Last summer, Grossman LLP successfully represented renowned artist and photographer Peter Beard and his studio in a lawsuit over three of his original artworks.  Our previous post on the case contains more detail, but in short, the defendants in the case, led by art collector Bernie Chase, argued that Chase had bought the works through a series of oral “handshake” deals, while Grossman LLP argued, on behalf of Mr. Beard, that there was no enforceable contract that met the standards of New York law.  The trial court judge, New York Supreme Court Judge Charles Ramos, sided with Mr. Beard, ruling on summary judgment that “Defendants’ ownership claims to the Works fail as a matter of law.”
 
The Chase defendants appealed to a higher court—the state’s Supreme Court Appellate Division, First Department—which held oral arguments on the appeal in January.  And this week, the appellate court again handed an important victory to Mr. Beard.
 
The majority of the five-judge panel first affirmed the lower court’s ruling that any purported contract was governed by New York’s Uniform Commercial Code § 2-201, commonly known as the “U.C.C. Statute of Frauds,” which provides that sales of goods for $500 or more are unenforceable unless memorialized in a writing, “sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought,” or that party’s agent.  (It was undisputed that there was no such writing between the parties, but the Chase defendants had attempted to avoid the Statute of Frauds by arguing that, because Mr. Beard was still working on the pieces at the time of the purported agreement, the contract was one for Mr. Beard’s “services,” not for goods.)
 
Second, the majority of the appellate judges also rejected the defendants’ argument that the Statute of Frauds should not apply to them because the parties had at least partially performed under the purported agreement.  As the appellate panel recognized, New York law will apply such an exception only if there is evidence of payment (by the buyer) and acceptance (by the seller) that is “unequivocally referable” to the disputed contract—as the Judge Ramos explained in his decision, this means there is evidence of conduct that is “inconsistent with any other explanation” besides the purported sale. Here, the appellate court recognized that the defendants could not meet that standard where their evidence of payment—which consisted primarily of a series of unlabeled wire transfers to a third party, combined with witness testimony claiming that thousands of dollars had been passed along to Mr. Beard in cash or “in-kind” by paying various bills for him—was explainable by “alternative explanations.”
 
This case stands as a reminder that the art business is governed by specific legal requirements, and when a dispute arises, parties will be held to those requirements; adequate contracts and transaction documents are not optional.