## Facts

- Joseph M. A. J. Dawson, a Jersey (Channel Islands) resident and collector, bought eleven Chinese art objects from G. Malina, Inc. (GMI), a New York art dealer, for $105,400 in 1974.
- Gerald Malina, GMI’s principal, described several objects as genuine antiques from specified Chinese periods/dynasties, and these descriptions induced the purchases.
- The objects were shipped from New York to London in late September 1974 and redirected to Jersey due to customs concerns; Dawson acknowledged receipt in good condition on November 2, 1974.
- Dawson later consulted experts who challenged the authenticity/period attributions of three key items: a large blue-glazed ceramic vase, a jade peach-tree carving, and a jade pilgrim vase; Malina offered opposing expert support.
- A separate dispute arose over freight and insurance for shipment; Dawson asserted Malina orally agreed to pay those costs, and Malina initially advanced them.
- Malina later applied a $2,500 refund owed to Dawson (for a returned porcelain mirror-black vase) as reimbursement for freight and insurance expenses.
- Evidence showed GMI did not consistently observe corporate formalities and operated largely as Malina’s alter ego.

## Issues

1. Whether Malina’s period/authenticity representations constituted express warranties, and whether those warranties were breached as to the large blue ceramic vase, jade peach-tree carving, and jade pilgrim vase.
2. Whether an oral agreement required Malina to bear freight and insurance costs, and whether he could set off those expenses against a refund owed to Dawson.
3. Whether Malina could be held personally liable alongside GMI based on disregard of corporate separateness.

## Decision

- The court found that GMI and Malina breached express warranties regarding the authenticity/characteristics of the large blue ceramic vase, jade peach-tree carving, and jade pilgrim vase.
- The court awarded rescission for those three purchases, requiring return of the items and refund of their purchase prices.
- The court held Malina was obligated under an oral agreement to pay freight and insurance and could not apply the $2,500 refund as a setoff for those expenses.
- The court held Malina personally liable with GMI because the corporation failed to maintain meaningful separateness.

## Legal Principles

- A seller’s specific statements about an artwork’s origin, period, or authenticity can be affirmations of fact that form express warranties when they become part of the basis of the bargain.
- Express warranties are breached when the warranted descriptions materially misstate the goods and lack a reasonable factual basis.
- Rescission is an available remedy where misdescription of authenticity goes to the essence of an art transaction, permitting return of the item and restitution of the price.
- An oral agreement on shipping-related costs may be enforceable, and the parties’ course of performance (including initial payment by the promisor) may corroborate the term.
- A party may not unilaterally impose a setoff that contradicts an agreed allocation of costs.
- When a closely held corporation functions as the owner’s alter ego and corporate formalities are disregarded, a court may disregard the corporate form and impose personal liability to prevent injustice.

## Conclusion

The court held that the dealer’s authenticity and period descriptions were express warranties breached as to three objects, justified rescission and refunds for those items, enforced an oral allocation placing freight and insurance costs on the dealer (disallowing setoff against a refund), and imposed personal liability on the dealer’s principal due to the corporation’s lack of separateness.


Dawson v. G. Malina, Inc., 463 F. Supp. 461 (S.D.N.Y. 1978)