PCGS The Standart for the Rare Coin Industry

In other articles, I have explained generally how express and implied warranties work. This column will cover the key warranty on art and collectible items, that of authenticity. Through express and implied warranties, dealers always assure collectors and investors about the authenticity of what they are getting, and authenticity probably is the only warranty applicable to all sales of rare coins.

As we have seen, terms contained in warranties are entitled to their literal meaning as well as to whatever special meaning is attributed to them in a particular trade. For example, in the art trade terms such as "attributed to" or "from the school of" a particular artist have specific meanings to dealers and collectors. Likewise, in numismatics a wealth of identifying information (everything from mintmarks to auction pedigrees) is provided by dealers in the form of express warranties of authenticity. Moreover, because authenticity is the primary element of "merchantability", it is implied regardless of what the dealer may say. But don't rely on implied warranties of authenticity. If at all possible, warranties of authenticity should be express, and in writing.

Most rare coin dealers are honest and scrupulous in describing coins, but sometimes you'll need to insist on a full written description, which should include country name, denomination, date, mintmark, variety and provenance (if known). Take time to make sure the written statements match whatever oral statements were made to you by the dealer, and that they are unequivocal. This is common sense -- if a dealer will not put his oral statements concerning authenticity in writing, you should think twice about the purchase. Collectors and investors are presumed to have less knowledge than the dealer regarding facts and technical distinctions relating to authenticity, and you are, therefore, entitled to rely upon the dealer's warranties and rescind a sale if the coin turns out to be falsely described in any material respect.

Authenticity issues sometimes become quite complicated. Where one expert says that a coin is genuine, and another disagrees, what are buyers and courts to do? The New York case of Dawson v. G.Malina illustrates the point in the analogous world of Chinese art. Dawson purchased certain items from an art dealer, and for each object the dealer stated from which imperial dynastic period it dated. A large ceramic vase was attributed to the Sung Dynasty (960-1279), and two jade sculptures were attributed to the period of Chien Lung's rule as emperor (1736-1795). Dawson then showed the works to various experts who questioned the dealer's attributions, but the dealer obtained opinions supporting his position and refused to take the items back. When the case reached court, Dawson argued that he could return the items unless the dealer could prove the items were genuine. The dealer, on the other hand, said it was up to Dawson to prove that the items were fakes. The court gave the dealer the benefit of the doubt. Noting that attributing works to a particular period of Chinese antiquity is an "inexact science" and "to a substantial extent a subjective judgment", the court determined that where there was a "reasonable basis in fact" for a representation at the time it is made, there is no breach of warranty. This standard has been adopted into New York statutory law for many categories of artwork, and seems equally appropriate with respect to many areas of coin collecting.