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27. If the collector's sale of the painting was NOT an acceptance of the goods, what is the maximum amount that the gallery is entitled to recover from the collector?
The painting was damaged in transit. The collector timely rejected it after inspection, immediately notified the gallery of the rejection, and told the gallery that the painting would be available for pickup. The gallery then sold the painting to a third party. It informed the collector that it would pick up the painting within a couple of weeks. Two weeks later, before the gallery picked up the painting, the collector sold and delivered the painting to an art admirer for $550,000 cash, after notifying the admirer about the damage. The collector sent no money to the gallery.
A collector bought from a gallery a painting correctly described in the parties' signed contract as a «one-of-a-kind self-portrait» by a famous artist who had recently died. The contract price was $500,000 in cash, payable one month after a truck carrier delivered the painting to the collector.
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A person can only transfer rights to property which they actually have. A person who transfers possession of goods that they do not have property rights to, to another person, can be sued for conversion.
A is correct. Here, the collector clearly refused to receive goods from the shipment, because of damage, and so title revested in the gallery. Since the collector refused to accept or retain the painting, the contract has been voided, and the painting belongs to the gallery. As a result, there is no contract — the UCC requires that goods, especially unique goods, be shipped without substantial damage, so the collector is justified in voiding the contract. If the goods were not unique, the gallery could have tried to «cure» and send undamaged items. But since it is unique, there is no opportunity for the gallery to cure the problem.
The collector sold the painting even though he has no ownership interest, and so has converted the painting. The gallery can recover under torts for conversion. Damages for conversion are the full market value at the time of conversion. If the third party had agreed to pay more than $550,000, then that would have been the fair market value instead. But the highest amount we have in the facts is $550,000, so that is the fair market value. Therefore, the collector converted the painting; the gallery has a right to recover damages under common law conversion, and damages are the fair market value at the time of conversion ($550,000 under the facts).
B is incorrect. The collector's exercise of ownership by selling the painting, after his rejection, was wrongful against the gallery and constituted conversion. The gallery should not be limited to the contract price for determining the value of the painting, because the remedy for conversion is the fair market value of the goods at the time of the conversion, which occurred when the collector sold the painting for $550,000. UCC §§ 2-601 cmt. 2, 1-103(b).
C is incorrect. The collector's exercise of ownership by selling the painting, after his rejection, was wrongful against the gallery and constituted conversion. The remedy for conversion is the fair market value of the goods at the time of the conversion. The collector's sale of the painting for $550,000 provides credible evidence of the painting's fair market value at the time of the conversion. UCC §§ 2-601 cmt. 2, 1-103(b).
D is incorrect. The collector's exercise of ownership by selling the painting, after his rejection, was wrongful against the gallery and constituted conversion. The remedy for conversion is the fair market value of the goods at the time of the conversion. The collector's sale of the painting for $550,000 provides credible evidence of the painting's fair market value at the time of the conversion. In addition, the gallery is not a lost volume seller, because the painting was a one-of-a-kind good, which means that the gallery was operating at full capacity. UCC §§ 2-601 cmt. 2, 1-103(b).