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Arts & Communication Legal risks and art exhibition contracts

Commercial Code. Thus, the U.S. does not recognize subject of debate among German academic scholars. 23,29 In
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situations where a transferee can acquire ownership of goods the U.S., Article 9 of the Uniform Commercial Code, titled
without payment (consideration). “Secured Transactions,” provides a unified framework for
Regarding stolen goods, the U.S. recognizes cases various forms of security rights encountered in socio-
where a buyer purchases goods from someone who has economic life. It establishes a consistent standard for
committed fraud and later sells them to a third party. This regulating secured transactions, including those involving
third party is a buyer unaware of the fraud and qualifies as movable property, intangible property, or property rights,
a good faith purchaser, but they do not recognize bona regardless of the transaction’s name or the ownership of the
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fide acquisition of stolen goods. 25 collateral. All such transactions are classified as “Secured
Transactions” under Article 9 and are governed by the
In addition to ownership transfer, artwork may also be same rules and regulations. According to Article 2-403
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subject to mortgages, pledge rights, or liens, which could be (a) and (b) of the Uniform Commercial Code, as long as a
considered limited property rights (although regulations debtor holds some degree of rights (not necessarily perfect
differ by country), and bona fide acquisition may apply ownership) over the collateral, security interests can subsist
in such cases. In Mainland China, the prevailing view is on it, meaning security interests can be acquired bona fide.
that bona fide acquisition applies to mortgages, pledge
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rights, and liens on personal property. This is consistent In summary, while the determination of bona fide
with paragraph 3 of Article 311 of Mainland China’s Civil acquisition often involves significant subjectivity, and most
Code, which applies to “other real rights.” An exception stolen goods are not eligible for bona fide acquisition, it is
exists under Article 62 of the Interpretation of the Supreme important to note that many countries have established
People’s Court of the Application of the Relevant Guarantee bona fide acquisition systems (good faith purchasers)
System of the Civil Code of the People’s Republic of China to safeguard transaction security. When artworks are
commercial liens based on the same legal relationship entrusted to others for management, there is a potential
cannot be acquired bona fide. risk of bona fide acquisition by third parties outside
the contract. In the aforementioned incident, someone
Taiwan follows the Roman law tradition and only falsely claimed ownership of an artwork and pledged
stipulates real property mortgages in its “Civil Code.” it as collateral to creditors without the original owner’s
Personal property is subject to pledge rights, while permission. Given the irreplaceable, unique, and difficult-
mortgages on personal property are governed by the “Law to-value nature of artworks, it is essential, when organizing
on secured transaction for movable property” and are international art exhibitions, to clearly identify the
commonly used in bank loans. Articles 886 and 928 of contractual counterparty, limit their rights to the exhibited
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Taiwan’s Civil Code allow for the bona fide acquisition of works within the contract, and strengthen their custodial
pledge rights and liens on movable property. However, the responsibilities. For instance, parties can agree on special
Civil Code does not explicitly address movable property liquidated damages clauses to reduce the burden of
mortgages, though some scholars view this favorably. 27 proof when protecting their rights and to reinforce the
In Germany, a strict distinction is made between real other party’s obligations. In addition, when purchasing
and personal property guarantees and personal property insurance, such risks should be carefully considered.
mortgages are not recognized. As such, there is no question
of bona fide acquisition of personal property mortgages. 4.2. Judicial seizure and immunity
Article 1207 of the German Civil Code provides for the Judicial seizure, as an important litigation preservation
bona fide acquisition of pledge rights, while liens are measure, can be applied to exhibited artworks as property
distinguished between civil and commercial liens. Civil in civil, criminal, or administrative cases. Given the
liens, defined as creditor rights, do not allow for bona fide complexities of international transportation, insurance,
acquisition. Commercial liens, on the other hand, apply and custodial issues, works exhibited internationally often
only to the debtor’s chattels and negotiable securities. follow strict schedules, and their seizure could lead to
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Thus, creditors cannot acquire liens bona fide because they multiple adverse consequences for the lender or borrower
are unaware of the actual ownership of the objects. in a contract. The situation mentioned earlier illustrates
It is worth noting that Article 1257 of the German such risks, which should be carefully considered when
Civil Code establishes a type of “statutory pledge” that formulating a contract.
differs from general personal property pledges. Due to To promote the exchange of art and culture, internationally,
its statutory basis, the scope of application is limited, many countries have enacted special legislation related to
and whether it applies to bona fide acquisition remains a judicial seizure. Under specific conditions, artwork can

Volume 3 Issue 1 (2025) 9 doi: 10.36922/ac.2881