The Importance of Delivery Specifications in Art Deals

A recent case illustrates the importance of negotiating and drafting clear delivery terms in art transactions, and the need to put the parties’ agreement in writing as opposed to relying on oral communication, especially in an art market in which works may undergo material price fluctuations.

Filing a complaint on July 20, 2016 in New York state court (Docket No. 653810/2016), Blue Art Limited, a UK company owned by Old Master art dealer Fabrizio Moretti (“Blue Art”), sued art dealer David Zwirner and his gallery, a contemporary art gallery in New York and London. The complaint was for breach of contract and fraudulent concealment and inducement, regarding an unnamed piece by an undisclosed artist.

In its complaint, Blue Art alleges a claim for breach of contract for failure to deliver the work and subsequent refusal to refund the purchase price. Blue Art also pleads fraudulent concealment and inducement, arguing that defendants made reckless oral representations regarding the time of the delivery of the work, “as they had no reasonable basis to believe that the Work would be completed in a reasonable amount of time.”

Blue Art alleges that in June 2014, it agreed to buy a work from Zwirner for $2 million, and that at the time of the deal, Zwirner told Moretti that the work was in the process of being manufactured by the artist’s studio. The purchase agreement did not specify any date for completion or delivery of the artwork, which allegedly is one of a series by a world-renowned American artist.

Blue Art alleges that although it paid the full price, Zimmer failed to deliver the work. Blue Art also alleges that the value of the purchased work “has fallen dramatically in the past year”, due to Zwirner’s “mishandling of other sales of works in the same edition” by the artist, “as well as a downturn in the market.” Blue Art indicates that the work is intentionally not described to mitigate any possible further damage to the work’s value.

In an email between Blue Art and Zwirner last July, Moretti told Zwirner that he was no longer interested in the piece and wanted to cancel the deal, asking Zimmer to wire him the money back. Zwirner refused.

Zwirner filed a motion to dismiss in response to Blue Art’s complaint, claiming that this is a case of buyer’s remorse and that Moretti has lost interest in the deal. Zwirner alleges that, shortly after the purported cancellation of the deal, the artwork in fact was complete and that, on August 4, 2016, Zwirner’s gallery informed Blue Art that the artwork was ready to be delivered, but that Blue Art failed to arrange for delivery, “standing by its bogus claim that it has validly canceled the contract.”

Zwirner further argues that, because the purchase agreement between Plainitff and Zwirner’s gallery did not specify any delivery date, delivery was required only by “a reasonable time,” and Blue Art did not have the right to unilaterally treat the contract as breached for late delivery without giving the gallery advance notice and a chance to perform by a specific, reasonable date certain.

By Dorisa S. Hanrahan, Esq.

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