Collector-to-Collector Transactions: Caveat Emptor

Although dealers and collectors benefit greatly from “meeting” each other online, it is important to recognize some of the differences a buyer and seller’s status confers on their respective legal rights and responsibilities.

by Armen Vartian | Published on February 4, 2025

I once gave two seminars at a coin show in Las Vegas. The first was for dealers and was entitled “How to Stay Out of Trouble”. The second was for collectors and was entitled “How to Get What You Pay For”. I expected the two audiences to be completely different, but was surprised to find that the “collector” audience included several people who told me they sold coins regularly online and considered themselves to be dealers as well. After having heard me explain the legal rights of retail customers vis a vis dealers, they wondered whether their online customers had similar rights (and whether they should have attended the earlier seminar!)

On platforms such as eBay, it isn’t always clear (or relevant) whether a seller is a full- or part-time dealer, another collector, or maybe just someone who inherits or finds a few coins and wants to dispose of them. But the seller’s status carries with it legal distinctions that can be crucial in analyzing problems that come up with a transaction.

It is generally accepted that product descriptions given by a “merchant” (the Uniform Commercial Code’s term for someone in a wholesale or retail trade) are enforceable warranties, and that the merchant is legally responsible if the products it sells do not conform, regardless of whether the merchant knew about the non-conformity or was negligent in its advertising. In other words, the risk of “honest mistakes” falls clearly on “merchant” sellers. However, descriptions given by laypersons—non-merchants—are not generally considered warranties.

The difference is sensible, in that a collector buying from a professional dealer is entitled to rely on the dealer’s superior knowledge and experience, and therefore whatever the dealer says about the goods becomes, in U.C.C. jargon, “part of the basis for the bargain.” Conversely, where the parties are on a more equal level of knowledge and experience, a seller’s statements are more likely to be considered opinions which do not become part of the bargain.

Similarly, a buyer’s ability to rescind a transaction because of a “unilateral mistake” on his or her part relating to an item—something that made the buyer think the item was more valuable than it was—will depend on whether or not the seller is a “merchant.” So a buyer who thinks a coin has, for example, a special provenance, may be entitled to rescind a purchase if the seller is aware of the buyer’s belief, but only if the seller is a merchant.

There are, of course, exceptions to the “dealer-collector” rule from time to time. Particularly with respect to warranties and rights of rescission, a buyer’s actual level of knowledge and experience is relevant. I once litigated a case where a collector attempted to return an ancient coin to a dealer on a breach of warranty claim, but the collector clearly had far more knowledge and experience with respect to ancients than did the dealer. I argued, and the court accepted, that in that case the collector did not purchase the coin in reliance on anything the dealer said about the coin, but rather used his own judgment. It is also the case that some platforms such as eBay have their own rules for handling disputes between buyers and sellers.

Another difference between buying from a dealer or another collector relates to the buyer’s assurance that he or she is getting good title to the purchased item. There are many instances where a seller could, unbeknownst to the buyer, have what the U.C.C. calls “voidable title.” For example, the seller may have taken the item on consignment from a third party and not paid the consignor for it. Or ownership of the item might be divided among more than one person, or subject to liens imposed by the seller’s creditors. A “merchant” seller has the legal right to pass good title to a good faith purchaser, and any other claimants have no rights against that purchaser. In other words, when buying a coin from a merchant, the buyer doesn’t have to worry about how or from whom that merchant obtained the coin, and is assured of good title (the only exception being if the item was stolen property, a different situation entirely). If the seller is not a merchant, however, the prior owners might assert their rights against the buyer.

Although dealers and collectors benefit greatly from “meeting” each other online, it is important to recognize some of the differences a buyer and seller’s status confers on their respective legal rights and responsibilities.

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Author: Armen Vartian

Armen Vartian image Armen R. Vartian has practiced commercial law and litigation since 1981. Armen is admitted to practice in California, Illinois, and New York, as well as numerous other state and federal courts nationwide. His specialty is handling legal matters relating to the art and collectibles industries, and Armen has represented dealers, auction houses, collectors, investors, museums, artists, and institutions from throughout the U.S. and abroad. Armen is the author of Legal Guide to Buying and Selling Art and Collectibles, as well as hundreds of articles relating to art and collectibles law. He was featured in the article "Niche Riche" in California Lawyer magazine.

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