Earlier this summer, a New York state court published a written opinion granting summary judgment to famed artist, Peter Beard, in an important lawsuit that will cause art-market participants to think twice before entering into hand-shake deals.

Grossman LLP filed this suit on behalf of Beard and his eponymous Studio against a group of defendants led by art collector Bernie Chase. Beard’s complaint alleged that during a series of interactions in the fall of 2013, Chase had taken possession of three artworks created by Beard, without permission from or compensation to Beard, and further, that Chase and his co-defendants had then marketed the works for sale at a New York gallery partially owned by Chase (and in fact had succeeded in selling one of the three pieces). Chase, in response, claimed that, during a party at the home of a mutual acquaintance in the fall of 2013, he and Beard had reached a “handshake deal” for the sale of two of the artworks to Chase. He claimed that he and Beard orally agreed to the sale of the third piece a few weeks later, and therefore that he was the valid owner of the three artworks.

Following discovery, Beard and his Studio filed a motion for partial summary judgment on their title claims, urging that the record lacked documentary evidence of any written sale contract that would satisfy the requirements of New York law, and further that there was no evidence that would allow the Chase defendants to circumvent those requirements, and that therefore the defendants could not prevail. After oral argument, Supreme Court Judge Charles Ramos agreed: “Defendants’ ownership claims to the Works fail as a matter of law.”

The decision hinges in part on a section of the New York Uniform Commercial Code, N.Y. U.C.C § 2-201, commonly known as the “Statute of Frauds.” The Statute 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). Here, per the Chase parties’ own version of events, the purported handshake deals were for amounts far greater than $500. It was undisputed, however, that the only written documentation of these purported deals was in the form of two “receipts” handwritten by a mutual acquaintance of Beard and Chase.

The court’s decision affirmed that those receipts were inadequate to establish a contract that complied with the Statute of Frauds. They did not bear Mr. Beard’s signature, and the mutual acquaintance’s signature did not suffice as a substitute, as there was no evidence that the acquaintance was Mr. Beard’s “agent” under New York law. In addition, the court ruled that the receipts did not even clearly identify the parties to the purported sales; Mr. Beard’s name appeared on the receipts only to identify him as the creator of the works, not necessarily as their seller. Moreover, the court ruled that the receipts did not sufficiently identify the artworks to which they referred; rather, they used ambiguous shorthand descriptions that did not match the formal titles of the works at issue in the case. Further, the purchase prices and payment timing shown on the receipts were inconsistent with Chase’s testimony in the case regarding what he had paid and when.

The Chase parties advanced several arguments attempting to circumvent the Statute of Frauds entirely. First, they sought to invoke an exception to the Statute that governs “specially manufactured goods,” based on Chase’s claim that Beard created the pieces for him. The court was unconvinced, citing case law holding that “specially manufactured goods” are, by nature, “not suitable for sale to others” besides the intended buyer. That was plainly not the case with the Beard works at issue here, which undisputedly had been marketed—and, in one case, actually sold to—other collectors.

The defendants’ next argument pointed to an exception to the Statute of Frauds that dispenses with the need for a formal writing if it can be shown that “payment has been made and accepted.” But under New York case law, this exception only applies if there is evidence of payment (by the buyer) and acceptance (by the seller) that is “unequivocally referable” to the disputed contract—as the court explained, this means there is evidence of conduct that is “inconsistent with any other explanation” besides the purported sale. Here, the court held, defendants had not met that standard. The defendants had provided evidence of a handful of wire transfers between Chase and the parties’ mutual acquaintance, and had offered deposition testimony that the acquaintance had paid various installments of that money, in cash, to Mr. Beard, or had, on various occasions, paid third-party debts on Mr. Beard’s behalf using those funds, and that Chase had thereby made full payment for the works. But the court held that this patchwork evidence of “wire transfers, hotel bills, medical bills, and periodic cash withdrawals purportedly made as payments for the Works could be explained by a variety of reasons.” As a final attempt to evade the Statute of Frauds, the defendants argued that the purported handshake deals were not really a “sale of goods” under the U.C.C. at all, but rather were a contract for Mr. Beard’s “services” in creating the works. The court again was not swayed, relying on the evidence showing that Mr. Beard’s “services” were “already significantly complete” by the time of the purported agreements.

For all these reasons, the court issued a major victory to Beard, concluding that the defendants had “failed to raise a triable issue of fact as to Plaintiffs’ ownership rights” to the artworks, and therefore that no trial is needed for the court to rule in favor of Beard and issue a declaration that Peter Beard rightfully owns the works. And in doing so, the court issued yet another stark reminder to the art world of the need for adequate documentation of agreements and payments in connection with art transactions.