Briefings
Art: Buyer of Art Beware
'Buyer beware', otherwise known as 'caveat emptor', is a fundamental principle of UK contract law. Limited legal protection is afforded to buyers who pay over the odds for works of art and then complain. It is a free market and buyers are free to run their own checks (and should do so) while relying on the guidance of expert dealers in whose trust they place themselves.
A recent case in which we were involved demonstrates this ancient principle of law. A businessman paid £1.5 million for what he was informed by the seller, a reputable Bond Street dealer, was a Van Dyck painting. Once hanging on display in his home, people began to raise doubts about the painting's attribution. Fearing he had vastly overpaid for a copy Van Dyck, he pursued the dealer. The Court, having heard expert evidence, found that the painting was indeed not by the Master. However it did not order the dealer to reimburse the buyer with the difference between the selling price and the painting's market value, which was significantly less than the purchase price. One reason was that, on the facts, the Judge found that the dealer had sold the painting based on an honestly held belief that it was by Van Dyck. The sale contract was based on his opinion which, the Court found, the sale documents made clear. This emphasises how perverse the law can be and underlines why those purchasing art must be particularly vigilant.
This briefing note serves as a broad checklist of potential pitfalls which a purchaser of art would do well to avoid.
1. Attribution and authenticity - who created the art?
Artworks and antiques are purchased because of their originality and authenticity; a painting by a follower of Raphael does not hold the same value as a painting by Raphael. Misattribution is one of the main problems encountered by purchasers of art. The Courts are reluctant to hold statements of opinion or belief about artworks to be legally binding. As the law currently stands, a successful suit would require the buyer to prove that the common intention of both parties, deduced from all the circumstances, was that the seller's opinion on attribution would become an essential term of the contract. Alternatively, the buyer would require proof of some element of dishonesty on the part of the seller. Auction houses have sophisticated wording built into the small print of their terms and conditions of sale to ensure they are not bound by the opinions they give.
Art Dealers
Generally, dealers have been found not to be liable for misattribution even when their opinion has been clearly relied upon by the buyer. The seller of the Van Dyck had expected all sorts of queries to be raised about the painting that were not. Had prying questions been asked, the purchaser may have found out that the painting was bought at Sotheby's a couple of years before it was sold to him for £30,000 with an attribution of "after Van Dyck" which, in common parlance, means it was not by Van Dyck.
The prudent buyer should always seek independent, expert advice when buying artwork. There are worldwide acknowledged experts in the field of Old Masters. For more contemporary works, on the continent for example many dead 19th and 20th century artists' estates, dealers or friends have formed "comites" which are often the only recognised body for attributing an original piece of art to the artist. Without their say so (usually in the form of a certificate) a work of art, albeit approved by other scholars, is not worth its market value as an original.
Auction Houses
The courts have been willing to find auction houses liable for misattribution in limited circumstances. A lot depends upon the terms and conditions of sale and purchase, which must be carefully scrutinised. There is often sophisticated wording in the small print which attempts to exclude liability for opinions. Christie's for example was forced to compensate a buyer who had acquired a forged painting wrongly attributed by them to the Austrian artist, Egon Schiele. The painting, begun by Schiele, had been substantially over-painted by another artist. Christie's were found to be in breach of their standard conditions of sale and to be negligent in failing to identify the forgery. Needless to say they have since changed the description of the term "forgery" in their standard conditions of sale.
Time Limits
The right of an aggrieved purchaser to sue is also easily lost through delay. In the UK it is not possible to bring an action for breach of contract or misrepresentation six years after the contract was entered into. In a famous case, a collector who had bought a fake Constable from a gallery was unable to sue to recover his losses for this very reason. There is also a similar time limit for bringing a claim in negligence, which is six years from the date of the negligent act or three years from the date that the purchaser could reasonably have had knowledge of the material facts giving rise to a claim in negligence (whichever is the later).
2. Title
Who owns the art on sale?
The purchaser must not take for granted that the seller, however well known, is the legal owner of the art for sale. A respected gallery or an auction house may not know that it does not have the legal right to sell art it is offering for sale. Possession of art is often confused with ownership. In the UK, possession does not equate to legal ownership. In France, however, the converse is true.
Art knows no boundaries. It passes easily and often illegally from country to country. Rights to title are won and lost depending on the national laws of the countries through which the artwork passes. The purchaser may discover that after legitimately buying an artwork in one country, he becomes the subject of a claim brought by a national of another country and under a different law. The prudent purchaser should ask for a detailed history of ownership and in particular ask where the seller purchased the piece.
If I purchase in good faith, am I protected?
A common misconception is that a good faith purchaser obtains all legal rights to the artwork. He does not. In the UK the seller can never transfer a better title than the one he has. If for example the seller buys an antique from a third party who had purloined it from its true owner, he has no title to pass. Even if the purchaser is innocent and pays a lot of money for it, the antique is not his. He must give it back to the true owner and then pursue the seller for the return of his money.
There is however some comfort for the good faith purchaser in the UK. Most countries have limitation periods under which claims must be made. Under UK law if no claim is brought by the legal owner of the stolen artwork within 6 years of purchase, the legal owner will no longer be able to recover the artwork from the purchaser in good faith.
3. The Contract
Points to insert into a Contract
Art dealers rarely give outright guarantees. Buyers should insist upon clear and definite terms. In particular, the seller should warrant that the artwork is authentic and that all reasonable efforts (including up to date art historical research) have been made to verify its provenance and condition. Buyers should also insist upon an indemnity that the seller has good title to the painting to protect the buyer from any third party claims. Look out for exclusion clauses, limiting the liability of the seller or agent. See if there is a money back guarantee and, if so, on what terms?
4. Can the artwork be exported, imported or left as a legacy?
There are strict guidelines governing the export and import of works of art. The Duke of Northumberland recently found his plans to sell Raphael's "Madonna of the Pinks" to the Getty Museum frustrated by UK Government intervention. The trustees of Castle Howard were also blocked in their attempt to sell Sir Joshua Reynolds' iconic painting, "Portrait of Omai".
An export licence is needed to export all works of art and antiques out of the UK that are more than 50 years old and are valued above set monetary limits. Licence applications must be made to the Export Licensing Unit of the Department for Culture, Media and Sport. The licensing criteria are different according to whether the object is to be exported within the EU or outside the EU. For example, the financial threshold for paintings exported within the EU is currently set at £91,200, but the threshold is £180,000 for export outside the EU. You are advised to check with the Export Licensing Unit to see what the relevant current rules and thresholds are.
The Government retains the right to refuse and to revoke an export licence, though statistics show that the vast majority of licences are successfully granted. If the artwork or antique is likely to be of national importance then the decision as to whether a licence is granted will be referred to a Reviewing Committee of experts. The experts consider what are known as the Waverley criteria: namely the object's connection with the UK's history and national life, its outstanding aesthetic significance or its outstanding significance for the study of some particular branch of art, learning or history.
If the experts decide that the artefact is of outstanding significance then they will recommend to the Secretary of State that the granting of an export licence be deferred in order to give national museums and public bodies time to purchase the artefact at a recommended fair market price. This happens in only rare cases. If an alternative domestic purchaser is found, then the original buyer will lose out. Purchasers should note that, at auction, works are generally sold "subject to licence".
5. Art as Security
The concept of art as security is worth a special mention as an increasing number of banks and other financial institutions accept art and antiques as security for loans. Unfortunately, however, these institutions are sometimes not as vigilant as they could be in checking provenance and ownership. In the international arena, artefacts of national heritage that have been illegally excavated, for example Egyptian antiquities, all too frequently become Charges against large bank loans. If banks do not exercise due diligence when securing loans they may discover that they have no claim to title once the real owner emerges.
Another problem is that Charges do not necessarily protect banks from unscrupulous dealers who may sell the work on. Whilst detailed loan documentation is always drawn up between the lending institution and the borrower, there is no central registry for the sale and purchase of art as there is, for example, for property. Accordingly, documentation subjecting art to a Charge cannot be found by a simple search such as at the Land Registry. This is an area of the art market that would benefit from regulation.
6. Conclusion
This briefing note is by no means definitive of the problems encountered by our clients. Their unfortunate experiences highlight the need for purchasers of art to ask searching questions and to obtain as much documentary information as possible. Most auction houses, galleries and private dealers are only too pleased to impart their knowledge of their art on sale, but only if asked!