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When Selling Artwork, Be Careful About the Rescission Clause

It is easy to focus on the bottom line commission when negotiating with art dealers or auction houses.However, many form consignment agreements, especially those used by major auction houses, that allow the consignee to rescind a sale many years after the sale has been consummated, for reasons such as errors in provenance and authenticity. 

The peril is that some contracts give the dealer or auction house broad discretion to determine whether such errors have occurred, including rescission provisions triggered merely by the dealer or auction house’s determination “in its sole discretion” that it “might” be subject to liability due to alleged errors in the prior sale. 

Once triggered, rescission provisions can require the sale to be unwound, artwork returned to the seller and the purchase price refunded. 

To avoid this problem, sellers should attempt to negotiate their consignment agreement to require the dealer or auction house to obtain an independent analysis that justifies the buyer’s rescission request before executing the rescission or at least articulate a reasonable determination of liability and provide such determination to the seller.