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Arts & Communication Legal risks and art exhibition contracts

The common law system differs from the continental As for contracts of loan for use, there are no explicit
law system. Traditionally, common law systems have not provisions, leaving room for interpretation. Traditionally,
distinguished between consensual contracts and real these are viewed as real contracts, but according to the
contracts to protect the interests of lenders in gratuitous principle of freedom of contract, parties should have
contracts. In the U.S., for example, the rule on consideration the freedom to determine when a contract is concluded.
allows bare promises to lose their mandatory execution Since works of art are non-consumer goods, international
effect and protects free lenders. Common law countries art exhibition contracts clearly fall under loans for use.
emphasize whether a promise can be subject to compulsory However, it is unclear when an art exhibition contract
execution, and the formation of consideration is the most is established. If considered a real contract, it would
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fundamental requirement for generating enforceability. If be established when the artwork is handed over to the
consideration exists for a promise, the promise typically has borrower. However, if following the principle of freedom
mandatory execution force (which can be understood as of contract, the parties can freely agree on the timing of the
equivalent to a contract being established in the continental contract’s establishment, based on the autonomy of will.
law system), whereas a bare promise (gratuitous contract) Taiwan’s “Civil Code” explicitly regulates contracts of
lacks consideration and, thus, does not have enforcement loans for use and loans for consumption in Articles 464
force. Consequently, there is no need to establish a real and 474, respectively. Both are real contracts by nature,
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contract to grant certain lenders the right to revoke at will. allowing unpaid lenders the right to repudiate and enabling
In general, a contract is established when a leasing contract either party to refuse to perform the contract at any time
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meets the requirement of consideration, with no additional without reason, before performance. Articles 465 and 475
special requirements. However, when lending artworks of the “Civil Code” also provide for pre-contracts of loans
for free in an art exhibition, significant differences among for use and consumption. This provision, which introduces
various countries, and must be investigated individually. the concept of “prior agreement,” mitigates the specific
nature of these two types of real contracts, acting as a
Continental law countries, inheriting Roman law compromise between the interests of unpaid lenders and
traditions, generally divide loan contracts into contracts transaction security in modern economic life. However,
for use and contracts for consumption. A loan for use is some scholars hold a negative view of this compromise. 13,17
a loan that allows the borrower to use the object without
damaging it, transferring only the right to use the object. Thus, when the art exhibition contract is gratuitous,
Conversely, a loan for consumption involves consuming the it should be established upon the delivery of the
subject matter through use, transferring the right to dispose artwork. However, the parties can still make the contract
of the object. Both types of contracts are explicitly provided “consensual” through a pre-contract. The German Civil
in Germany, France, Japan, and the Taiwan region. 11 Code similarly regulates loans for use and consumption
in Articles 598 and 607, respectively. Although there
Before the promulgation of the Civil Code, Mainland was uncertainty regarding the nature of loan contracts
China addressed two types of loan contracts in Article 126 for consumption before the revision of the Civil Code,
of the Interpretation of the General Principles of the Civil the current consensus in Germany is that both should
Law of the People’s Republic of China and Chapter 12 of the be considered consensual contracts. Consequently, an
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Contract Law of the People’s Republic of China. Currently, artwork exhibition contract in Germany can have binding
only contracts for money loans are provided in Chapter 12 force without actual delivery of the artwork.
of Book Three of the Civil Code, titled Contracts. Contracts In traditional continental law debates about the nature
for money loans are a special type of loan for consumption, of loan contracts, as previously mentioned, common
meaning the characteristics of a loan for consumption law countries emphasize the consideration of a promise.
align with those of a money loan if the object of the loan is Bare promises often do not form enforceable contractual
money. In this sense, the loan for consumption is a broader relationships and only have binding force in exceptional
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concept, with the money loan being a subset of it. Article cases, such as when the U.S. adopted the “promissory
679 of the Civil Code specifically stipulates that a contract estoppel principle” to protect the reliance interests of the
for a loan of money between natural persons is established promisee. Therefore, in the U.S., an artwork exhibition
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when the lender delivers the loan to the borrower, implying is established through an agreement between the parties,
that loans between natural persons must be real contracts. without the need for actual delivery of the artwork.
However, for contracts between non-natural persons, the
Civil Code does not provide a clear stipulation, and the 15 The “promissory estoppel principle” refers to the principle
prevailing view in academic circles in Mainland China is that in appropriate cases, a promise of gift or other bare
that such contracts should be consensual. 10-12 promises can have legal binding force and be enforceable.

Volume 3 Issue 1 (2025) 6 doi: 10.36922/ac.2881