Auction Law

Question 1

Agency

Answer 1

A fiduciary relationship in which the principal grants the agent the authority to act on their behalf.

Question 2

Fiduciary Relationship

Answer 2

A trust-based relationship

Question 3

Principal

Answer 3

The person establishing the trust-based relationship (seller)

Question 4

Agent

Answer 4

The person acting on behalf of the principal (auction house member)

Question 5

Agent + Principal Relationship

Answer 5

A party (the principal) grants another party (the agent) authority to act on their behalf, and may involve a third party.

Question 6

Assignment

Answer 6

where one party assigns/ transfers their rights under the contract to a third party.

Question 7

Ratification

Answer 7

The action of signing or giving formal consent to a treaty

Question 8

Scope of the agency

Answer 8

Outlined in the agreement set out by the principal and the agent

Question 9

4 General Duties of an agent:

Answer 9

• care and skill
• to perform the principal’s lawful instructions
• trust
• confidentiality

Question 10

Specific Duties

Answer 10

What is outlined in the contract

Question 11

Consignor (Auction House)

Answer 11

The person selling the stuff

Question 12

Bailee (Auction House)

Answer 12

The agent selling the consigners stuff becomes the bailee

Question 13

4 Reasons for the termination of an agency:

Answer 13

• frustration
• death
• insanity
• principals bankruptcy

Question 14

UCC

Answer 14

Uniform Commercial Code

Under the UCC, bids are offers, the hammer forms the contract, auctions are presumed “with reserve,” and undisclosed seller bidding allows the buyer to cancel the sale.

Question 15

Irrevocable bid

Answer 15

Cannot be withdrawn or cancelled once it has been made

Question 15

Reserve

Answer 15

The minimum price the seller is willing to accept for a lot

Question 16

Provenance

Answer 16

The record of ownership, custody, and history of an artwork or cultural object

Question 17

Case Study underlining duty of care

Answer 17

Thomson vs Christie’s

• purchased 2 vases believed to be 18th century, later discovered they are 19th century.
• Thomason sues Christie’s for misrepresentation
• Judge rules Christie’s not at fault - their opinion was reasonable based on evidence and they are not supposed to undertake exhaustive research

Question 18

Case study underlining the duty to obtain best price and disclose

Answer 18

Cristallina vs Christie’s

• Sale of 8 paintings and a Christie’s NY auction, agreed by director
• specialist warns director some paintings are unlikely to meet estimates
• director does not communicate this to Cristallina
• 7 out of 8 works fail to sell
• Cristallina sues Christie’s for misrepresentation, negligence, breach of fiduciary duty, breach of contract
  CHRISTIE’S GUILTY - did not act in good faith and breached fiduciary duty