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Harvey Manes MD

Introduction - Article by Harvey Manes MD - continued

Section 1-The Issue of Art-Fraud

Depending on the jurisdiction and the facts of the case, a suit for art fraud can be heard in either contracts or torts. Even though the issues with regard to fine art are different from those involving other forms of personal property, fine art is still classified under the general category of "goods." . The Uniform Commercial Code (hereafter-UCC) warrantee can either be express under 2-313, which means the seller guarantees the validity of the goods in writing, or implied, under 2-314 and 2-315, which means that the goods sold are what they purport to be and are merchantable. These provisions go beyond the doctrine of caveat emptor and are a kind of a strict liability similar to product liability found in torts. The statute of limitations (hereafter-SOL) under the UCC § 2-725 is four years from the time of purchase. This relatively short limitation puts the buyers at a disadvantage since frequently the fraud or negligence is not discovered until many years later. (See cases, infra). However, the UCC assumes that both parties are sophisticated and therefore the buyer is expected to find the mistake within the four years period. The "code" does not consider the fact that the retail buyer is frequently not sophisticated and may have no idea what a SOL means or that it even exists. Therefore, in order to give further protection to the retail buyer some courts have interpreted the SOL to start at the time of discovery; a concept that is used in torts.
The discovery rule first arose in the U.S. as an equitable remedy in the area of medical malpractice. It was applied when a foreign object was left in the patient who did not discovery the mistake until after the SOL had run. It is appropriate "whenever equity and justice have seemed to call for its application." The discovery rule recognizes that a person kept ignorant of the location of his artwork should not be barred from asserting a claim at a later date.

Apart from the SOL problem, the buyer has to prove either negligence or fraud. An action for outright fraud or negligence is more commonly sounded in torts. In order to sue for fraud, the buyer has the difficult burden of proving that the dealer knowingly and maliciously sold a fake and that the buyer reasonably relied on the misrepresentation to his own detriment. A dealer could easily defend himself by claiming that he did not know that the artwork was a fake and that in his opinion it was genuine and therefore he does not have the scienter necessary to prove fraud. Reputable dealers and experts frequently disagree and well-executed copies can fool even the most qualified experts. For example, in May 2000, both Christies and Sotheby’s were offering the same painting by Gauguin for sale and was listed in their catalogues at the same time. The one at Christies turned out to be the fake.

The burden of proof

Harvey Manes, M.D.


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