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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
http://www.RalphELerner.com/
Emperor’s New Clothes
Hans Christian Andersen
http://www.RalphELerner.com/
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
http://www.RalphELerner.com/
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
http://www.RalphELerner.com/
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
http://www.RalphELerner.com/
IMPLIED WARRANTIES
§ 2-314; 315
1 - Merchantable
2 - Fitness for particular purpose
http://www.RalphELerner.com/
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.
http://www.RalphELerner.com/
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
http://www.RalphELerner.com/
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
http://www.RalphELerner.com/
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
http://www.RalphELerner.com/
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
http://www.RalphELerner.com/
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
http://www.RalphELerner.com/
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)
http://www.RalphELerner.com/
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
http://www.RalphELerner.com/
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
http://www.RalphELerner.com/
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.”
http://www.RalphELerner.com/
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
http://www.RalphELerner.com/
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
http://www.RalphELerner.com/
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.
http://www.RalphELerner.com/
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.
http://www.RalphELerner.com/
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
http://www.RalphELerner.com/
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
http://www.RalphELerner.com/
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
http://www.RalphELerner.com/
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
http://www.RalphELerner.com/
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
http://www.RalphELerner.com/
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
http://www.RalphELerner.com/

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Ralph E Lerner: Commercial Transactions.ppt

  • 1. 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 http://www.RalphELerner.com/
  • 2. Emperor’s New Clothes Hans Christian Andersen http://www.RalphELerner.com/
  • 3. 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 http://www.RalphELerner.com/
  • 4. 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 http://www.RalphELerner.com/
  • 5. 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 http://www.RalphELerner.com/
  • 6. IMPLIED WARRANTIES § 2-314; 315 1 - Merchantable 2 - Fitness for particular purpose http://www.RalphELerner.com/
  • 7. 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. http://www.RalphELerner.com/
  • 8. 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 http://www.RalphELerner.com/
  • 9. 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 http://www.RalphELerner.com/
  • 10. 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 http://www.RalphELerner.com/
  • 11. 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 http://www.RalphELerner.com/
  • 12. 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 http://www.RalphELerner.com/
  • 13. 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) http://www.RalphELerner.com/
  • 14. 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 http://www.RalphELerner.com/
  • 15. 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 http://www.RalphELerner.com/
  • 16. 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.” http://www.RalphELerner.com/
  • 17. 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 http://www.RalphELerner.com/
  • 18. 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 http://www.RalphELerner.com/
  • 19. 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. http://www.RalphELerner.com/
  • 20. 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. http://www.RalphELerner.com/
  • 21. 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 http://www.RalphELerner.com/
  • 22. 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 http://www.RalphELerner.com/
  • 23. 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 http://www.RalphELerner.com/
  • 24. 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 http://www.RalphELerner.com/
  • 25. 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 http://www.RalphELerner.com/
  • 26. 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/
  • 27. Ravenna v. Christie’s Ludovico Carracci - Pieta Cir. 1600 http://www.RalphELerner.com/