Boston, MA
Last November a federal court in New York dismissed a lawsuit by the dealer Phoenix Ancient Art, S.A. against the Kimbell Art Museum over an alleged contract to buy a Roman torso that the museum had received “on approval”. The parties did not intend to be bound without a written agreement, the court said.
The case did not go to trial because the museum moved for summary judgement to dismiss the lawsuit. The judge therefore said in his written decision that the pertinent facts he had considered to reach his judgement were either “undisputed” or, when they were “disputed” by either of the parties, were taken in favour of Phoenix.
The story begins in December 2000 when, according to the decision, Phoenix sent the Kimbell a Sumerian statuette. Upon receipt, the museum’s registrar completed a log-in form with the notation “on approval”. After Kimbell’s board authorised the purchase of the statuette, the Phoenix sent draft sales documents. Numerous changes were made, and a final sales agreement was signed in mid-December 2000.
However, the Kimbell then sought to return the object. Phoenix then agreed to buy it back, the judge said. Under a repurchase agreement that the parties executed in July 2001, Phoenix agreed to make periodic payments to the Kimbell until the original purchase price for the statuette was repaid.
As further guarantee of the repayments, Phoenix gave the Kimbell a security interest in a Roman torso, which Timothy Potts, the museum’s director, had previously viewed in Phoenix’s gallery in New York. When the torso arrived at the museum, the museum’s registrar again prepared a log-in form and a receipt, both bearing the notation “on approval.”
In November 2001, Phoenix told the museum the security interest in the torso would have to be released because it would be completing its payments two days later.
The museum was interested in buying the torso, however, and after research on it was conducted, Dr Potts negotiated a potential purchase for around $3.6 million. A board meeting in December 2001 approved the acquisition for up to $4 million.
On 12 December 2001, the Kimbell faxed Phoenix unsigned proposed sale documents, which “included a number of blank spaces to be filled in”, the court decision says.
Soon after, however, the Kimbell received a subpoena dated 17 December 2001 from a federal grand jury, requesting records relating to Phoenix, the decision says.
In January, the museum’s counsel faxed Phoenix a letter, saying that “because of certain legal issues”, counsel had advised the museum not to proceed with the purchase. The letter asked Phoenix if it wanted the torso returned at that time. Sometime the same day, Phoenix faxed the museum an invoice for the torso, the decision says. A few days later, Kimbell’s counsel confirmed that the museum would not go forward with the purchase. Phoenix then sued.
Turning from the facts to contract law, Judge Rakoff said that for a contract to be found, a “meeting of the minds” about the material terms of the transaction had to be objectively shown.
The parties indisputedly had negotiations about the possible sale, the judge said. But the museum made an express reservation not to be bound unless in writing, the decision says. In its instructions faxed to Phoenix, the Kimbell required a “completed, signed, dated and delivered” bill of sale and warranty as an unqualified condition of purchase. “No such condition was ever met,” the judge said.
Phoenix argued that since the torso was logged in by the Kimbell as “on approval”, its shipment of the object to the museum could be viewed as part-performance of the contract. But the court said the torso was shipped to the museum not as part of a contract for sale, but as security for the repurchase agreement relating to the Sumerian statuette. The museum never paid any part of the purchase price, the court said, and offered to return the object as soon as negotiations ceased.
Further, as shown by blank spaces in the documents the Kimbell sent, a number of material items remained open, including proof of good title, provenance, publications and exhibitions, the judge said.
The judge said that “not only does common experience suggest that a contract for a $4 million piece of art would be reduced to a written agreement,” but that this was clearly the parties’ course of dealing, where both the sale and repurchase of the less expensive statuette involved signed written agreements.
From 1999 to 2002, Phoenix itself “executed written agreements for every sale of artwork valued at more than $1 million”, the decision says.
The judge said the claim had to be dismissed on the separate ground that New York law requires a written contract for every sale of goods over $500. While Phoenix had referred to “snippets from various documents” in an effort to satisfy this requirement, “none of them” sufficed, the judge said. Among the excerpts it offered, Phoenix had cited the museum’s receipt for the torso, with its “on approval” phrase. “In ordinary parlance all that ‘on approval’ signifies is an offer, not an acceptance,” the judge said. The museum board’s authorisation of “up to” $4 million for the purchase, also cited by Phoenix, clearly implied that negotiations were still in progress, the judge said.
The decision was issued on 17 November 2003 by Judge Rakoff of the US District Court for the Southern District of New York. No appeal was made, and the appeal period has now expired.