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Contract: Breach, Misrepresentation, Agency

I need help to identify the cause of action, liability, damages and any claim of consequential loss of each parties in the problem question below.

Elijaz Neutral Paintings intend to sell one of their paintings, Van Dyke 'The Night', which they have had for a number of years.. Having had the agreement of other directors, they sent one of their wardens, Benjamin Reed who look after the company properties and belongings to value the painting with a gallery who advertised an exhibition of works by the same artist.

On his arrival at the gallery, Benjamin informed the gallery owner that he had come to ask the gallery for valuation of the artwork, and that if the valuation given is favourable, his company will consider to arrange a private sale. The owner informed Benjamin that he may consider buying the work outright.

Benjamin reported the owners intention to Mr Roberts who is also authorised to sell the painting by the company. He advised Benjamin not to agree to sale without consulting him.

The gallery owner asked Benjamin for more information about the Van Dyke. Benjamin informed the gallery that the painting was purchased by his company in 2001 for $12450. He said that he expected the painting to have increased in value over the years. He also said that he knew that he prices of art work have increased greatly in recent years as a result of the downtrend of stock markets. He said that he made the last statement so that the gallery would not take advantage of the company.

As the gallery owner had no time to view the artwork, Benjamin offered to send her a photograph of the work and posted it to the gallery on 29th November 2004. The gallery owner was so impressed with the high quality of the photograph that she used the negative in printing the picture of the artwork in her catalogue for her exhibition.

Benjamin advised the gallery to contact the directors, which they did.

In a letter dated 6/12/04 the gallery made an offer in writing to purchase the painting. The offer was accepted by Mr Roberts on behalf of Elijaz in his letter of 9/12/04. In the letter he also made reference to "I am delighted to accept your offer of $25,000 for the painting, l feel that such lovely work of art are best in galleries such as yours". (I have no further information of any other representation made by Mr Roberts in my bundle.)

The gallery owner purchased the artwork. She later discovered that the artwork is a fake and that its worth only $7000. The expert the company invited confirmed this was so. Elijaz Neutral painting had no idea that the artwork is fake.

Unfortunately, while in the gallery's care, the painting was damaged and the gallery accepted responsibilities for its repair. The cost of repair is $1000 after which the painting was valued at only $4,5000.

The artwork is still at the gallery and my company would like to hold the gallery to the contract.

The gallery in their letter of 3/1/05 demanded their money back and costs incurred to print new catalogue in time of the exhibition.

Advice the company with respect to their position regarding the breach of contract and misrepresentation regarding the sale of the painting, further advise the company regarding the representation made by mr Robert and Benjamin, and the claim of damages and consequential losses made by the gallery owner.

Solution Summary

Referring to the case, this solution helps to identify the cause of action, liability, damages and any claim of consequential loss of each parties. Supplemented with an article on commercial law (UCC).

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