Art Investor Magazine, Winter 2002

THE UNENFORCEABLE ANDREA ROSEN CONTRACT

A John Curin painting appeared in an advertisement for an upcoming auction at Phillips in an art magazine. When Andrea Rosen of the eponymous gallery got wind of the consigned Curin lot, she notified the auction house of a sales agreement in effect that every client of the gallery is compelled to sign prior to the purchase of any artwork. The contract states that each collector will: offer the work back to the Rosen Gallery should it be resold; not auction a piece under any circumstances; and, not exhibit it without written consent of the artist. Additionally, if the gallery declines to purchase a work prior to resale, the original buyer must forward to Rosen the name and address of the new collector. Phillips withdrew the Curin slated for auction. Andrea Rosen succeeded in not only restricting the free transfer of an artwork, but even further, prohibited the transfer itself. Signing of the so called "Sales Agreement" is now a trend that has been followed by Matthew Marks, and Barbara Gladstone galleries as well-a blow to laissez-faire economics that is as incomprehensible as it is unsound.

A legal analysis of the relevant case law and applicable statutes in New York State and on a Federal level reveal that the contract is on its face illegal and unenforceable in a court of law. A casual conversation with a staff member of the Rosen gallery disclosed an admission of this fact, which indicates that the intent to continue to proffer the document is plainly to intimidate gallery clients into falling in line if they wish to continue doing business with Rosen and her colleagues. Many unsuspecting collectors that have abided by the wrongful covenants unilaterally dictated by the galleries have in essence been robbed of the opportunity to achieve full fair market value for their artworks in the resale and auction markets.

The common-law rule against unreasonable restraints on the distribution of property invalidates unduly restrictive controls on future transfers but requires a case by case analysis that measures reasonableness of the restraint by its price, duration and purpose. The statutory rule provides that any restrictive transfer without delimitation is void if it suspends the absolute power of alienation for a period beyond lives in being at the creation of the covenant plus 21 years. Both the statutory and common-law rules attempt to strike a balance between society's interest to freely transfer property and the rights of parties to control future transactions. There is no consideration paid for by Rosen for the right to restrict subsequent sales; such alleged "agreement" is unlimited in time and could conceivably lastòforever; and, the purported purpose of protecting her artists' markets is not outweighed by the unqualified restriction on free trade. Such agreements have in the past been upheld if they facilitate a broader marketing of the art, rather than the Rosen case which only applies a prophylactic constriction of the marketing of the works. The Rosen Sales Agreement fails on all three fronts, not even taking into consideration the Draconian ban against auctioning. What has been upheld on previous contracts of this nature but missing from the Rosen version is a provision entitling the collector to offer the artwork to a third party and only then to provide the option holder (Rosen) the chance to meet the price.

The more patently offensive proviso calls for no auctioning of the art. Where auction restrictions have been upheld they have provided the collector with the possibility of proposing a price for the artwork to the dealer and if that price was not agreed upon between the parties, it was set forth that a major auction house representative set a price level. Rosen's proscription to auction hinders not only the buyer's ability to achieve the most for their art when they wish to sell, but also additionally, the artist's capacity to increase their market levels via public, open auction. Such clause is unreasonable under any interpretation of the law. Instead of buyers beware, sellers beware! Would anyone like to join a class action?