Commercial Transaction
Sales
Consignments
Uniform Commercial Code
State Statutes
by
Ralph E. Lerner
RalphELerner.com
ralph@artworldadvisors.com
590 Madison Ave, New York, NY, 10022
(212) 521-4437
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Emperor’s New Clothes
Hans Christian Andersen
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EXPRESS WARRANTIES
§ 2-313
1 -Any affirmation of fact or promise by the seller to the buyer
which relates to the goods and becomes part of the basis of the
bargain
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1 - Any affirmation of fact or promise by the seller to the
buyer which relates to the goods and becomes part of the
basis of the bargain
2 - Any description of the goods which is part of the basis
of the bargain
EXPRESS WARRANTIES
§ 2-313
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WEBER v. PECK
Bill of Sale
Artist: Jacob Van Ruisdael (1628-
1682)
Description: Painting entitled “A wooded
river landscape with a waterfall,
and travelers on a bridge”
signed, being an oil on canvas;
stretcher size 26” X 21”
Condition: Excellent
Provenance: “See Attached exhibit A”
Seller warrants that the above described
painting is authentic and as described above.
A wooded River Landscape
Jacob van Ruisdael
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IMPLIED WARRANTIES
§ 2-314; 315
1 - Merchantable
2 - Fitness for particular purpose
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EXCLUSION OF WARRANTIES
§ 2-316
v. Other than as specifically represented and warranted by the Seller
as set forth in this Agreement, the Buyer shall purchase the Work
in “as is” condition, without any representations or warranties by
the Seller of any kind whatsoever, express or implied, including
without limitation, representations or warranties as to value,
condition, provenance, merchantability or fitness for a particular
purpose.
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WARRANTY OF TITLE
§ 2-312
1 - In every contract the seller warrants that the title conveyed
shall be good and its transfer rightful, and
2 - The goods shall be delivered free from any security interest
or other lien or encumbrance
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DAMAGES - BREACH WARRANTY TITLE
Menzel v. List
1932 - Menzel Purchases for $150
1941 - Painting taken by Nazis
1941-1955 - Location not known
1955 - Perls purchases from dealer in
Paris for $2,800
1955 - Perls sells to List for $4,000
1962 - Menzel say “Give it back”
1966 - Jury for Menzel - value now
$22,500
Jacob’s Ladder
Marc ChagallMeasure of damages $22,500
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DAMAGES - FRAUD
Nacht v. Sotheby’s
1981 - Nacht purchases for $23,815
1996 - Nacht discovers it is not authentic
- if it was authentic value $225,000
Measure of damages $23,815 Francis Picabia
Josias
1930
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PASSAGE OF TITLE
§ 2-401
Title to goods passes from the seller to the buyer on physical
delivery of the goods, irrespective of when or even whether
payment has been made
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VOIDABLE TITLE - § 2-403(1)
ENTRUSTMENT - § 2-403(2)
Graffman v. Espel, et al.
Graffman - owner - Sweden
Espel - art merchant - Spain
Delecea - brother-in-law of Espel
art merchant - New York
Avanti Gallery - art gallery -
New York
Does - buyers of painting from
Avanti Gallery
Pablo Picasso
Le Peintre et Son Modele
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VOIDABLE TITLE - A person with voidable title has power to
transfer good title to a good faith purchaser for value.
ENTRUSTMENT - Any entrusting of possession of goods to a
merchant who deals in goods of that kind gives him power to
transfer all rights of the entrusted to a buyer in the ordinary
course of business.
VOIDABLE TITLE - § 2-403(1)
ENTRUSTMENT - § 2-403(2)
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Graffman - owner - Sweden
Espel - art merchant - Spain
Delecea - brother-in-law of Espel
art merchant - New York
Avanti Gallery - art gallery -
New York
Does - buyers of painting from
Avanti Gallery
VOIDABLE TITLE - § 2-403(1)
ENTRUSTMENT - § 2-403(2)
Graffman v. Espel, et al.
Pablo Picasso
Le Peintre et Son Modele
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ENTRUSTMENT (Avanti defense)
1 - entrusting
2 - merchant
3 - deals in goods of that kind
4 - ordinary course of business
A. good faith without knowledge of violation
B. good faith - honesty in fact
C. reasonable commercial standards of fair dealing
Merchants are held to a higher standard of good faith than other
purchasers
Duty of Avanti to investigate
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1 - intention to sell
2 - merchant
3 - good faith purchaser
A. good faith means honesty in fact
B. no knowledge of other arrangements
Non-merchants held to lesser standard than merchants
VOIDABLE TITLE (Does defense)
Duty of Does to investigate
“As a matter of law, the Does had no obligation to
investigate the provenance of the Painting.”
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1 - Sign posting law
2 - files a financing statement (UCC-1)
3 - can show that dealer is “generally known by his
creditors to be substantially engaged in selling
the goods of others”
SALE ON APPROVAL - § 2-326
CONSIGNMENTS
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EXPRESS WARRANTIES - § 2-313
AUTHENTICITY
Rogath v. Siebman
In order to induce Buyer to purchase,
Seller warrants to Buyer:
1. Title
2. Authenticity
3. That the Seller has no knowledge
of any challenge to the Seller’s title
and authenticity of the Painting
Self portrait
Francis Bacon
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iv. Dealer has informed Buyer of all facts within its
knowledge about the Work, including, without limitation, facts
pertaining to the condition, authenticity, provenance and title to the
Work, and Dealer is not aware of any claims, challenges or
disputes (past, pending or threatened) relating to the Work’s
condition, authenticity, provenance or title.
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STATUTE OF LIMITATIONS - TITLE
§ 2-275
1 - prompt filing of suits
2 - protection for a defendant after period of repose - evidence
can be lost or destroyed with passage of time
3 - promotion of free trade
An action for breach of any contract for sale must be commenced
within four years after the cause of action has accrued.
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DISCOVERY RULE
Gregory Erisoty v. Jacqueline Rizik
An owner’s cause of action does not
accrue until he discovers or by
exercise of reasonable diligence
and intelligence should have
discovered, facts which form the
basis of a cause of action
Corrado Giaquinto
Winter
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DEMAND REFUSAL RULE
DeWeerth v. Baldinger
An owner’s obligation to make a
demand without unreasonable
delay includes an obligation to use
due diligence to locate the stolen
property
Claude Monet
Champs de Ble a Vetheuil
1879
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Guggenheim v. Lubell
An owner has no obligation to
use due diligence to locate his
stolen property - whether it
was unreasonable not to do
more is an issue of fact
relevant to the defense of
laches
The Cattle Dealer
(Le Marchand de Bestiaux)
Marc Chagall
1912
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Patriarchate of Jerusalem v. Christie’s
An owner’s reasonable diligence in
locating his lost property is highly
relevant to a laches defense
Doing nothing for 70 years is not
reasonable
Archimedes Palimpsest 10th century
manuscript contains writing of
Archimedes
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STATUTE OF LIMITATIONS - AUTHENTICITY
Rosen v. Spanierman
Four year statute of limitations applies.
A warranty of authenticity does not
extend to future performance of the
goods.
Lack of knowledge of the breach is not a
defense.
The Misses Wertheimer
John Singer Sargeant
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BALOG v. CENTER ART GALLERY
Hawaii
In the case of artwork which is certified authentic by an expert in the field
or a merchant dealing in goods of that type, such a certification of
authenticity constitutes an explicit Warranty of future performance
sufficient to toll the U.C.C.’s statute of limitations - but only in
Hawaii http://www.RalphELerner.com/

Ravenna v. Christie’s
Ludovico Carracci - Pieta
Cir. 1600
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