Buyer Sues Zwirner Claiming Failure To Deliver Work Within a "Reasonable Time"
08/11/2016Prominent art dealer David Zwirner and his eponymous gallery have been sued by a buyer over a $ 2million deal gone bad, in a case that should serve as a reminder about the importance of clear contracting regarding the timing of art transactions.
In a complaint filed July 20 in New York state court (Docket No. 653810/2015, Sup. Ct. N.Y. Co.), the plaintiff, a UK-based entity called Blue Art Limited, alleges that in June 2014, it agreed to buy a work from Zwirner for $ 2 million (Artnet reports that Blue Art is headed by European art dealer Fabrizio Moretti). At the time of the deal, the plaintiff says, Zwirner told the plaintiff that the work was “in the process of being manufactured by the Artist’s studio.” (The complaint carefully avoids naming the work, in order to avoid “possible further damage to the Work’s value.”) Over the course of the following year, the plaintiff made installment payments on the work, amidst “continuous . . . assurances from Zwirner . . . that the Work was near completion and would be delivered shortly.” The plaintiff claims that the full purchase price was paid by the end of June 2015, but that Zwirner never delivered the work (and has also refused to refund the buyer’s payments). The plaintiff also alleges that, due to Zwirner’s “mishandling of other sales of works in the same edition” by the same artist, “as well as a downturn in the market,” the value of the unnamed work (and others in its series) “has fallen dramatically in the past year.”
The complaint’s first claim is for breach of contract based on the failure to deliver the work in a timely fashion (or refund the price). The second claim is for “fraudulent concealment/fraudulent inducement,” with the plaintiff urging that it agreed to buy the work “in reasonable reliance upon” Zwirner’s oral representations that the work would be completed “within a reasonable amount of time.” Plaintiff argues that those representations were reckless as Zwirner in fact “had no good-faith basis to believe” that the work would be completed promptly. The plaintiff also points to the “multiple oral representations” by Zwirner “that the Work was shortly forthcoming,” despite the fact that the defendants allegedly “knew,” but concealed, that the Work was not near completion by the Artist.”
Zwirner has already countered the complaint with a motion to dismiss, arguing first that all claims against David Zwirner himself (as opposed to his gallery entity) should be dismissed, because the complaint alleges a contract only with the gallery (and not a contract between plaintiff and Zwirner individually); likewise, Zwirner argues, the complaint does not specify any allegedly fraudulent statements made by him personally. As to the contract claim, Zwirner argues that the contract never provided a delivery date, and in the absence of a specified delivery date, New York’s Uniform Commercial Code (N.Y. U.C.C. § 2-309(1)) requires that delivery occur at “a reasonable time.” Here, says Zwirner, to cancel the contract for failure to deliver with in a reasonable time, Blue Art had to give Zwirner notice fixing a reasonable time within which to perform, and inform Zwirner that a failure to perform by that date would be considered a default; and such notice, Zwirner says, never happened. Interestingly, Zwirner also claims that as of August 4, the work is now finished and ready for delivery and plaintiff must accept it.
The court will not rule on the motion until after further briefing by the parties. But the case represents a reminder that, as we’ve seen many times before, when it comes to art transactions, a party’s vague, unwritten expectations or understandings may be difficult to enforce if a dispute later arises. And in the fast-moving art market, where the value of a work may fluctuate widely as months or years pass, buyers and sellers should negotiate at the outset clear terms regarding the timing of each step of a transaction, from installment dates to delivery dates. Savvy legal counsel may be able to help parties negotiate and draft a sale agreement so as to account for contingencies and make contractual provisions for and allocate the risk of delays.
Art Law Blog