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Q&A – Price renegotiation

Question: I have sold a painting but because of Covid-19, the buyer wants to renegotiate the price.  Must I accept a lower price? Can I insist that he pays the full price?

Answer: The first question is whether you have agreed contract with the buyer. If so, you can demand that the buyer pays the agreed price, and refuse a lower price. However, there are situations where even where there is a contract, the buyer has the right to cancel the sale, and may use his right as leverage to negotiate a lower price.

If you have not yet agreed contract with the buyer, you cannot prevent the buyer from offering a lower price or walking away.

Under English law, a contract is formed when:

  1. there has been an offer
  2. the offer has been accepted
  3. there is consideration
  4. there is an intention to create legal relations, and
  5. the terms ofthe contract are sufficiently certain.

A contract can be concluded orally, e.g. on the telephone or on a social media platform.  It can be concluded by exchange of emails, texts or Whatsapps.  If you have issued an invoice, typically the invoice confirms a contract concluded orally or in writing although that may depend on the context. 

The party making the offer can be the seller or the buyer. For example, if you advertise an item on your website, generally speaking, under English law, this will amount to an invitation to treat.  The buyer will make the offer (even if the buyer offers the asking price) and you will accept (or reject) the buyer’s offer.  Accordingly, if the buyer has, say by email, offered you a price of X for an artwork you advertised online, you have yet to respond, and the buyer emails you to say that he is offering 50% of X, there may not be a binding contract yet, and you cannot force the buyer to pay X.  If, however, you replied to the buyer’s first email offering you X and accepted X, there will be a binding contract if the other conditions are met, and you can force the buyer to pay X even if he later emails you to say that he will only pay 50% of X.  The question of whether there is a contract or not is a fact-based enquiry and in doubt, you should take legal advice, because the answer may depend on a variety of factors.  This is even more so if the buyer is not in the same jurisdiction.

If there is a contract, in principle you can enforce the contract against a buyer attempting to renegotiate the price. You can sue a buyer for damages if the buyer reneges on the contract or does not pay the full price (subject to the buyer’s right to cancel the contract, see below). Whether it is commercial to do so will depend on many factors, including whether the artwork is on consignment or from stock, the likelihood of recovery from the buyer, the cost of taking legal action, the commercial relationship with the buyer, confidentiality and the potential reputational damage of taking the buyer to court. 

The contract may include a clause allowing the buyer to walk away in certain circumstances.  It is unlikely that a contract for the sale of an artwork will include a clause allowing the buyer to pay less than the agreed price, unless the artwork is not as described.  That is not our situation.

If the contract includes a force majeure clause, the buyer may use the clause as leverage, arguing that the contract can no longer be performed (for example, due to the Government imposed lockdown, the artwork cannot be delivered).   Few contracts in the art world contain a force majeure clause, and even if your contract does, it may not allow the buyer to treat the contract as being at an end.  A pandemic, quarantine or lockdown may delay performance of the contract but it is unlikely to render the contract incapable of being performed.  The buyer may struggle to show that force majeure means that he is entitled to pay less.  As a matter of law, the question of whether force majeure can be relied on depends primarily on the wording of the force majeure clause, accordingly, if a buyer sought to rely on it, you should take legal advice on whether the clause can be relied upon in the circumstances.

The buyer may argue that the contract has been frustrated.  If so, and the conditions of frustration were met, the contract would be at an end.  If the buyer wants the artwork but simply wants to pay less, the doctrine of frustration will not assist.

If the sale is one that falls within the definition of a “distance contract” [1] or an “off-premises contract”[2] under the Consumer Contracts Regulations 2013, and the buyer is a consumer as defined in the Regulations, the buyer has the statutory right to cancel the sale within 14 days of receiving the goods.  As shipping has for the time being almost grinded to a halt, if you concluded a sale shortly before or since 24 March, the chances are that you have not delivered and the cancellation period is extended until 14 days after you will succeed in delivering the artwork to the buyer. Unfortunately, if you failed to provide buyers with the information required by Regulations, including information on the right to cancel the sale, the cancellation period is extended by 12 months. This means that if, for example, you did not comply with the Regulations by providing the consumer buyer with information on his right to cancel, you sold a painting to the consumer-buyer at a distance in the last week of March, and you are able to deliver the painting only in the first week of May, the buyer has until the first week of May 2021 plus 14 days to cancel the sale.  If however, you provided consumers with the information required by the Regulations, the buyer will have until 14 days after delivery in the first week of May (in our example) to cancel the sale, say until around 20 May 2020.  There is nothing to stop the buyer from using his right to cancel as leverage to negotiate a lower price during the cancellation period.  Either you agree to a lower price, or the buyer returns the artwork, and if you were paid, you must return the price in full.

To conclude, if there is no binding contract, the buyer is free to seek to impose his price. You can accept or reject whatever price is offered. If there is a binding contract, the buyer must pay the agreed price, however you may decide to accept a lower price in order to complete the sale, especially if the buyer has the right to cancel, or there is a risk that the buyer could succeed if he claimed force majeure or frustration.

[1] A contract between a trader and consumer where the two are not physically in the same place. A distance contract is one where a consumer visits the premises to view and learn about an artwork and the contract is negotiated and concluded remotely. However, occasional one-off sales conducted at a distance are not distance contracts, nor are sales where the negotiations take place on the premises but concluded remotely or initiated remotely and concluded on the premises.  (Regulation 5)

[2] A contract concluded in the presence of the trader and consumer but at a place that is not the trader’s premises, or a contract where an offer is made by the consumer in the presence of a trader but not at the trader’s premises. (Regulation 5)