Sales & Auctions: Under the hammer

In January the media reported that an item catalogued by Lawrences auctioneers in Somerset as a 19th century French claret jug, which had an estimated price of £100-£200, had been sold at auction to an anonymous buyer for £220,000. Reports quickly followed that the purchaser believed the jug to be an 11th century Fatimid ewer with a market value significantly greater than the hammer price. Specialist dealers described the find as possibly the biggest 'sleeper' ever to appear on the Islamic art market. Last month it was reported that the 'jug' is to be auctioned by Christie's on 7 October and is expected to fetch in excess of £3m. It has now been authenticated as a carved rock crystal ewer made for the court of the Fatimid rulers of Cairo in the late 10th or early 11th century. The importance of the ewer clearly was not known to the seller and had not been spotted by Lawrences. Thankfully, in this case the parties managed to avoid any dispute about the original sale. But whose side is the law on when a sleeper slips through? At auction, a sale is normally treated as binding and complete when a bid has been accepted by the fall of the hammer (section 57(2), Sale of Goods Act 1979). However, things are not always that straightforward. The common factor where a sleeper is concerned is the lack of appreciation by the seller or auctioneer of the true or potential value of the item for sale. By definition, the seller of a sleeper has failed to appreciate the true value of the item up for auction. In limited circumstances, the law may treat a contract as void where it was made on the basis of a mistaken understanding on the part of one or more of the parties at the time the contract was made. However, a high degree of proof is required to persuade a court that a mistake should nullify the sale. The court will need to consider carefully whether there has been a mistake as to the terms of the offer, as distinguished from a mistake as to the quality of what is being offered. A mistake as to the terms raises problems of offer and acceptance; but a mistake as to the quality usually does not. While in an extreme case a mistake as to the quality of what is being offered might negate the agreement by destroying the subject matter, it will not usually prevent the formation of an agreement. It is well established that a mistaken motive of one party cannot prevent the formation of an agreement, even if realised by the other party.A seller who is unable to persuade his buyer, or the court, to void the contract of sale may instead consider looking to the auctioneers for a remedy. These circumstances give rise to a possibility that the seller will bring a claim for damages - alleging a failure on the part of the auctioneers to discharge their duties. The relevant law on auctioneers' duties is set out in the important Court of Appeal decision in Luxmoore-May v Messenger May Baverstock [1990]. In that case, two paintings carrying a catalogue description of "English school. Hounds by Rocky Seashore. Panel. Pair. Oil on paper" were sold in 1985 through the auctioneers Messenger May Baverstock. A reserve of £40 was placed upon them and, to everyone's delight, they fetched £840. However, five months later the seller's pleasure turned to anger when the paintings were sold at Sotheby's for £88,000 as A Pair of Foxhounds by George Stubbs. The seller, a Mrs Luxmoore-May, sued the auctioneers for the difference between the price obtained on her sale and the subsequent sale at Sotheby's. The case established the principle that the duty of auctioneers is to express a considered opinion as to the sale value of pictures. But the question arose whether all auctioneers should be treated in the same way. The Court confirmed that a valid distinction should be made between those who might be described, by analogy with the medical profession, as general practitioners, as opposed to specialists. This provincial firm of auctioneers fell squarely within the general practitioner group and the Court held that "there is ample scope for genuine difference of opinion and one man clearly is not negligent merely because his conclusion differs from that of other professional men". Thus, the true test is whether he has failed to act with the care expected of someone in his position.There is no doubt, therefore, that auctioneers remain potentially liable for misattributions which depress the price obtained at auction, and also for advice on values and reserves which is given carelessly. However, the degree of skill and care that one is entitled to demand of a provincial auction house is rather less than one would be entitled to demand from, say, Christie's or Sotheby's. In Mrs Luxmoore-May's case, the Court found that the auctioneers had done what was expected of them and they were not liable. Where a sleeper has slipped through the net, the sale contract will not necessarily be void merely because one or both of the parties would not have made it had the true facts been realised. Each case must be carefully considered on its own facts and merits. nPhilip Davis is a partner in the commercial litigation department and Graham Ludlam a professional support lawyer at Davies Arnold Cooper.

October 08, 2008 at 09:03 PM

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