A collector buys a painting described as a unique self-portrait by a recently deceased artist, paying $500,000. The painting is damaged in transit. The collector rejects it, and the gallery sells the damaged painting to a third party. The collector later sells the painting for $550,000. If the collector’s sale was not an acceptance, what is the correct measure of damages for conversion?

• A. $550,000 (the fair market value at the time of conversion)
• B. $500,000 (the contract price)
• C. $50,000 (replacement cost)
• D. $0 (no damages because rejection occurred)

Answer: (A)

Damages for conversion are measured by the fair market value of the property at the time it was converted. Here, the gallery’s act of damaging and then selling the painting constitutes conversion, and because there was no acceptance, the remedy is not the contract price or replacement cost but the property's value at the moment of conversion. The problem states the painting’s fair market value at that time as $550,000, which is the amount needed to put the owner in the position they would have been in if the conversion had not occurred. The later sale by the collector for $550,000 does not change the value at the time of conversion. Therefore, the correct damages are $550,000.