## Facts

- Peter G. Kohler and Walter J. Kohler inherited a painting titled “The Plains of Meudon” and consigned it for auction sale through Leslie Hindman, Inc., an auction house acting as their agent.
- The consignment agreement incorporated the auction catalog’s conditions of sale, including “AS IS” language and disclaimers stating there were no warranties of authenticity and that no oral or written statement would constitute such a warranty.
- The consignment agreement also granted the auctioneer unilateral authority, “in our sole discretion,” to accept a return and rescind a sale if it determined the offering had exposed the auctioneer and/or consignor to potential liability “under a warranty of authenticity.”
- Before the auction, a prospective buyer’s agent expressed doubts about authenticity; the buyer, Richard M. Thune, remained interested but wanted independent expert authentication.
- Hindman and Thune made an undisclosed oral arrangement allowing Thune to return the painting if an expert concluded it was not by Theodore Rousseau.
- Thune bought the painting for $90,000, obtained an expert opinion that it was not a Rousseau, returned it to Hindman, and Hindman accepted the return and rescinded the sale.
- The Kohlers sued Hindman and Thune after not receiving sale proceeds; the district court granted summary judgment for defendants on the remaining claims, and the Kohlers appealed.

## Issues

1. Whether the consignment agreement and conditions of sale authorized the auctioneer to rescind the sale and accept the buyer’s return based on authenticity concerns.
2. Whether the auctioneer breached contractual or agency duties by entering an undisclosed side agreement with the buyer and by not disclosing authenticity doubts to the consignors.
3. Whether the buyer could rescind despite “AS IS” and no-warranty-of-authenticity clauses.

## Decision

- The Seventh Circuit affirmed summary judgment for the auctioneer and the buyer.
- The court held the contracts allocated the risk of non-authenticity to the consignors and gave the auctioneer broad discretion to rescind sales to avoid potential authenticity-warranty liability.
- The auctioneer’s acceptance of the return fell within its express contractual authority.
- The undisclosed side arrangement did not create liability where the auctioneer could independently rescind under the consignment agreement’s rescission clause.

## Legal Principles

- Courts enforce clear auction consignment terms that disclaim warranties of authenticity and allocate authenticity risk to consignors.
- An agency relationship defined by contract may grant an auctioneer broad discretionary authority to rescind a sale to prevent potential authenticity-related liability.
- A buyer’s conditional right to return based on authenticity may be consistent with “AS IS” sales when the governing consignment documents authorize rescission to address authenticity disputes.
- A claimed breach of fiduciary or agency duty will not succeed where the challenged conduct is within express contractual authorization and the plaintiff’s loss is the risk the contract assigns to the plaintiff.

## Conclusion

The court enforced the consignment agreement and catalog conditions as written, holding that the consignors bore the risk that the painting was not authentic and that the auctioneer had contractual discretion to rescind the sale and accept the buyer’s return, leaving the consignors with the painting.


Kohler v. Leslie Hindman, Inc., 80 F.3d 1181 (7th Cir. 1996)