Business Monday

My View: Getting what you bargain for: A buyer’s guide to purchasing art

Michael Galex, a senior partner at Walton, Lantaff, Schroeder & Carson, LLP, is a Miami-based attorney with over 20 years’ experience as lead trial and appellate counsel for individuals and businesses.
Michael Galex, a senior partner at Walton, Lantaff, Schroeder & Carson, LLP, is a Miami-based attorney with over 20 years’ experience as lead trial and appellate counsel for individuals and businesses.

Miami’s Art Week is here, with its myriad fairs, museum and gallery spectacles, and other events for all, regardless of the size of one’s collection or wallet. Analysts expect brisk, record sales. In 2014 Art Basel Miami Beach saw inventory sell out before opening to the general public. Now, coming off a strong fall auction season, analysts expect continued sales growth.

Yet, each sale is, whether warranted or not, opportunity for dashed expectations, lasting bitterness and litigation. Whether the work is a $30 million Warhol or an inexpensive piece from the up-and-coming artist du jour, buyers and sellers risk relationships if one side feels slighted in the bargain. This creates ripe conditions for lawyers to be unleashed, flurries of correspondence, threats of litigation, and damaged reputations and relationships. Just one year ago a court rejected Ronald Perelman’s fraud claim against dealer Larry Gagosian concerning the sale of artworks by Jeff Koons and other high-priced artists. And those two are experienced art market players.

Would-be buyers should understand how Florida law governs art transactions. Buying art is a commercial transaction governed by fairly well-established legal rules. The vast majority of dealers are honest, and both know and follow these rules. Nonetheless would-be buyers are best served by knowing the law surrounding art buying, especially with so many non-Florida dealers here for Art Week. To help with this, and in celebration of Miami’s local art scene, assume a fictional buyer wants to buy original painting by Miami-based artist Jenny Brillhart from a fictional dealer.

CAVEAT EMPTOR AND EXPRESS WARRANTIES

Caveat emptor” means “let the buyer take care.” This legal principle requires the buyer to inspect the painting she wants to buy, including checking for any obvious problems and, generally, ensuring it is actually the original Brillhart painting she believes she is buying. Yet, as with many legal rules, caveat emptor is not as far reaching as it once was because courts and legislatures have modified it over time. One important modification is the “express warranty.”

To close a sale, dealers will invariably make statements about the quality of the artwork, the materials used, and, most importantly, the pedigree, marketability and expected future success of the artist. Any would-be buyer must listen closely to what the dealer says and ask any questions considered important, to ensure a full and complete understanding of the artwork offered for sale. Further, most art purchases are not documented beyond a one-page invoice detailing price, payment terms, delivery date, and the title and author of the artwork.

But this invoice gives our buyer the greatest assurance that she is actually buying an original Brillhart painting: the “express warranty.” Florida law specifically states the written invoice an art dealer provides in a sale to a non-art-dealer buyer is an “express warranty” that the artwork is by the artist identified in the invoice. An “express warranty” is an explicit promise that the artwork is what the dealer says it is.

So in our example, if the dealer’s invoice unconditionally describes the painting as “an original Brillhart,” Florida law holds that dealer has expressly promised this to the buyer. Further, this law also states this “express warranty” is “presumed to be part of the basis of the transaction.” This is important because, if the painting is not in fact “an original Brillhart,” the dealer has breached the sales contract and must both refund the purchase price and pay any attorney’s fees and costs buyer incurred. Further, the dealer may also be criminally liable.

LIMITATIONS ON THE “EXPRESS WARRANTY” RULE

As usual, there are limits and exceptions to these rules. First, Florida law allows dealers to negate an express warranty. A dealer who includes a “conspicuous[ly]” written disclaimer which is not “separate and apart” from any “express warranty” language in an invoice can likely defeat a buyer’s claim of breach of express warranty over the provenance of the artwork at issue.

In our example, the invoice must contain limiting language that “clearly and specifically” tells the buyer that the dealer “assumes no risk, liability, or responsibility for the authenticity or authorship of” the painting. The invoice must contain such a written disclaimer, obvious to anyone who might read it, that, despite evidence to the contrary, the dealer is disclaiming any and all “risk, liability or responsibility” if the painting is not actually “an original Brillhart.”

Second, a dealer’s statements about an artwork’s value or aesthetics are often just opinions, which Florida law considers “puffery” and not an express warranty over the artwork. “Puffery” is a statement of opinion by a seller about whatever is being sold. Dealers often “puff up” an artist or artwork to consummate a sale. For example, if our dealer tells the buyer, “This painting is the best example of Brillhart’s distinctive style,” this is probably just a dealer’s own opinion about the merits of the work. It most likely will not be construed as a warranty or promise of any type.

If, however, our dDealer goes beyond opinions on aesthetics, value and the like, and instead vouches for the painting’s authenticity or provides facts supporting her opinion, then she is no longer puffing. She is now likely making fact-based statements which can qualify as warranties or promises about the work, especially if the dealer’s knowledge about the artwork is superior to the buyer’s. This is more akin to a warranty or promise.

Hopefully this summary of applicable legal rules will help buyers successfully navigate Art Week. Buyers should continue buying what they love from trusted dealers. Some will also buy and sell with an eye towards investment and turning a profit. Whatever your motives during the upcoming week, be sure to enjoy yourself. We are lucky to live amongst so much beauty. Just please leave the Jenny Brillharts for me.

Michael Galex, a senior partner at Walton, Lantaff, Schroeder & Carson, LLP, is a Miami-based attorney with over 20 years’ experience as lead trial and appellate counsel for individuals and businesses. His primary practice areas include first- and third-party insurance coverage, liability and bad faith defense, art, collectibles and antiquities-related transactional work and litigation, and general civil and criminal trials and appeals. mgalex@waltononlantaff.com; www.waltonlantaff.com.

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