Painting the picture: the facts
If you have had access to the media in the past few weeks you will know about a piece of art (‘Girl with Balloon’) by the infamous “Banksy” being sold at Sotheby’s auction house for circa $1.4 million. The highest offer of the day made by a European bidder was accepted by Sotheby’s. Unfortunately, the painting self-destructed immediately after the gavel dropped. The painting instantaneously started shredding through the bottom of the frame. Banksy has now confirmed he installed a shredder into the frame of the painting years before. The most expensive Banksy art at auction had therefore changed completely and was not the painting that the buyer had originally bid for.
It is assumed prior to the auction that the buyer would have been aware of Sotheby’s terms and conditions. Before commencing bidding, it is likely that the buyer would have accepted Sotheby’s terms in writing. If an express acceptance was not provided the buyer would have accepted Sotheby’s terms by implication once the buyer started bidding. Once the highest bid was made, the gavel went down confirming the agreement between the parties. At this point, the parties would have entered into a contract for Sotheby’s to provide the painting and the buyer would have been obligated to make payment of the monies offered. However, Sotheby’s could no longer provide the buyer with the painting in the condition at the time of the purchase when the contract was formed. But how did this effect the contract?
When a contract becomes frustrated: the Law
A contract had been formed for the buyer to purchase the painting. However, it is clear that the contract could no longer be fulfilled as Sotheby’s could not provide the painting that the buyer had bid for, in the condition it was in when the buyers offer was accepted and the contract was formed.
A contract may be discharged if the contract is physically impossible to fulfill. In this instance, at the point when the artwork was ‘destructed’ the contract could not technically be fulfilled by the seller. In circumstances such as this, the contract is likely to become frustrated and the parties will not be obliged to continue with the contract, as it would be impossible to do so. Normally, if a contract cannot be fulfilled the party who cannot fulfill its obligations would be liable to the other party for damages.
However, if an event does result in the contract being frustrated, the contract will automatically be discharged; this is an exception to the rule for damages for breach of contract and damages would not be payable by the party who cannot fulfill its obligation(s).
But, how do the parties determine whether an event amounts to a frustration of the contract? The parties may not be able to agree whether an act amounted to the frustration of the contract. In these circumstances a court will consider all of the facts and circumstances of the case to determine if the contract was frustrated considering the following principles:
- The event occurs after the contract has been formed;
- It is so serious it goes to the route of the contract and could not have been contemplated by either party at the time they entered into the contract;
- The event is not the fault of either party; and
- The event has made it impossible to perform the original obligations under the contract that were originally intended at the time the contract was entered into and it could not be fulfilled even in a different matter.
If the above four principles are applicable it is likely that the event will cause the frustration of the contract.
It is clear that a contract could be frustrated if an event happened which was outside of the control of either party making it impossible for one or both parties to fulfil their obligations under the contract. If the contract is frustrated the parties are unable to seek damages. In this instance as the painting self-destructed, it would satisfy the principles that the court would consider and would not fall under the relevant exceptions.
It is not clear what the situation between Sotheby’s and the buyer of the painting was. However, it has been confirmed that the buyer still wished to purchase the painting for the original bid that was accepted by Sotheby’s at the fall of the gavel. This is a great outcome for both parties particularly for the buyer who now has a painting that whilst partly destroyed is likely to be more valuable than at the fall of the gavel!
At times, issues can arise in contracts which could amount to a breach of contract or an event that lead to the contract being frustrated. If you have an issue with breach of contract and/or the frustration of a contract please contact Amiee O’Toole or a member of our dispute resolution team at Else who will be happy to assist you.
Upon releasing this article, it has since been reported that Banksy intended the artwork to be shredded in full, “In rehearsals it worked every time” Click here to view the full clip on YouTube.
Photo credit: https://pixabay.com/en/street-art-urban-banksy-wall-boy-606379/ labelled for reuse.