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Auction house not liable for damages for low sale proceeds of 'most expensive carpet in the world'

Published on 8 April 2014 at 13:40

In 2009, someone brought a Persian rug to an auction house in Augsburg, Bavaria. He wanted to sell it.  An estimate of € 900,= was made.


It was a local auction house with no specific knowledge and therefore was not a specialist in the sale of carpets. The auction house assessed the carpet and, using specialist literature, determined the origin and age. She enquired with a carpet dealer she knew about the recommended auction price. This was set at € 900,=. The carpet was offered as an antique Persian carpet intended for a collector. On October 9, 2009 the carpet was sold for € 19.500,=. A nice return, the seller must have thought at first.

 

But it was the buyer who did good business. Some months later the same carpet was offered for auction at Christie's in London. The guide price was £200,000.-- to £300,000.--. In the Christie's catalog the carpet was described as a so-called Vase carpet from Kirman (a region in south-eastern Iran). It was a carpet of which a picture had been printed in a book on Persian carpets in 1939. The carpet was sold on April 15, 2010 for £ 6.2 million (approximately € 7.2 million). 

 

The contributor to the local Augsburg auction house unsuccessfully sought damages from the auction house in two instances. The OberLandesGericht in Munich ruled in its decision of March 20, 2014, that what matters in determining the (damages) obligations of the auction house is whether the auction house exercised the care that can be expected of it as a so-called "varia auction house". So not that of an expert. The Court concluded that the auction house had not breached its obligations with respect to viewing, valuation and catalog description of the carpet.

 

The Court found that what the auction house had done to establish provenance and age was enough for it. More could not be expected from her as a general local auction house. There had been no concrete indications to assume that the carpet was exceptional. The carpet and the knotting technique as such should not have suggested otherwise. The book in which the carpet was published did not require the auction house, as a general auction house, to be familiar with it. In the absence of contraindications the auction house did not need to hire an expert. The Court of Appeals established that although there is case law that the recommended price and the actual price must be in proportion to each other, this did not apply to this case in which the auction house could assume that only experts would bid above the list price. Also the interest in the carpet at the auction should not have led the auction house to believe that the estimate of the value was wrong or too low. 

 

The Court found that the carpet had been exhibited sufficiently before the auction. The description was not wrong, admittedly somewhat short and vague, but such descriptions are common for general auction houses. Moreover, the carpet was described as Persian and antique; also as a collectible. The auction house also had no obligation to refer the owner to a more specialized or larger auction house.

 

Comment Oostwaard

This ruling is somewhat in line with other case law that an expert can be expected to function like other experts. If he is a generalist then no specialist knowledge is required. He must give an opinion as can be given by his colleagues. With regard to auction houses the distinction is made whether they operate locally or in another field in which more specialist knowledge may be assumed. An owner himself selects the place where his goods are to be sold and is therefore primarily responsible for his actions. However, where the line lies, namely where an auction house may be expected to refer, is a matter that should become clear in the future through case law. After all, there is also something to be said for the fact that someone who sells carpets should actually know what he is selling. The risk now lies very unequivocally with the owner. One could ask oneself whether these kinds of risks are not insurable or should be insured.  

 

 

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