Grace Waterhouse comments on the importance of written contracts in the art world.
18 April 2019
So called ‘gentlemen’s agreements’ are notorious in the art world, with dealers arranging sales of artwork on nothing more than a handshake, but the 2018 de Pury case should serve as a reminder of the importance of getting contracts down on paper.
The case centred on Gauguin’s painting Nafea faa ipoipo (meaning ‘When will you marry’?) which was sold by the Defendants, a Swiss family trust, to the Emir of Qatar in 2014 for the astronomical sum of $210 million. This sale was orchestrated, in part, by art dealer Mr de Pury, who introduced the Qatari royal family as potential buyers, and was involved in early negotiations for the sale. He did so under the impression that he would be receiving a $10 million commission, but the seller trustees decided against paying this under the mistaken belief that he had lied to them. So Mr De Pury took the defendants, once his friends, to court.
The two week court case which followed saw both parties attempt to discredit the other; putting forward an embarrassment of dishonest dealings, criminal offences and tax avoidance schemes. The judge himself refused to rely on either Mr or Mrs de Pury, whom he considered to be ‘deliberately misleading’, nor would he trust the evidence of Mr Staechlin, one of the trustees, by whose recollections the judge was ‘not persuaded’.
However, the judge was prepared to find in favour of Mr and Mrs de Pury, ordering them to be paid the $10 million, despite the lack of a written agreement in this regard. The basis for this decision lay ultimately in a meeting that took place on 26 June 2014, in which two of the trustees had agreed with Mr de Pury that if the painting was sold for $210 million, he would receive commission of $10 million. This, along with a handwritten note of the meeting with the words “Commission $10 m if $210 m”, was sufficient to amount to a binding contract. The judge found there was ‘nothing in the context or the expression of the agreement which would prevent the consensus reached from having contractual effect’.
This should serve as a stark reminder of the importance of establishing written contracts at the outset of a deal. Both parties could have avoided expensive litigation – and the outing of numerous skeletons – had they concluded a contract beforehand. It also highlights the importance of ‘entire agreement clauses’ (clauses preventing reliance on anything outside the terms of the written contract) because even the vague recollection of a meeting and a hand scribbled note can bind parties. Even in the art world, where deals are made through mutual connections and handshakes, it has never been more important to get it in writing!