Contract to Sell Mondrian Painting Never Materialized
Following a three day bench trial, U.S. District Judge Richard Holwell recently ruled that an Upper East Side gallery did not have an enforceable breach of contract claim regarding its elaborately tied together sales arrangement with a London based buyer.
Asher Edelman, founder of Edelman Arts, originally set out to buy a Mondrian painting for a client in 2005, with the hopes of then reselling it almost immediately. "By simultaneously negotiating to buy the painting and to sell it, Edelman was engaged in arranging a back-to-back transaction, one in which an art dealer has both a buyer and seller in place and is prepared to take payment from the buyer and pay its own price over to the seller upon receipt of that payment from the buyer," the judge stated "Such transactions are common in the art world."
Edelman Arts bought the painting with the hope of then selling it to Art International, who was then planning to sell it to a third party, Galerie G. Still with me?
Galerie G, however, did not provide the prepayment it had agreed upon with Art International, and thus the deal fell through. Edelman's suit was aimed at enforcing the deal with Art International.
The judge, however, dismissed the breach of contract claim, stating that, "It was undisputed at trial that the subject of the condition precedent, i.e., that funds be received from Galerie G, never occurred." Thus, because the condition was never fulfilled, it is legally as though the contract never existed, and thus Holwell entered judgment for Art International.
Art Law cases are always incredibly interesting because aside from the compelling art itself, multiple areas of the law are almost always indicated.
While the facts may be hard to follow in this case, due to the involvement of several different parties, conditions precedent are not as uncommon as you might think. For example, they are incredibly common in Real Estate transactions, where the seller may agree to fix a crack in the foundation, or attach the home to the sewer lateral, prior to transferring title to the buyer. Conditions precedent are also infamous in Wills & Trusts, e.g. "My entire estate to my beloved son, so long as he has reached the age of 25."
What is particularly vexing here, however, is that given the fact that this decision will undoubtedly reverberate in the Art Law world, I wonder what the impact will be on potential deals. i.e. Will buyers and sellers continue to agree to deals requiring these conditions precedent, thus potentially evaporating any enforceable breach of contract claims, or will sales agreements become entirely separate from potential buyers so that dealers will not get stuck with paintings that they never intended to keep?
Whatever the case, I'm sure the New York and Los Angeles courts will be faced with further interesting cases.
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