, I have canceled the transaction with Sedo and requested a refund of the money I paid for the domain some 7 weeks after I sent the funds.
So for me this transaction is done, as I logically spent $75K-$150K to get the right to by a domain that is worth maybe $50K at most.
For everyone else, you should demand that Sedo fix its contract to provide for attorney fees for the prevailing party, so we get the same protection as buyers and sellers, that Sedo has provided for itself and also allow suit for specific performance.
Until and unless Sedo changes their contract, you can expect more defaulting buyers and sellers on their auctions.
Mike, you know (as a lawyer) that the contract was purposely created that way. In this way, Sedo will not be drawn into lengthly legal battles.
I’m sure Sedo would not want this flaw in the contract to be known.
I was also a bidder in one of those auctions – at the time found it all a little peculiar – that someone would have a bunch of premium law related domains in a non-premium auction. Guess we’ll never know.
I wonder if sedo will sue the seller for their sales fees?
I do agree till sedo provide the certainty of sale through their auctions they can’t hope to create a stable, trusted marketplace. Now while these auctions were notable because of the quality of the domains, I believe non-completed auctions are fairly common. Sedo needs to eliminate this – and in the case of this large tranche of premium domains I don’t think it was out of the question for them to make additional contact with the domain owner.
Good points, Mike. Folks need to carefully read all their contracts, to understand their risks. That’s why one has to carefully read all the garbage coming out of ICANN and its workgroups too, because there are so many loopholes and “unintended consequences” — probably not so “unintended” in some cases. Some of these contracts are held together by scotch tape and thumb tacks, and aren’t as strong as people expect, and as people should demand.
Mike,
Interesting that you discovered this. I guess it was about time that Sedo address this issue.
Why would it cost $75k to $150k to sue to get this domain when it was auctioned in a public forum?
Isn’t this like a one day in court type of lawsuit?
Sedo is completely flawed and there are zero repercussions from both not paying buyers and sellers. I was a seller for a mid $x,xxx and the winning buyer did not issue payment. After 3 phone calls, sedo cancelled the transaction and indicated that they could not reach the buyer. For a domain to sell in the mid x,xxx in an auction and sedo cannot reach the seller for payment is a complete shame. Why would they allow this type of activity to take place on their own marketplace. As there becomes more and more of these type of non-paying auctions, people become hesitant to want to conduct business through their platform.
If folks go to Internic.net, one can also see that Sedo has a registrar accreditation with ICANN. However, I’ve never seen them actually use this to do a secure transfer between buyer and sell. If it’s a valuable enough name where the seller might back out (e.g. women.com !), the domain could have been at Sedo’s registrar to ensure the transfer went through.
Coffee
“the contract was purposely created that way. In this way, Sedo will not be drawn into lengthly legal battles”
I don’t think so.
I think the contract does not in any way help Sedo from getting drawn in to legal battles.
The contract was in-artfully drafted in my opinion and did not omit these issues on purpose
Dan
I can’t speak for Sedo but it does not appear that Sedo will sue for their fees which is a bad decision for them and for the industry
Rob
Filing a lawsuit is the cheap part, a few grand.
Its what happens after that costs money.
If you file suit and the defendant doesn’t answer you win, but it the defendant wants to drag it out for years and years and hit you with discovery after discovery, deposition after deposition it will add up quickly.
Being a friend the attorney gave me a worst case estimate, which is better than being given a low ball best case figure and then getting into a costly nightmare
Mike,
I would have done it differently. I would have tried to get the 7 bidders names from Sedo first. If that didn’t happen, I would have posted for the 7 bidders to come forward.
Once all biddrs were identified I would had requested each bidder to contribute $1000 bucks and at least file suit on him and see what happens from there. Even though you guys may have decided to not go forward, the person with the names might not have know and could could have been a good way to evaluate the situation from his situation and what his next step would have been.
Now, the seller knows he won and there is nothing that anyone is going to do. So, because Sedo is an awful place to do business, the bidders lose while they still try to get paid.
We were the wiining bidder on one of the 7 domains as well. Sedo said they could release our names to the other 6 winners to file suite but wondered why we didn’t receive notices from the other buyers.
If anyone is still interested in pursuing this, please let us know.
Why is it that Sedo still lists TrademarkLawyer.com for sale? (i.e. go there and do a search for the domain)
Marlene
I know I guess now all of the winning bidders the problem is that if you can’t recoup your attorneys fees even if you win, it make it a bad business decision to pursue it.
Steven
With all due respect I disagree.
The last thing anyone needs it to be involved in a suit with 5 other people (1 bidder won 2 domains) and have to go back time and time again to each of the 5 other parties, once suit has been filed asking for more and more money.
If any one of the 5 refused to pay more money than the rest would have to cough up that one’s share and hard feeling are certain to follow. If the other 4 refused to pay extra then it would fall on one person or the suit would be dismissed.
It’s best for everyone involved to know the worst case scenario and agree ahead of time to fund the amount required to carry forward than to come back and back to the same pockets for more money down the road
If the remaining buyers really wanted these domains, the cost of suing wouldn’t be an issue. It’s an issue about acquiring the domain names for the winning bid amounts.
Needless to say, we are open to working with other buyers if that are still interested in pursuing this matter with us or any other buyers.
Marlene
If the cost of filing suit and attorney fees is not an issue for you then go ahead and file suit, you don’t need the rest of us.
I will help you in anyway I can, other than spending a fortune to pursue a case in which I can’t recoup my attorneys fees
Getting estimates from one lawyer @ 150k doesn’t mean it’s going to cost 150k. That being said, you also don’t know the financial situation of the seller either.
If the domain you bought isn’t that important to you, than I can understand your position. I was merely reaching out to determine if any of the other buyers were serious about doing something.
If any of the other buyers of the defaulted auction wish to contact Marlene drop me a note and I will hook you guys up
Thank you.
Don’t any of you watch mafia or gangster movies? Its cheaper to hire a tony montano type person to make the seller say hello to his little friend then to pay a lawyer. :-p
Mike, you should get Jeremiah Johnson, SEDO’s GC to comment.
I recall seeing the post right after the auction. The post commented that the price was low and that they should have been sold at auction together. I remember thinking that the seller would read the post and back out.
That being said, the following approach might work.
1. You do not have to sue in MA. That is where the parties agree that jurisdiction is proper. However, jurisdiction would also be proper where the seller is located.
2. Pressure Sedo to sue for their commission. To do so, Sedo must prove the existence of the contract – e.g. that the seller validly started the auction process. This is 95% of the buyer’s case.
3. Join the buyers together to file a joined action against the seller and have that group join in the commission action brought by Sedo. This is a fairly common process. In response to the concerns about chasing down payments, I don’t think that is such an issue for several reasons:
a. The common attorney could require a retainer that would obviously be shared
b. There would be a joint contribution agreement with remedies should one party not contribute. For example, there could be an assignment of the Sedo deposit and the rights to the domain and a subsequent sale to generate the needed cash (remember the plaintiff still has the money on deposit at Sedo). There could also be a forced dismissal to limit further costs to argue about.
c. There would have to be a conflicts letter signed by all common plaintiffs.
d. There are of course other solutions as well.
The point is that neither the problems with the SEDO contract nor the disperse nature of plaintiffs should stop contract enforcement. The industry as a whole suffers when parties breach agreements without penalty.
As to SEDO, there are several corrections that should be made in their agreement. However, the specific performance and attorneys fees is definitely the highest one. As for Sedo not wanting to become involved, such additional protections for the parties would not increase this risk. And, they already have an indemnification provision should they be sued.
At any rate, the Sedo agreement is far better than many other agreements out there. For example, the Escrow.com agreement (no offense Brandon) is not really a contract for sale but rather an escrow agreement. Upon a party breach it is unclear exactly what rights remain to the parties. Is the escrow void? cancelled? and if so what provisions remain for the parties to attempt to enforce?
There is another option – sue Sedo !
If the seller is still a member, and the domain is still listed on Sedo.com without any explanations from Sedo to you, I see here Bad Faith.
“There is another option – sue Sedo !
If the seller is still a member, and the domain is still listed on Sedo.com without any explanations from Sedo to you, I see here Bad Faith.”
Yaron, not a smart move at all. If you read the agreement then you will see that Sedo is well protected – among the many ways is a limitation of damages provision.
PRESSURE: One pressure point for the industry is to push SEDO to enforce their contracts AND to blacklist buyers/sellers who default. The blacklisting should include a ban on parking as well as any other services offered.
Jeremiah – what say you?
Paul
“1. You do not have to sue in MA. That is where the parties agree that jurisdiction is proper. However, jurisdiction would also be proper where the seller is located.””
This is why I contacted my attorney in Tampa as the domain owner lives in the Tampa bay area.
“2. Pressure Sedo to sue for their commission.”
Have done so and I looks like they are refusing to do so.
Actually it maybe that they have NEVER sued anyone for commission.
Bad business I agree but Sedo does not seem interested in suing for commission.
3. Join the buyers together to file a joined action against the seller and have that group join in the commission action brought by Sedo.
This only works if Sedo sues.
“”a. The common attorney could require a retainer that would obviously be shared””
“” For example, there could be an assignment of the Sedo deposit and the rights to the domain and a subsequent sale to generate the needed cash (remember the plaintiff still has the money on deposit at Sedo).””
No all the plaintiffs to the best of my knowledge have taken their money back
“the Escrow.com agreement is not really a contract for sale but rather an escrow agreement. Upon a party breach it is unclear exactly what rights remain to the parties. Is the escrow void? cancelled? and if so what provisions remain for the parties to attempt to enforce””
I don’t think its fair to compare escrow.com to Sedo.com.
Let’s remember Sedo.com is not just acting as an escrow agent but the domains sold on their platform under their rules and they are entitled to a commission of 10% or around $18,500, while escrow.com would only charge a few hundred dollars to handle the transaction.
Paul,
I didnt say seu for damages.
Sedo is now assisting a member to sell a domain he was suppose to transfer to a previous buyer under a contract he signed with sedo.
Also, If and when the domain sell again, sedo will provide an escrow account and will hold and then transfer money to this member.
This is BAD Faith!
(NOTE: I’ll make it clear from the start of my comment: Paul Keating is a hard act to follow, so this isn’t easy)
Em-Bee… Since several auction sites charge a WHOPPING 20% for sales commissions, a lot of domainers wonder what these sites do for them to “earn” that compensation. That’s a big question ALL domainers should ask themselves before submitting domains to any auction site. What will that auction site DO FOR YOU to justify taking $10,000 if you sell a $50,000 domain? I try to answer this question on my blog at http://www.successclick.com.
Thx Em-Bee for giving me a topic to write about! See my full answers on my blog.
Paul Keating permalink
PRESSURE: One pressure point for the industry is to push SEDO to enforce their contracts AND to blacklist buyers/sellers who default. The blacklisting should include a ban on parking as well as any other services offered.
Jeremiah – what say you?
************
This is not a new issue , domainers have/had complainted for years , sadly Sedo prefers to make a Dollar than act ethically… in the long run it will cost them more.
Their disclaimer is their safe harbor.
Delinquent sellers (buyers) get a slap of the hand…
Busin$$ as u$ual.
“I didnt say seu for damages.”
You must sue for some remedy and there are only 3 – damages, specific performance and injunctions. All of these are REMEDIES. You still must have a proper cause of action (theory that will support the REMEDY). Here, as the prior contracting buyer, you have already agreed to the SEDO contract. You cannot now come in and show that you were “harmed” by the subsequent sale unless you prove the existence of the prior contract. Once you do this, SEDO’s contract limits its remedies. You could possibly try to sue for a non-contractual theory but I cannot see one that would apply. BTW, Bad Faith is not a theory but rather part of a theory and the presence or absence of bad faith helps prove that theory.
Stephen
I agree that one of the things action houses should do for their up to 20% commission is assert there rights and thereby the rights of buyers and sellers in the case of default
Then what is function of the Escrow service? Does other auction houses & their escrow service like Afternic have the full coverage to protect the buyer’s or seller’s right to sue if the contract is not complied with? All the domainers should come forward towards fixing this important issue that may include any other prection clauses in the contract.
I had an identical experience with Sedo years ago, but had neither the inclination to litigate a costly and uncertain solution, or the bully pulpit to spit hellfire at Sedo’s cleverly crafted policies, practices and TOS agreements. Instead, I quietly resolved to reduce my activity in the Sedo marketplace and moved much of my business elsewhere. My discontent set-off a corporate panic which prompted Sedo’s senior hierarchy to yawn with concern and seek refuge on the golf course.
Point is, Mike, neither my prior discontent, nor your current rant, nor countless other individual gripes in between — all of which have grown mold while awaiting a satisfactory outcome — will compel Sedo to place its clients’ best interests at par with its own. No individual instance can rattle Sedo’s formidable bottom-line. However, en masse and with hurricane-force resistance, the rumble of those proverbial trees falling in the forest will be heard loud and clear in the corporate boardroom.
The only antidote for bad policy and form is retreat. *Resolve* to do business elsewhere, until such time as Sedo values your best interests as much as it does your business. Simultaneously voting on bad policy and practices with a few hundred wallets is the only vote that will register in the boardroom. Form a conga line of resistance, then sit back and listen to the sound of tall trees falling on senior policy-makers.
In my estimation, Sedo exposed its corporate core when it turned client confidentiality a commodity by imposing a 2.5% “transaction privacy option.” This practice is improper, bordering on obscene, and wholly subverts the essential fiduciary responsibility of professional sales brokerage. Double the impropriety when Sedo serves as the transaction’s escrow agent. With rare exception, an escrow attorney would be subject to suspension or disbarment for breaching client confidentiality.
Hello? Gloria and Emilio? Is that you? Where do we line-up?
♬♪ Come on, shake your body baby, do that conga,
I know you can’t control yourself any longer . . . ♪♫
Mike,
I appreciate the candid discussion of Sedo’s purchase and sale agreement templates. As background, I’d like to point out that Sedo traditionally uses different templates depending on the nature of the transaction. The short-form purchase and sale agreement used in online marketplace transactions is a more concise agreement, absent specific representations and warranties, whereas the long-form template we offer parties for a brokerage transaction is more detailed. As you correctly note, Sedo is not a party to these purchase and sale agreements and as such, the templates we provide are suggestions only and the parties involved in any deal are free to choose a template of their own liking and that can be agreed upon. We have received a fair degree of feedback over the years and the current forms reflect the perspectives of buyers and sellers alike.
While we offer use of a template agreement for any transaction, for domains being represented by a Sedo broker, most involve a contract provided by one of the parties. In these cases, Sedo is only in a position to review the terms to ensure that a smooth transaction takes place and by offering our advice of what best practices have been followed in previous transactions. Besides this review, Sedo is not responsible for the ultimate agreement and should an agreement fail, Sedo is only in a position to put the facts on the table.
I sympathize with the frustrations that Sedo is not in a position to do more, but as we are rarely in a position to fully determine the facts related to a broken deal and do not have control of the domain in question, Sedo is seldom in a position to pass judgment. It would not be prudent to take sides with either the buyer or the seller except to provide the necessary documentation to help the injured party enforce their rights. In cases when it has been determined that either a buyer or seller has not lived up their obligations, Sedo has a long-standing record for taking whatever actions are under our control, whether that is suspending the rights and privileges of an offending user account or outright banning the user from Sedo’s services. Our Security and Compliance team works daily to prevent, detect and eliminate fake bidders and has shut down many accounts where a seller has not followed through with an agreed transfer, and we’re proud of the team’s results.
But all that said, I really do appreciate the candid feedback and I think you and your readers make some very interesting points. Contracts are living documents that can always afford timely review to ensure all parties reach all of their goals and objectives. If you or any of your readers have additional feedback, please let me know at legal@sedo.com.
Thanks,
Jeremiah Johnston
COO / GC, Sedo.com
Just to be clear when a buyer/seller agrees to purchase/sell a domain at Sedo, Sedo will do nothing more than close the account of the breaching party?
Why even bother with any contract then?
Sedo took the domain off their inventory in the last 24-36 hours.
Yaron
It was the post and the comment here that caused Sedo to take it down although the seller should NEVER had been allowed to relist the same domains he refused to sell again on their system
@ Jeremiah, Esq.
Hi Jeremiah – I have the utmost respect for you as a person and as an attorney, which is why it pains me to ask:
Why should we pay Sedo a fee for doing nothing other than connecting a buyer and seller? Listing services are easier, and charge less. Those services (including my own) don’t guarantee anything, but we also don’t ask for 20% refcomm on a sale.
There are DEFINITELY further steps that Sedo can easily make to “put it up front” about what they can’t or won’t do in a domain sale. Most people using Sedo believe that all will be protected and guided under your prestigious mantle.
So what IS the refcomm paying for? Introducing buyer/seller and let them have at it on their own terms? That is a really bad position for Sedo to take if they want to grow their business, especially with the big domains. And there’s the rub…
Would you admit you help with securing iron-tight deals for domains in the mid six figures, and give special treatment to the buyer/seller in these types of deals? I mean, I can’t see Sedo being so cavalier about a $800,000 domain name sale… hence your mention of the “different agreement templates”.
I think you should discuss this in a public forum, and if ever there was someone who could make us believe, it would be you. There’s your challenge, my friend.
@ Scott,
Dude, you are writing better than me. Quit it. You made me chuckle and give the “Black Power” fist move more than once. 😉
Great writing, kudos.
Jeremiah
“Sedo is not responsible for the ultimate agreement and should an agreement fail, Sedo is only in a position to put the facts on the table…but as we are rarely in a position to fully determine the facts related to a broken deal and do not have control of the domain in question, Sedo is seldom in a position to pass judgment”
No one is saying that Sedo is responsible to render a judgment.
All I’m asking Sedo to do is to have a basic agreement that a Seller Or Buyer can use and rely on to enforce their rights if they choose to do so. The current agreement is insufficient since it does not provide that the prevailing party is entitled to recover its attorneys fees, which is standard in mostly every legal agreement and in every agreement I ever wrote as an attorney.
Without the clear right for the winning party to get its attorneys fees back, it make enforcement of rights highly unlikely just as business decision.
So your agreement basically takes away rights of a victim of a failed transaction to pursue his claim.
Sedo contract provides for attorneys fees for itself if it files suit, why wouldn’t give your customers the same right?
Moreover the right to sue for specific performance must be included in the agreement, which is of course is exactly what a buyer who is faced with a non-performing seller would sue for.
Finally if Sedo would start suing parties for failing to live up to their obligations for commission a lot of this defaulting behavior would stop.
You guys do have an obligation to do what you can to stop fraudulently bidding and non-performing sellers.
You as a company have to enforce your rights under the contract if you expect that anyone will respect your system.
Several days ago I have received an offer on Sedo to buy a domain that matches my business name. After several hours of thinking I decided to buy the domain. I transferred the money to Sedo via paypal and…. 3 days later Sedo wrote me that the transaction has been canceled since it was a fake sale and they are dealing with the seller and Sedo suggested to me to take legal action against the seller. The seller wrote to me it was Sedo’s glitch indeed and showed me their correspondence, where Sedo actually excuses themselves to the seller for this mistake! It’s been 5 days now and Sedo stopped responding to my messages and did not refund my money even if they wrote they will. I am submitting a payment reversal (claim) with paypal to get my money back from Sedo (Sedo.com, Sedo.co.uk, Sedo.de), which appears to be a dishonest and untrustworthy business.
Irrelevant to what Drew just posted or to this article, but I also bought a domain via SEDO this past week.
The seller seems can not transfer the domain out due to 60 days lock out period. However only 12 days were remaining.
I wrote in there, I wouldn’t mind waiting it out. I already paid via PayPal.
I just got an email few hours ago from SEDO saying they cancelled the transaction…I am lost for words…
I give you props for writing a post like this and then, not attempting to sell your readers on another service with an affiliate post, and it makes me trust you more. But the question is whether there exists a better option than Sedo. You would think that all of the domain name sites have the same types of contracts.
Sedo want to steal my money period : Here I am one of the nightmares of any domainer that trusts on “good practices” or good attitude of SEDO after sending your domain. SEDO not want to pay.
https://www.namepros.com/threads/sedo-want-to-steal-my-money-period.866908/