Avrora Fine Arts Investment Ltd v Christie, Manson & Woods Ltd, High Court
Avrora purchased a painting at an auction hosted by Christie’s, paying a premium as well as the auction price. The catalogue produced by Christie’s described the painting as being the work of a particular Russian artist, based on “careful study” and “the opinion of experts”. The catalogue incorporated Christie’s standard terms and conditions of sale which included:
- an express warranty that the catalogue description of the painting as “authentic and not a forgery” applied for five years from the date of sale;
- an exclusion of all other warranties, representations and guarantees, whilst also excluding liability for a number of criteria including description, condition, attribution, authenticity, rarity and provenance;
- a disclaimer that anything stated in the catalogue was a statement of opinion, was not a warranty or assumption of liability and should not be relied upon, such that buyers had to verify any goods purchased to their own satisfaction; and
- the sole remedy and limit of liability for breach of the express warranty was cancellation of the sale and a refund of the purchase price paid.
Following the purchase, Avrora discovered that the painting was probably not by the artist stated in the catalogue and sued for breach of warranty, negligence and misrepresentation.
The High Court ruled that the painting was probably not an original, meaning that Christie’s was in breach of warranty. Under Christie’s terms and conditions of sale, this was a breach of the express warranty, so Avrora could cancel the purchase and receive a refund. However, the judge rejected Avrora’s other claims for negligence and misrepresentation.
The High Court decided that, despite the clear attempts to exclude responsibility for negligence or representations regarding the painting, Christie’s had, in fact, accepted responsibility in this case for identifying the artist in the catalogue, so the relevant provisions of the terms and conditions of sale, excluding all other warranties and representations, were actually limitations on Christie’s liability. Therefore, the exclusion of claims for negligence and misrepresentation had to be “reasonable” under the Unfair Contract Terms Act 1977.
The High Court ruled that the exclusion clauses were reasonable, limiting Avrora’s claims to breach of the express warranty and a right to cancel the contract for a refund of the purchase price. The High Court said that the refund of the purchase price was a “substantial” remedy and that Christie’s exclusion of other forms of liability and remedies (including misrepresentation and negligence, despite not expressly listing negligence by name) was rational and therefore reasonable. In addition, Avrora could be expected to know of the terms and conditions of sale and had an equal bargaining power when it came to the purchase of the painting.
Simon Weinberg, a solicitor in the Commercial/IP/IT team at Matthew Arnold & Baldwin LLP, commented, “Solicitors advise clients all the time to be careful with limiting their liability under a contract to avoid the limitation being considered unreasonable and therefore unenforceable, leaving liability unlimited. This case is proof that there is a happy medium that can be reached, where an exclusion clause is reasonable; the limitation that Christie’s relied upon was reasonable in the circumstances and entirely justifiable. Christie’s accepted some liability and, despite excluding everything else, the liability that Christie’s accepted was considered reasonable. Clients should take note; whilst accepting some liability can seem an unwanted option, it is likely to provide more protection than not accepting any liability at all.”