Art & Antiquities Litigation

I am developing ‘Art Litigation and Cultural Heritage Disputes’ as a niche practice area, and am a member of the Institute of Art & Law in London, where I am studying for a Diploma in Art Law.

My new book, the ‘Contentious Trusts Handbook’ contains a practice note contributed by the distinguished Art Historian, Pandora Mather Lees (www.artonsuperyachts.com), entitled, ‘Art & Heritage Assets – Duties of Trustees’, and I am currently researching substantive aspects of art and antiquities law for a new book I am planning to write for publication in 2022 provisionally entitled, ‘Transnational Art and Antiquities Litigation.’

Art Due Diligence & Claims

Due diligence involves investigating:
(a) provenance; and
(b) condition.

‘Establishing good title before exercising a transaction by searching its provenance or history of ownership is an important first step for a collector, auction house, dealer, or museum. An art object may possess an impeccable chain of ownership, however, it is not the exclusive answer to the issue of good title … The work itself may be a forgery and not be authentic. An art expert that issues a certificate of authenticity might change his or her opinion based on new facts or revelatory technology. A buyer relying upon one expert’s professional judgment that is disputed by a different art appraiser or art historian might cause the value of the acquired art to decrease dramatically, which might lead to breach of warranty claims. Another concern, especially for works of antiquities and even post-modern art, is that because of their rarity they may have acquired a unique intrinsic, and sometimes sentimental, “inflated” value. In a celebrity-driven commercial world, art connected to the social status of the seller may impact the work’s market value. A fundamental duty exists for a buyer of an object d’art to examine the work’s provenance, authenticity, and value before making a purchase. It is also imperative to know and trust the party that is brokering the art transaction.’ (Jones, page 57).

‘Essentially an appraisal is an informed opinion or expert estimate of the monetary value of an object. Appraising original artwork is fraught with difficulty … When original works of art change hands, it is often done privately, and the prices are not necessarily made publicly available. Objective factors, such as the rarity of the work, may tend to increase value, since the laws of supply and demand influence the art market as they do any market … The physical condition of a work may also have an effect on the price … The provenance of a work is a critical factor in valuation. For example, if a work originated from the estate of the artist, a prominent collector, or had been owned by or exhibited in a museum or by a prominent art dealer, the history will enhance its value, because it is an indication of high quality. Celebrity ownership is also an important factor in prices achieved for works of art as well as memorabilia. This is often true even if the object has no great intrinsic value … Subjective determinants, such as taste, style and reputation of the artist, influence prices, and evolve constantly. An artist’s stature may be difficult to measure objectively, but reliable indicators include exhibition history, critical response, publications, and inclusion in important public and private collections. Still, often the relative quality and value of a work is debated, even among appraisers … When it comes to the work of recognised artists, authenticity is without doubt the single most important factor that determines the value of the work of art … An appraisal can take the form of an oral opinion, with minimal or no supporting data, a brief letter, or a highly detailed formal written report prepared by an expert based on extensive research and documentation.’ (Prowda pp.203 – 205).

‘Upon consignment, an in-house specialist or external expert appraises each lot in order to generate a description for the sale catalogue. In appraising an art object, the expert identifies its attributes, namely its creator or the respective place of origin or discovery, the date or period of creation and provenance. The final result of that assessment is expressed in the art object’s attribution … A sleeper is an artwork or antique that has been undervalued and mislabelled due to an expert’s oversight, which consequently is undersold at auction. The auction house’s misattribution is printed in the sale catalogue as well as displayed on its website, communicated to potential clients and to those attending the sale. Accordingly the art object is introduced into the public art market under a wrong label … When a sleeper is introduced at auction, the expert has failed to correctly determine the valuable attribution of the art object. As a result, the art object is sold for a considerably underestimated price …
A misattribution is an erroneous attribution: the error lies in the wrongful identification or appreciation of the object. With sleepers, the misattribution must also devalue the art object. Essentially, three types of erroneous and undervalued attributions produce sleepers … attribution of the artwork or antique to a lower-valued creator instead of the actual higher-valued creator … incorrect dating of the object, which is essentially relevant for antiques; and … incorrect provenance or ownership history. To be clear, an art object’s physical condition is not an attribute. The erroneous identification of one attribute often inevitably leads to a wrong assessment of many of the art object’s other attributes.’ The Sale of Misattributed Artworks And Antiques At Auction by Anne Laure Bandle, published by Edward Elgar.

‘An auction is defined by its three players – the consignor (seller), the auction house (agent), and the buyer – and the intricate relationships among them. [The Consignor-Action House relationship] is characterised by its fiduciary nature. The auction house must act in the utmost good faith and in the best interest of the principal, the consignor, at all times. A breach of fiduciary duty could give rise to liability on the part of the auction house as agent for the consignor as principal, whether the cause of action is based in contract or negligence.
The auction process begins when a consignor decides to sell property through an auction house. Sellers are typically known to consign works from their collections in the event of death, divorce, debt or discretion … the last point referring to sellers who do not have to sell but chose to do so in order to take advantage of a strong market…
The job of the auction house is twofold: to attract consignments and to conduct the sale, both in a responsible manner. First the auction house must assess whether an item is “auctionable,” that is whether it should be sold in a public fashion at auction, or privately via a “private treaty sale,” or sold through a private dealer or gallery …
Once an item is deemed auctionable and the consignor decides to go forward with the sale, the parties will enter into a written consignment agreement …
Most major auction houses, including Sotherby’s and Christie’s, require the consignor to make certain representations and warranties as a condition to accepting the property for sale. The most important of these concern legal title. Specifically, the consignor must represent and warrant ownership and clear title to the work being consigned, free of all liens, claims, and encumbrances, and to support the provenance of the work if it is questioned. Upon sale the consignor warrants that good title and right to possession of the work will pass to the buyer free and clear of any liens, claims, or encumbrances.
The consignor is also required to represent and warrant that he will indemnify the auction house if there is a defect in title …
[The main concerns] of the buyer are authenticity, provenance, and clear title. The buyer relies on the credibility and expertise of the auction house and on the representations about the property that are contained in the auction catalog. Therefore, if an auction house represents to the buyer that the work is authentic, the buyer has a right to rely on that information. Later, if questions arise concerning the authenticity of the work, the buyer will seek recourse from the auction house, even if the identity of the consignor is disclosed, since the auction house is considered a market expert and has made representations in the catalog concerning authenticity …
The buyer is also entitled to rely on the auction house for assurance that he will be granted clear title to the item purchased whether or not the principal is disclosed …
All bidders at an auction can assume that the auction process is conducted with integrity and that the estimated prices are reasonable, and can bid with confidence on the assumption that the auction is not subjected to illegal manipulation by the auction house in order to obtain higher prices (no shill bidding).
Because courts have enforced time limitations for breach of warranty of authenticity claims, buyers have resorted to other theories, such as negligent misrepresentation and fraud.
The most common tort claim asserted is negligent misrepresentation, in which a buyer claims the auction house represented that the work was authentic, and it is proven to be inauthentic. A prerequisite to negligent misrepresentation is the existence of a “special relationship” between the parties, which under New York law is a fiduciary one, requiring more than an arms-length business relationship.’ (‘Prowda pp.184 – 199).

In private treaty sales it is usual to carry out a search of a stolen art database, e.g. Interpol, the ICOM Red List, the FBI, the Art Loss Register and Art Recovery International.

Where the forger is the seller, or is connected to the seller, the buyer is entitled to rescind the contract on the basis of fraudulent misrepresentation.
Where the seller is innocent but mistaken, in the absence of an express warranty of authenticity, provided the view expressed by the seller is reasonable and genuinely held, there is no contractual remedy against the seller. (See Drake v Thos. Agnews [2002], Taylor Thomson v Christie’s [2005] and Thwaytes v Sotheby’s [2015]).

However, a dealer or international auction house may owe a higher duty when selling an item within the scope of his advertised expertise.

Each case will depend upon on its own facts.

Whatever the size of gallery, there are usually two forms of transactions between dealer and artist:
(a) an outright purchase of artwork by the dealer; and
(b) more commonly, a consignment. Which is an outright purchase.
The relationship between dealer and artist is a buyer-seller relationship, and not a fiduciary relationship, because the dealer is not acting as the artist’s agent, but rather becomes the owner of the work.

In a consignment transaction, the artist consigns the work to a dealer.
Artist-dealer representation agreements are sometimes confused with simple consignment agreements.

Each form creates different legal obligations:
(a) a consignment agreement ordinarily addresses particular works for a limited transaction (for example, a specific gallery exhibition); and
(b) an artist-dealer agreement usually includes general provisions that pertain to consigned works and a separate consignment agreement or rider identifying specified works.

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