In response to a couple of requests on the Bloomsbury Auction thread I have tried to put together some information on the legal issues involved in print buying problems and dodgy dealings.
I tried to make this simple and interesting, I failed. Whilst I hope some of you find this interesting (I’ve tried to apply it to the art world wherever possible) I admit it’s not always simple but that’s because the subject matter isn’t simple and there’s no point in me trying to make out that it is.
I apologise for the length but hope that at least a few of you find it useful.
Is there any added protection when buying from an auction?Firstly a sale by auction will not be a consumer deal for the purposes of the Unfair Contract Terms Act 1977. Therefore any contractual terms removing consumers’ usual rights under the Sales of Goods Act (satisfactory quality, fit for purpose, as described etc) will normally be effective so expect the auction house to exclude liability for everything and assume that exclusion to be valid.
Note however that consumer rights can only be excluded where there is the opportunity to attend the auction personally, although it doesn’t matter whether you did actually attend in person or not.
There are 3 distinct contracts in an auction sale:
(1) Between the seller (owner) and the highest bidder
(buyer)
(2) Between the owner and the auctioneer
(3) Between the auctioneer and the buyer
Dealing with the last one first it is important to note that the auctioneer does not warrant (ie promise) that the seller is the legal owner of the goods provided the buyer knows that the goods do not belong to the auctioneer. The closest you get to this is that the auctioneer promises that he knows of no defect in the seller’s legal title. So if your Banksy bought at auction turns out to be nicked don’t assume you can blame the auctioneers.
The auctioneer does however promise that he has authority to sell so if you win an item at auction and the seller then turns around and says the auctioneer had no right to sell that item, you will have a potential claim against the auctioneer (but you will still not receive the print from the “innocent” seller).
In reality the fact that almost all exclusion clauses will be effective (and inevitably will be present) and the limited nature of any implied warranties given by the auctioneer means that when things go wrong you will normally be left to fight it out with the seller – don’t expect any assistance from the auction house.
Be aware that e-bay is not an auction in the legal sense. I believe that there are various reasons for this but primarily it is because the sale comes to an end through the elapse of time rather than because nobody is prepared to bid higher. As a result the Sale of Goods Act and the Distance Selling Regulations will apply to most e-bay sales provided you are buying as a consumer from a business seller. The Distance Selling Regs do not apply to contracts concluded at auctions.
The Law of Mistake.
Most people have a basic understanding of the Sale of Goods Act and of the principles of offer and acceptance but when dealing with authenticity issues or more general dodgy dealings almost inevitably the law of mistake will come into play. This is a very complex area and one that most lay people do not appreciate. I think this is partly because consumer websites like the CAB or Consumerdirect steer well clear due to its complexity and secondly because with such a simple sounding name people assume it can’t be that complicated.
The basic issue here is whether the buyer can “escape” from an unfavourable contract on the basis of mistake.
There are several different sub-categories of mistake, some are more likely to arise in the context of art sales than others but it may be useful to briefly go through the main ones:
Mistake as to Quality or Subject MatterThis is the one that concerns authenticity and assumes that both the buyer and the seller mistakenly believe the item to be genuine. Generally if you buy a Banksy that both you and the seller believe to be authentic but it turns out to not to be the contract will be valid. This happened with a Constable painting in Leaf –v- International Galleries and the buyer was stuck with it. You are deemed to have agreed to purchase that physical item regardless of its true quality.
Despite this you may be able to argue that you actually bought something so fundamentally different to what you believed you were buying that the contract ought to be void for mistake as to subject matter. In Nicholson & Venn –v- Smith Marriott the buyer bought table napkins described as having been owned by Charles I, however they turned out to be Georgian and worth much less. In this case it was suggested that the contract could have been declared void however for various reasons it was unnecessary for the court to decide whether it actually was.
There is a very fine distinction, if any, between these two scenarios but still we have two different outcomes. This is recognised as the most difficult part of the law of mistake.
The real distinction lies in the difference between a mistake as to substance and a mistake as to quality but this is a very, very fine distinction as the two are often inextricably intertwined – are you buying your Banksy print for the image, in which case the true identity of the artist is irrelevant, you have the print you agreed to buy and the reduced “quality” of the print if it turns out to be a Pranksy will not allow you to escape the contract, or are you buying “a Banksy” and if it is not by Banksy then it is something fundamentally different to what you believed, ie a mistake as to the actual substance or subject matter of the contract, that may allow you to escape the deal. A very fine line and one which will ultimately be decided on a case by case basis depending on the evidence given by the parties.
Mutual MistakeThis one is fairly simply to explain: I have previously visited your house and admired your Grin Reaper on the wall. One day you offer to sell me your “Banksy” for £4000 and I agree. I have assumed you are talking about the Grin Reaper but unknown to me, you also have an unframed Flags under your bed and it is this print that you are offering to sell. Obviously I don’t really want to be held to having to buy your Flags for £4,000!!
In this case it will be easy for me to escape, you thought the agreement was for one thing, I thought it was for another. There was never a true meeting of minds as a result of our respective assumptions and this is mutual mistake.
Operative MistakeRemember the Tesco X-Box thread? Tesco’s mistakenly listed X-boxes for sale on their website for £36 – once orders had been accepted were they obliged to honour the deal?
The general rule is that
“A seller who, as a result of some miscalculation, offers goods at a price lower than that which he would have asked but for the mistake cannot, after the offer has been accepted generally rely on the mistake to make the contract void” However, this principle has been tempered through the development of case law which now ensures that a mistake as to the terms of the contract, if known to the other party, may avoid the contract. There has been uncertainty as to whether the mistake must actually be known to the other party or whether it is enough that it ought to have been apparent to any reasonable man. It is now pretty well resolved that the latter is correct, for example in Hartog –v- Colin & Shields the sellers escaped from a contract in which they had mistakenly agreed a price per pound when it should have been per piece. It was decided that the buyers must have realised the sellers’ error and the contract was declared void.
Mistake as to IdentityThis is less relevant than it used to be as people become more aware of the potential for fraud but it can become an issue in several circumstances. For example, lets say you are approached by an individual named David Smith who says that he represents a reputable gallery that you have heard of, who says he would like to pay £5,000 for your Banksy. Maybe you even call the gallery who confirm that David Smith works there. On this basis you sell him your print but it then transpires that the cash/cheque is fake and that the buyer was in fact a rogue fraudulently purporting to be David Smith. Only being in it for the money he has very quickly sold on your Banksy to an innocent seller – he is long gone but can you recover your print from its new owner?
The answer is that you may well be able to on the basis of mistake as to identity in that you intended to deal only with the reputable gallery and not with the rogue. As the contract is void, no title will have passed to the rogue and so he was unable to pass title to the innocent buyer who would have to return it to you. They would be left to pursue the dishonest seller.
Sounds simple enough but now consider a very similar situation where you meet another David Smith who has told you he is a wealthy art collector and again would like to buy your Banksy. The money is handed over personally and again turns out to be fake and “David Smith” an assumed identity. Is the contract void as in the previous situation?
Almost certainly not. Although you thought you were dealing with David Smith when actually you were not this is probably not a mistake as to identity. The courts are likely to conclude that you intended to contract with the person stood in front of you whatever his name may be. The only mistake is to that person’s honesty or credit-worthiness, not his identity.
On the face of it there is little difference between these two scenarios but probably a very different outcome for you as a seller. The crucial question is whether the mistake is to the buyers’ actual identity (second scenario) or to the capacity in which buyer deals (first scenario)
The above scenarios assume a face-to-face transaction and these days many sales will be online. Recently after BLKMRT’s decision to only permit those on a particular list to buy an Ian Francis, several members queried whether the gallery could refuse to supply the pieces to buyers whose orders were accepted despite not being on the list. At the time I suggested that (under UK law anyway) they may be able to escape those contracts on the basis of mistake as to identity ie they only intended to deal with those that had been on the list. In order to rely on this argument they would have to show that:
(1) The identity of the other party must be of crucial importance (here it may well have been as they went to the time and trouble of selecting those to be e-mailed)
(2) The mistaken party must have in mind an identifiable person with whom he or she intends to contract (ie only the named individuals who had been e-mailed)
(3) The other party must be aware of the mistake (which they would have been since they would have had to have obtained the log in details from an alternative source)
There are in fact other forms of mistake in addition to the above but these are the most relevant and the others are simply too specialist to get bogged down with.
MisrepresentationNeedless to say any description that is applied to an item must be true. If it is not and you proceed with the contract in reliance on that misrepresentation then you will be entitled to escape the contract and/or receive damages. Again this is more complicated than you may imagine with misrepresentations being either fraudulent, negligent or innocent but I think we’ll leave that for another time!!
Sale of Goods ActI haven't dealt with this here as I think most of you have a pretty good understanding of the basic but if anybody would like me to do so I'm happy to.
If nothing else, I hope this helps you all appreciate that there is more to contract law than the CAB website would have you believe - no disrespect to the CAB intended, they do a great job.