Translated from the French original.
I. Introduction
Sold in 2005 for the modest sum of USD 1,175, the painting known as Salvator Mundi was then considered a late copy. Its fortunes changed when art historian Martin Kemp authenticated it as a work by Leonardo da Vinci. This attribution led to a new appraisal of the piece, now included in the master’s body of work, and triggered a spectacular surge in its value.
On the basis of this authentication, the painting was sold in 2013 for USD 127,500,000, and reached its peak price in 2017 when it was sold by Christie’s for USD 450,000,000, becoming the most expensive work ever sold at auction. This dizzying trajectory illustrates the central role played by expertise and attribution in establishing the value of a work of art. It also reveals the fragility of a market based on expert opinions, sometimes contested a posteriori, and the considerable economic implications that may follow.
Beyond this emblematic case, attribution errors are a recurring phenomenon in the art market. They arise in the form of ‘sleepers’, (‘Sleepers’ – the auction of misattributed works of art and collectibles under Swiss law, in Anne Laure Bandle/Frédéric Elsig (eds.), Risks and Perils in the Attribution of Works of Art: From Expert Practice to Legal Aspects, Zurich 2018, Schulthess Editions romandes, p. 49ff., cited as ‘Bandle’), works sold at low prices due to under-attribution, as well as ‘fakes’, where the buyer acquires a work whose authenticity or attribution is subsequently found to be incorrect. These situations highlight an information asymmetry between market participants, namely the seller, the buyer and the auction house.
This raises several questions: how does Swiss law deal with attribution errors at auction? What remedies are available to the seller and the buyer respectively? And above all, to what extent can auction houses be held liable, even though they often play a decisive role in the appraisal and valuation of works?
As we shall see, Swiss law tends to place the legal and economic consequences of attribution errors primarily on the seller or the buyer, whilst auction houses, in practice, benefit from liability that is largely limited by contractual arrangements and exemption clauses.
II. ‘Sleepers’ and ‘Fakes’
A ‘sleeper’ refers to a work of art or collectable sold at a low price due to an attribution error (Bandle, p. 53). Once ‘rediscovered, its value may increase manyfold, as was the case in the famous ‘New Jersey Rembrandt’ affair, where a work by Rembrandt sold for USD 870,000 after being estimated at between USD 500 and 800 (Bandle, p. 51).
The ‘sleeper’ represents, in a sense, the opposite of a forgery or an erroneous attribution. In the latter case, the buyer acquires an object believing it possesses essential characteristics justifying its value, whereas this is not the case (Olivier Weber-Calfisch, Fakes and Defects in the Sale of Works of Art: A Legal Study of the Question of Authenticity and Warranty for Defects in the Sale of Works of Art, Geneva: Georg, 1980, p. 37. On this point, Olivier Weber-Calfisch stated that in the absence of authenticity, ‘the object loses its identity’). Let us illustrate this with the example of the famous drawing attributed to Picasso, sold for CHF 250,000, which the Picasso Committee ultimately concluded was inauthentic, thereby reducing its value to nothing (TF 114 II 131, JdT 1998 I 50.).
In the art world, attribution is a fundamental benchmark as it directly influences the price of a work of art. Auction houses may therefore be tempted to adopt more favourable attributions in order to increase the estimate of a work, which has the advantage of encouraging a seller to entrust the work to them, thereby increasing the commission received by the house in the event of a sale, sometimes to the detriment of scientific rigour. The reverse is also possible; an auction house might also, due to a lack of time or resources, neglect to carry out an expert appraisal.
III. Nature of contractual relationships: between mandate and limited liability
Under Swiss law, the nature of contractual relationships depends on the actual and shared intention of the parties, in accordance with Article 18 of the Swiss Code of Obligations (CO) (Bandle, pp. 59–60). When applied to the art trade, however, this principle raises significant difficulties where the auction house acts as an intermediary between the owner of the work and the buyer.
The majority of auction houses state in their general terms and conditions that they act as agents of the seller, within the meaning of Art. 394 et seq. CO. For example, Art. 1 of the Terms and Conditions of Sale of the auction house Koller Auktionen provides that ‘[t]he auction items shall be auctioned by Koller in the name of and on behalf of the person who has consigned them (“Principal”). Koller acts in the name of and on behalf of the Principal as a direct/immediate representative within the meaning of Art. 32 para. 1 CO.
According to this interpretation, the auction house acts as the direct representative of the owner of the work. In accordance with Article 32(1) of the Swiss Code of Obligations, the rights and obligations arising from the contract of sale then arise directly in respect of the principal, who legally becomes the seller. The auction house is, in principle, not contractually bound to the buyer and bears neither liability for defects nor a guarantee of the work’s authenticity. It can only be held liable towards the seller, on the basis of the agency contract, particularly in the event of a breach of its duties of care (see Art. 398 CO). This arrangement is therefore particularly advantageous for the auction house, insofar as it significantly limits its legal risks.
However, this classification faces an initial practical obstacle: although auction houses claim to act ‘in the name and on behalf of’ the consignor, they generally fail to disclose the seller’s identity to the buyer. This is problematic for various reasons (Bandle, p. 60). Firstly, it is worth noting Article 16(3) of the Federal Act on the International Transfer of Cultural Property (LTBC), which creates the obligation for art dealers and auction houses to retain the identity of the supplier and the seller for 30 years. Thus, assuming the purchaser is a person active in the art trade, the latter must, within the meaning of the LTBC, know the identity of the seller if they are to fulfil their duty of care.
Secondly, legal doctrine considers that the disclosure of the principal constitutes a necessary condition for the recognition of direct representation within the meaning of Art. 32(1) CO (Bandle, p. 60). Failing this, the situation amounts to the conclusion of a contract in the name of an anonymous party, the admissibility of which is debated in legal scholarship for reasons of legal certainty (Joëlle Becker, ‘Relation entre le fournisseur et la maison de vente’ in La vente aux enchères d’objets d’art en droit privé suisse: représentation, relations contractuelles et responsabilité, Etudes en droit de l’art vol. 21, Geneva 2011 Schulthess Editions romandes, N 277).
If it is accepted that direct representation cannot be applied in such a context, then the regime of indirect representation must be applied. In this case, the auction house is regarded as the buyer’s true contracting party, whilst the consignor is merely a supplier, bound to the auction house by an internal contract, generally described as an agency agreement (Bandle, p. 60). Auction houses would thus act in the manner of a commission agent, contracting in their own name but on behalf of the seller (Art. 425 et seq.); the buyer’s rights vis-à-vis the auction house would then be equivalent to those arising from an ordinary contract of sale (Bandle, p. 60). This is the most common practice adopted under Italian law (CIAN G., Commentario del Codice Civile, Art. 1731–1736, 2024).
This classification is reinforced by other indicators. Indeed, many auction houses expressly provide guarantees, particularly regarding the authenticity or provenance of the works. Thus, Christie’s stipulates in its general terms and conditions, clause E.2, that it ‘guarantees, subject to the provisions below, the authenticity of the lots offered for sale ”. Whilst these guarantees are primarily intended to reassure buyers by giving them the impression that they are contracting with a known and solvent party, they also constitute strong evidence in favour of the auction house’s status as a contracting party. In such a scenario, the auction house contracts with the buyer in its own name and reserves the right to subsequently seek recourse against the seller on the basis of the internal relationship.
Consequently, the first problem faced by buyers and sellers of a misattributed work is determining against whom they should take action.
IV. Actions to be brought
1) Fundamental error and warranty claim
The second problem is determining what remedies are available to the various parties involved. In the case of a forgery or a ‘sleeper’, the first possible remedy is a claim based on fundamental error (Art. 23 et seq. CO). The concept of ‘fundamental error’, in particular the basic error referred to in Art. 24(1)(4) CO, requires the fulfilment of two cumulative conditions: the error must have been subjectively decisive for the party relying on it and objectively recognisable as fundamental for the other party (B. Schmidlin/A. Campi, Art. 23, in L. Thévenoz/F. Werro (eds.), Commentaire romand Code des obligations I, Art. 1–529 CO commentaire romand, Basel 2021, N 9 and 40 et seq. (cited as: CR CO I-Schmidlin/Campi, Art. 23/24).
This category includes errors concerning the authenticity of works of art or collections, provided that such assets are not used as objects of speculation (CR CO I-Schmidlin/Campi, Art. 23/24, N 48). The case law of the Federal Supreme Court therefore recognises that an error regarding the authenticity or attribution of a work may constitute a fundamental error, provided that the reality differs from the contractual description (Federal Supreme Court judgment 5A_337/2013 of 23 October 2013, para. 5.2.1; ATF 82 II 411, JdT 1957 I 182; ATF 114 II 131, JdT 1988 I 508).
Such an action could be brought not only by the purchaser who has acquired a forgery, but also by the seller who has sold a ‘sleeper’. However, whilst an error regarding authenticity may in principle give rise to an action based on a fundamental error where it concerns a fundamental attribute of the work, such as the artist, the period or the provenance, taking into account a purely speculative motive leads to a more nuanced analysis. Given that works of art are increasingly viewed as assets with a strong speculative dimension, it is worth considering whether, in certain cases, the avenue of fundamental error might not be closed and, consequently, whether it would not be appropriate to re-examine this solution and, where appropriate, with a view to standardising the approach, to exclude the invocation of fundamental error in the field of art. Take, for example, the French Art Fund (Inocap Gestion), which invests in both artworks and art-related shares.
In the event of a forgery, the buyer also has the possibility to claim a warranty against defects (Art. 197 et seq. CO). This is the primary remedy in practice and available only to the buyer, since this article expressly provides that ‘the seller is obliged to warrant the buyer’.
The defect thus constitutes a quality defect, that is to say, an element that impairs the value or utility of the item (CR CO I-Schmidlin/Campi, Art. 23/24, N 3). The defect may concern a material quality, a physical property of the item, and covers not only ‘defects’ in the technical sense of the term, but also the authenticity of a work (CR CO I-Schmidlin/Campi, Art. 23/24, N 4).
The question of whether there is an alternative or exclusive relationship between the action based on Art. 23 CO (fundamental error) and that based on Art. 197 CO (warranty against defects) remains open. Whilst the law is silent on this point, the Federal Supreme Court clearly recognises an alternative concurrence between the two regimes. Legal scholarship, however, is divided: one school advocates an exclusive approach, whilst another supports the possibility of concurrent application (CR CO I-Schmidlin/Campi, Art. 23/24, N 70ff).
Whilst the warranty claim thus offers the buyer an additional remedy, it is nevertheless subject to strict conditions: the buyer must inspect the goods without delay, report defects immediately and act within very short time limits (Art. 210 CO), which commence upon delivery of the goods.
Finally, according to the Federal Supreme Court, when the buyer chooses to bring a warranty claim, they ratify the contract, and in doing so, thereby exclude any recourse to an action for fundamental error (ATF 127 III 83 para. 1c.). These requirements thus make the warranty claim difficult to invoke.
2) Exclusion of liability in the event of an erroneous attribution
However, in practice, the general terms and conditions of auction houses frequently provide for a very broad exclusion of liability in the event of an erroneous attribution, which is presented as a mere opinion. Thus, the auction house Piguet states in its catalogues (Art. 6) that the information provided constitutes only ‘the expression of an opinion and does not constitute a guarantee’. Similarly, the auction house Koller Auktionen specifies in its Art. 4.2 that ‘the information contained in the catalogue, as well as in the condition reports, represents only a general assessment and a non-binding evaluation ”.
Where an action is brought against the auction house itself, it therefore comes up against these disclaimers. These clauses generally exclude any warranty regarding the attribution, authenticity or estimated value of the works. Case law recognises in this regard that an error concerning a quality expressly excluded from warranty cannot, as a general rule, justify the invalidation of the contract (ATF 91 II 279 para. 2; ATF 95 III 21 para. 3; ATF 123 III 165; 126 III 59).
Furthermore, case law recognises that the parties may, to a certain extent, restrict the invocation of fundamental error by introducing clauses excluding guarantees or accepting a risk. In this regard, the Federal Supreme Court has held that a fundamental error cannot be upheld where the mistaken belief relates to characteristics of the item that could have been the subject of a warranty, but which the seller has expressly excluded or refused, and the buyer has nevertheless entered into the contract. In such a case, invoking the error is contrary to good faith and must be dismissed pursuant to Art. 25(1) CO (ATF 53 II 153; ATF 91 275 para. 2b; ATF 126 III 59 para. 3).
It follows from this case law that warranty exclusion clauses influence the assessment of its essential nature. By contractually accepting a risk regarding certain specified qualities, the buyer assumes the risk of their absence and can no longer, in accordance with the rules of contractual good faith, regard these qualities as essential elements of the contract or invoke a fundamental error in relation to them within the meaning of Art. 24 para. 1 cl. 4 CO. To accept the contrary would amount to depriving warranty exclusion clauses of any practical effect. In our view, it is appropriate here to consider the distinction to be made between a warranty exclusion clause incorporated into the contract itself and one contained in general terms and conditions.
It follows that, depending on the scope of the agreed warranty exclusion, the buyer may be denied both the rights arising from the statutory warranty regime for defects (Art. 197 et seq. CO) and the possibility of rescinding the sale on the grounds of a material mistake. However, this limitation is only permissible provided that the clause complies with the requirements of good faith, is neither unfair nor surprising, and does not render the statutory protection meaningless.
Finally, where the error arises from an auxiliary within the meaning of Art. 101(1) CO – which is often the case in practice, as it is generally employees who carry out the appraisals – the auction house may in principle exclude its liability, whilst remaining liable for the selection, training and supervision of that auxiliary, with no possibility of exemption in the event of fraud or gross negligence. In this regard, a flawed appraisal classifying an item as genuine when it is in fact a forgery, or vice versa, does not in our view necessarily constitute gross negligence under Swiss law.
If the appraisal is delegated to an external expert, the firm is liable as for its own acts in the absence of the seller’s consent (Art. 399(1) CO); with such agreement, its liability is limited to the choice of expert and the instructions given (Art. 399(2) CO) (Bandle, p. 64ff). It is worth emphasising here the decisive importance of the choice of expert, particularly with regard to their specialisation (historical period, artist, movement, etc.), as well as the analytical methods employed. In this regard, we are also seeing the emergence of new technological tools: certain firms and companies now offer authentication services based on artificial intelligence. It will therefore be interesting to observe how the courts will assess the decision to use this type of expertise.
Consequently, the chances of success of a claim brought by a buyer or seller against an auction house remain, in practice, relatively limited, particularly where the general terms and conditions have been validly accepted and applied in good faith.
3) Action for breach of the agency contract
For sleeprers and if it is considered that the seller is a party to the contract (see supra), the focus of the dispute shifts to liability for breach of the agency contract (Art. 398(2) CO), which imposes on the auction house a dual duty of care and loyalty towards its principal (Bandle, p. 64ff) . This is not an obligation of result regarding the ‘correct’ attribution, but a heightened obligation of means: to act as a conscientious auction house would in similar circumstances, taking into account the difficulty of authentication, the time available, the importance of the matter and the qualifications of the experts engaged (Bandle, p. 64ff).
Thus, as we have seen above, auction houses will also invoke their disclaimers, considering that their duty is subject to certain limits.
V. Conclusion
The analysis of ‘sleepers’ and forgeries at auction highlights the limitations of Swiss law in the face of the specificities of the art market. Whilst attribution errors may in theory open the way to remedies based on fundamental error, warranty for defects or breach of the agency contract, in practice these mechanisms often face numerous obstacles such as strict time limits, contractual acceptance of risk and liability exemption clauses.
The result is a situation in which auction houses, although the primary authors of the expert reports and thus of the valuation of the works, most often manage to avoid the legal consequences of an erroneous attribution. The economic risk is thus largely shifted onto the seller or the buyer, which has the effect of undermining the trust placed in auction houses, a trust which nevertheless forms the foundation of the art market.
VI. Assessment
In light of the above analysis, it seems legitimate to question the balance of the system and explore possible avenues for action, with the aim of strengthening protection for the parties most at risk.
Auction houses charge high commissions from both the buyer and the seller, with the standard practice generally being around 20% of the sale price for each party. For example, Article 4 of the general terms and conditions of the Piguet auction house provides for a buyer’s commission of 25% of the sale price excluding VAT, to which is generally added a comparable commission payable by the seller, also amounting to 25% of the sale price.
These commissions cover not only the organisation of the sale, but also the work involved in appraising, attributing and valuing the artwork. Yet it is precisely these elements which, in the event of an attribution error, are the cause of the loss suffered by the buyer or seller, without the auction houses, in practice, bearing the legal consequences.
With this in mind, one avenue for consideration would be to introduce a mechanism allowing for the partial refund of commissions, to both buyer and seller, where the attribution of a work is called into question following a sale.
Such a solution would aim to create a kind of economic incentive for auction houses to exercise due diligence. Furthermore, this mechanism would have the advantage of better distributing the risk without market participants running the risk of encountering liability exemption clauses. Another advantage would be that it would not expose the parties to complex proceedings and would allow buyers and sellers to recover part of the damage suffered more easily.
This solution might risk unduly penalising small auction houses, which lack both the financial resources and access to the same experts enjoyed by larger firms. This is why, rather than introducing a legal obligation, we propose treating it as a contractual option, which could allow smaller firms to choose not to offer it.
An alternative would be to establish a presumption of due diligence in favour of auction houses that implement a documented authentication protocol, based on a minimum checklist (stylistic analysis, consultation with recognised experts, documentation of provenance). This approach would have the advantage of making due diligence more objectively measurable and limiting the courts’ need to reconstruct the auction house’s conduct. To achieve this, reference should be made to the provisions already set out in the RAM (Responsible Art Market) guidelines.
Any reform must, of course, avoid turning the authentication of a work of art into an obligation to achieve a specific result, as this would prove incompatible with the evolution of knowledge and the diversity of scientific opinions associated with authentication.