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Arts & Communication Legal risks and art exhibition contracts

Compared to the liability for breach of contract, from a person who disposes of it without proper authority
claiming culpa in contrahendo for failure to establish a under certain conditions.
contract involves several challenges. First, the creditor may Article 311 of Mainland China’s Civil Code outlines the
face a higher burden of proof. In the continental law system, system of bona fide acquisition, considering the following
liability for breach of contract is typically based on no-fault factors: (1) Whether the transferee is acting in good faith,
liability (or strict liability in the common law), meaning (2) whether the transfer was made at a reasonable price,
that if a party fails to fulfill contractual obligations, they and (3) whether the transferee has taken possession of the
bear the responsibility. Creditors generally only need to property. In principle, Mainland China does not recognize
prove that the debtor has breached the contract. the bona fide acquisition of stolen goods, but some scholars
Second, culpa in contrahendo mainly aims to believe that if the stolen goods are purchased in the open
compensate for reliance interest losses and usually does market or obtained through strict auction procedures, the
not cover contract performance losses. As for whether the transferee should acquire the ownership of the goods. 21
loss of inherent interests can be claimed directly through In Taiwan, the “Civil Code” governs bona fide acquisition
culpa in contrahendo varies across countries, with some in Articles 801 and 948 to 951. Unlike Mainland China’s
jurisdictions requiring creditors to claim tort liability Civil Code, general legal principles in Taiwan do not
separately, further increasing their burden of proof. require payment for bona fide acquisition. However, in the
Finally, in the common law system, such as in the U.S., absence of payment, the transferee may still be obligated
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reliance interest losses are protected after the contract to return the benefits obtained. For stolen goods, the
is established (if there is consideration for a promise). original possessor may only request their return from the
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However, before the contract is established, protection of good faith transferee within 2 years of losing possession.
reliance interests and unjust enrichment is only considered Thus, bona fide acquisition may apply to stolen goods.
in certain specific circumstances. Because the civil law systems of Mainland China and

4. Unauthorized disposition and judicial Taiwan are largely influenced by German and Japanese
law, Germany’s bona fide acquisition system is, generally
seizure speaking, quite similar. In both Germany and Taiwan,
When an exhibition work is illegally disposed of by another whether the transferee has paid for the item is considered
party, the rightful owner’s request for its return may be irrelevant, as both circumstances can constitute bona fide
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hindered if a third party acquires it in good faith. In such acquisition. However, paragraph 1 of Article 816 of the
cases, the rights holder can only claim damages from the German Civil Code explicitly grants the original owner
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contractual counterparty or other infringers, resulting in the right to claim restitution for unjust enrichment. If an
loss of ownership and the failure of the exhibition. This object is taken from the owner’s possession without their
constitutes an “illegal factor.” In addition, if a dispute consent, such as in the case of stolen goods, the rule can still
arises, judicial authorities may seize artwork, which could apply again when the lost object is money, bearer bonds, or
disrupt or even cancel the exhibition. This represents a other items transferrable through a public auction. 23
“legal factor.” Both of these risks should be considered In the U.S., the concept of bona fide acquisition involves
when drafting contract terms to avoid irreparable losses. the notion of a “good faith purchaser.” Under normal
The “Kiefer” storm exemplifies such issues. International circumstances, the U.S. adopts common law principles.
exhibitions are subject to different legal frameworks in Article 2-403 (a) of the Uniform Commercial Code stipulates
various countries, which cannot be ignored. that a purchaser of goods acquires all the title that their
transferor has or has the power to transfer. This means
4.1. Bona fide acquisition of personal property right
that if the seller lacks the right to dispose of the goods,
When the owner of an artwork delivers it to another party the buyer cannot acquire ownership. The responsibility
(whether or not a contract has been established), the work for verifying the seller’s property rights falls entirely
may be sold, mortgaged, or pledged without the owner’s on the purchaser. Strict adherence to this rule would
permission. It may also be detained by the creditor of significantly hinder commercial transactions, so courts
the other party, or stolen by others and resold due to the have established exceptions. Under certain conditions,
failure of the other party to fulfill the necessary custodial the property rights of good faith purchasers of chattels
obligations. These actions constitute unauthorized are protected, provided they meet the following criteria:
disposition under the law. To ensure transaction safety and (1) payment of valuable consideration, and (2) a good
stability and to reduce transaction costs, the law allows a faith belief that the seller has valid property rights. These
“good faith” transferee to acquire ownership of the object requirements have since been absorbed into the Uniform

Volume 3 Issue 1 (2025) 8 doi: 10.36922/ac.2881