Art buyer and the law: Here are legal due diligence process for collectors

From copyright act to pricing, here's everything you need to know about laws pertaining to artworks

How important is authenticity in respect of an artwork?

One of the most perilous issues plaguing the Indian art world is rampant circulation of forged and counterfeit pieces. Several Indian artists have fallen prey to this practice. It has been reported that stalwart progressive artist S H Raza maintained bills of his paintings from the 1960s to combat this concern. 

Under the contract law, the doctrine of caveat emptor, which implies “let the buyer beware”, has been superseded with the doctrine of caveat venditor, meaning, “let the seller also beware”. This strikes an appropriate balance between the rights and obligations of the seller and the buyer in commercial transactions. Having said that, both buyers and sellers should adequately assess where the risks lie before transaction closure and ensure they are appropriately covered in case something goes wrong.

While issues regarding authenticity can be potentially mitigated in cases of direct purchase from the artist or purchase from a renowned gallery or auction house, the best protection from fraud and art forgery for any collector or buyer is to conduct an art and legal due diligence to their satisfaction. From a buyer’s perspective, it is imperative to trace the seller’s history and standing; undertake satisfactory title verification; check provenance by verifying the documentary evidence relating to the chain of custody; ask for past catalogue; and instead of relying on experts appointed by the seller, a potential buyer should appoint his own art law advisors and trusted art experts for the transaction.

What are the key concerns regarding ownership and vesting of copyright under the Copyright Act?

Under the Indian Copyright Act, 1957 (Copyright Act), copyright subsists in an artistic work. The scope of ‘artistic work’ includes a painting, a sculpture, a drawing, an engraving or a photograph, whether or not such work possesses any artistic quality. 

Given the complexity of legal provisions, lawsuits are contested over the rights in the intellectual property, many of which arise due to the parties’ lack of awareness regarding the basic principles of intellectual property law and the intricacies involved therein.  In art sales the questions that arise most frequently pertain to actual ownership of copyright, that is, whether the same vests with the artist or the buyer. It is presumed that once a buyer has acquired the art, he is permitted to utilise the same as per his sole discretion. In case of a sale from an artist to a gallery, it is assumed that the artist does not have any rights in subsequent sales. 

The answers to these questions are not always straightforward. Broadly speaking, as per the Copyright Act, copyright in an artwork vests with the artist, except in case of commissioned artwork, where it vests with the person commissioning the art, unless otherwise agreed. 

This analysis takes us to the next question that relates to the discretion of the buyer. The obvious assumption is that, once the buyer has acquired property rights over an artwork, the buyer has complete usage and treatment rights over the artwork. Note that under the Copyright Act, the author has special rights, also known as ‘moral rights’, which are inalienable in nature and are intended to recognise the author’s inherent rights in the artwork.

How is the pricing of an artwork determined?

Art valuation concerns itself with estimating market demand; estimating liquidity; capability of lots, works, and artists; the condition and provenance of works; and with valuation trends such as average sale price and mean estimates. 

The value is determined by what the market is willing to bear for the painting. This, of course, is directly correlated with the acclaim of the artist and the availability of the artist’s paintings. Given that most legal disputes involving art transactions are mediated, as a buyer or a collector, it is necessary to focus on the above-mentioned aspects to ensure that art transactions are watertight and contractual provisions are well aligned with the legal provisions.

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The writer works with Shardul Amarchand Mangaldas & Co, and is qualified to practice law in New York and India