Katalin Andreides
Andreides Law, Budapest

Causes of action

Under Hungarian contract law, the buyer of an artwork that turns out to be misattributed can void the contract or alternatively can pursue a claim for breach of contract.^[1] While these are distinct and separate actions, in the field of a sale of an inauthentic work, there can be a significant area of overlap. Nevertheless, these are certainly not simply two methods providing the same remedy – ie, the right to rescind the contract, restitution of the good and monetary remedy to compensate the loss. Depending on the actual facts of the case, a prospective claimant will consider the nuances between these two actions that may significantly impact the outcome.

In brief, in the case of avoidance the burden of proof lies on the seller of the misattributed work to prove that his conduct was reasonably expected in a particular situation, and that he could not and should not have foreseen the loss caused at the time the contract was made.^[2] On the basis of the principle of full compensation the ‘loss caused’ will cover the current value of the amount paid for the artwork, including interests from the date of the contract, any loss of pecuniary advantage that could have been achieved if the artwork had been authentic – especially if the purchase was made for investment purposes – and finally all costs necessary for the mitigation or elimination of the financial losses sustained.^[3]  

On the other hand, in the case of defective performance (or non-performance) it is on the aggrieved buyer to demonstrate that the loss was foreseeable at the time of conclusion of the contract.^[4] Also, the scope of damages to be awarded will be assessed by reference to how the parties actually agreed to allocate their risks, rather than on the basis of non-compliance with the expected level of duty that is reasonable in a given situation. It is also important to mention that breach of contract does not of itself discharge the performance obligations of the party in breach, and so, in some cases, the buyer may still elect to receive the authentic artwork where that is possible.^[5]

In essence, when considering which cause of action would facilitate a claim for the desired damages, in case of avoidance the defendant-seller of a non-authentic work might be in a better position to ‘exculpate himself’ from liability, but if he fails to do so to the requisite standard and is held to be liable to his buyer, he may end up having to pay more than he would have for breach of contract.  

Period of limitation

Avoidance on the ground of mistake or misrepresentation may be effected by notice to the other party given within a period of one year from the date on which the contract was concluded. It may also be directly effected in court within a period of one year by the party who sent notice to the other party for the purpose of avoidance, and if said avoidance has been declined. The party entitled to void a contract can enforce this right by challenging a claim originating from the same contract even if the time limit for avoidance has already expired.^[6] This means that when the period of limitation lapses, the opportunity for enforcing the claim in court ceases but the mere right remains, so voluntary performance cannot be reclaimed as unjust enrichment and collateral claims are enforceable.

If the buyer is unable to enforce a claim for an excusable reason, this will suspend the applicable limitation period. In the case of mistake, suspension will last until the discovery or recognition of the mistake. The excusable reason suspends the running of the period only if the period of limitation has already lapsed or there is less than three months remaining.^[7] It is worth mentioning that negotiations between the parties also suspend the one-year period.

While another action against the seller to enforce the claim would interrupt the limitation period, the announcement of a prospective civil claim to recover damages caused by criminal offences in a criminal proceeding will not have the same effect.

In the case of breach of contract, the buyer is required to inform the seller of any lack of conformity without delay. In case of a consumer contract, if the notification is made within two months of the time the misattribution is detected, it is deemed to have been made in good time.

The buyer’s right to warranty to receive an authentic artwork will lapse after one year from the delivery of the artwork. When the buyer is a consumer, his right to warranty will lapse after two years from delivery. The parties may agree on a shorter limitation period but it still cannot be less than one year.^[8]