Legal Risk Management for Trade of Calligraphy and Painting Works

By Liu Shijie,[Patent]

In recent years, the market of calligraphy and painting art works has become increasingly prosperous. As the saying goes, people pursue “gold in times of trouble and art collection when times are flourishing.” However, the market of art works is in such chaos that people show no fear when it comes to making fake works. A chain of fraudulent printing, publishing and selling has even been formed. Therefore, both buyers and artists are trapped in an awkward situation where it’s difficult to protect their legitimate rights and interests.
Case Playback
Shenyang Intermediate People’s Court made the final decision on the lawsuit raised by Feng Jun, an entrepreneur against an art company in Shenyang for the sale of a fake painting. Feng Jun won the lawsuit after six years’ trial and got his money back. Many of the media believe that the judicial decision breaks the guild regulation that art companies are only responsible for the sale and instead of authenticity insurance for the art works. Actually, this is not always true, because “sale without authenticity insurance” mainly refers to the guild regulation under the trading rules of auctions.
Feng Jun bought the painting works on condition that the person in charge of the art company committed that the art paintings were all genuine and would return the money if they were fake. Feng paid 810,000 yuan for seven paintings, including the Plum& Magpie, Wisteria and Crab by Qi Baishi, Pine and Gentlemen by Ren Bonian, Great Egret by Lin Fengmian, Rest on Autumn Cliff by Pan Tianshou and Splash of Colorful Landscape by Liu Haisu. All of the seven paintings were identified as fake and Feng Jun then launched the lawsuit. It is clear that the transaction method of art works has a significant impact on trade risk.
Methods of Calligraphy and Painting Trade
Generally, there are two common transaction methods for calligraphy and painting works. One way is that buyers purchase directly from painting and calligraphy art shops, art companies or individuals, and the other way is to purchase in auction.
The first way can be called a general transaction, which is regulated by the Contract Law; the second one can be called an auction transaction and is regulated by the Auction Law. Though general transactions and auction transactions are both trade in the legal sense, the trading rules regulating the two methods have essential differences. For example, the auction company’s warranty liability in an auction is much weaker than general trade. Auction companies have the right to make a disclaimer on the defects of the auction items while purchasers bear a much heavier obligation to inspect the underlying defect of the trading items in auction than in the general transaction.
General Legal Risk Management for Calligraphy and Painting Trade
In the above-mentioned case, the transaction by Feng Jun was a general trading. In this case, if the buyer were a natural person, he could defend his legitimate rights and interests according to the Contract Law as well as related regulations in the Consumer Protection Law. Since Feng Jun has evidence that the seven paintings bought from the defendant company were indentified as fake and he paid the corresponding fees and other reasonable expenses, the court fully justified his claim because the guild regulation of “sale without authenticity insurance” was found to be conflicting with the provisions of China’s general trade laws and regulations and were found not to be applicable in this case.
The writer even believes that Feng Jun may also require the company to return damages which are double the amount of the painting purchase price and request for compensation for reasonable expenses according to Article 49 of the Consumer Protection Law. Article 49 provides that “a business operator that practices fraud in providing a commodity or a service must, at the request of the consumer, increase the compensation for losses incurred by such consumer. The amount of the increase in compensation shall be the price of the commodity purchased or the fee for the service received by the consumer.”
Therefore, it’s better for the purchaser of paintings works to sign a written agreement with the seller, which shall include a clause regarding the genuine nature of the works. Also, purchaser should keep a trade agreement, trade bill and certificate of authenticity as evidence to protect his or her legitimate rights and interests in case there is a dispute. For the seller, he should fully identify the authenticity of art work before sale and make no commitment inconsistent with the nature of the work. Also, the seller should sign a written agreement with the original holder of the works, which should also include the clause on the legal responsibilities born by both parties if the works are proven to be counterfeits.
Legal Risk Management for Calligraphy and Painting Auction
Talking about the auction transaction, the lawsuit between Su Minluo and Beijing Hanhai Auction Company is well known. Su purchased the Wu Guanzhong’s painting of Pond at the Hanhai Auction, but the painting was identified as a fake. Su lost the first trial in this case. The result of the second trial is still unknown but not optimistic. Obviously, in Feng Jun’s case, the guild regulation of “sale without authenticity insurance” is not applicable, since the guild regulation is only recognized by paragraph 2, Article 61 of the Auction Law, which provides that “where an auctioneer and client declare, prior to the auction sale, that they cannot guarantee the genuineness or quality of an object of auction, they shall not be liable for the guaranty of the object.”
Therefore, the buyer and auctioneer should pay sufficient attention to the legal risk caused by “sale without authenticity insurance” in the calligraphy and painting auction. First of all, the auction company shall publish an announcement seven days before the auction day. Once the buyers desire to buy, they should gather information as soon as possible and make preparations for purchase. Secondly, the auction company shall display the objects no less than two days and check the conditions and auction information. If buyers desire to purchase, they should ask the auction company to provide the written documents on the object sources and defects. They should also undertake a comprehensive examination on the materials to check whether or not the authenticity or quality can be guaranteed. At the same time, they should make a preliminary conclusion by ways of appraisal, literature evidence and instrumental detection of forgeries.
If the auction company makes a disclaimer statement and does not guarantee the authenticity or quality, it will not assume warranty responsibility and will enjoy exemption if the auction items are fake goods. As for Su Minluo, he may still lose the lawsuit. Therefore, when the authenticity of the auction items can not be determined, buyers of the entrance level should give up purchase while senior purchasers should be more careful. Thirdly, if the purchased works of art are found fake and the auction company made no declaimer statement, the buyers should raise legal proceedings within one year from the date when they know or should have known about the damage; the falsification. They may bar the filing the lawsuit if the claim exceeds the time limitation, often referred to as the statute of limitations for filing a claim.
In summary, parties involved in calligraphy and painting art trade should fully understand the differences between general transaction and auction transaction to better guard against legal risks.

Liu Shijie is a member of the Expert Advisory Board for the China Intellectual Property magazine, senior partner of the Beijing Dacheng Law Offices, lawyer, member of Intellectual Property Professional Committee of the All-China Lawyers Association, the Seventh Company Law Committee and the Eighth Copyright Law Committee of Beijing Lawyers Association, freelance writer for Cultural and Creative Industry Week, member of the China Democratic National Construction Association and Deputy Director of the Eighth Branch of Xicheng District, Vice President of Assistance Teaching Fund of the Central Committee Youth Development Foundation, one of the first instructors of National Business Account Management Training Program, member of the China Law Society and the China Behavior Law Association.

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