The Artist-Gallery Partnership

A Practical Guide to Consigning Art

Tad Crawford, Susan Mellon

• Publisher: Allworth
• Year: 2010
• ISBN:
  9781581157505
• Topic: Art
• Subtopic: Art & Business

Artists, dealers, and gallery owners will welcome this clear explanation of the consignment contracts that lie at the heart of the relationship between artists and galleries. Updates include the latest developments in state laws and all of the current statutes in the 32 states that have laws regarding consignment sales. A thorough discussion of the Standard Consignment Agreement, covering agency, consignment, warranties, transportation, insurance, pricing, gallery commissions, promotion, return of art, and more, plus a ready-to-use contract, is included. Want a clear understanding of art-consignment law? Get The Artist-Gallery Partnership.

1
The Consignment
Relationship

Artworks are commonly sold on consignment. In such an arrangement, the artist entrusts the artworks to a gallery (whether a cooperative, commercial or nonprofit gallery, an art consultant, a retail store, or another outlet), and is paid a portion of the price the gallery receives upon the sale of the artwork.

Both the gallery and the artist can benefit from this relationship. The artist, who is in the business of creating art, is not forced to go into the business of marketing it. By selling through a gallery, the artist avoids the expenses and the expenditure of time required in maintaining a retail shop. Artists promoted actively by established dealers stand to gain wider exposure than is ordinarily possible as a result of direct studio contacts. Craft artists who normally sell through fairs and wholesale markets may find that consignment in gallery outlets offers a special opportunity to create exhibition-type pieces for display to an art-conscious audience in a prestigious setting that tends to stimulate sales. Creative expression can be an intensely personal statement and many artists prefer dealing through galleries, rather than promoting their own work.

For the gallery, one clear benefit of consignment is the reduction in capital required: less of the gallery’s funds are tied up in inventory. As a result, the gallery can afford the risk of showing unique kinds of artwork for which no sure market exists, and it can introduce promising young artists to the buying public without a substantial financial investment. A gallery dealing mainly in consignment can spend a considerable sum on overhead expenses, yet still maintain a large stock of artworks and vary its displays frequently, factors which certainly enhance the likelihood of sales.

Each party in the consignment relationship makes a serious commitment to the other. Consigning artists give up a measure of control over their creations, entrusting them to an agent whose business is the marketing of artworks. Artists depend on galleries to promote them effectively, to care for the artworks properly, and to keep the works on public display. If consigned artworks do sell, the artist accepts that proceeds will be less than those from a direct studio sale.

The gallery taking artworks on consignment is making as strong a commitment. Although consignment limits its financial risks, the gallery depends on the sale of artworks for its survival. With limited space, the gallery is relying on the marketability of the artworks on hand and on receiving a continuing supply of works from the artists it represents. As agent for its artists, the gallery has a legal obligation to those artists and a responsibility for the safekeeping of the artworks in its possession.

Because of their interdependence, gallery and artist must depend on the integrity and high standards of professionalism of one another. Before entering into a consignment arrangement, therefore, the parties should first evaluate one another carefully, for the relationship between them should not be a matter of blind faith. Although in practice artists and galleries frequently begin their professional association in an extremely casual manner, it is far better for both to know as much as possible about the reputation for quality, reliability, honesty, and good will of their potential business partner.

The gallery might ask about the artist’s training and professional background, finding out how long and how extensively the artist has been in business. It should know where the artist’s work has been shown and through which other galleries the artist has been and is currently represented. The gallery should ask about the general scope of the artist’s production and the level of output that can be expected in the future, as well as the artist’s typical price range. If the artist is interested in accepting special orders or commission work through the gallery, references of past performance are well worth checking; the gallery will be staking its reputation on the artist, relying on the artist’s ability to deliver work of consistently acceptable quality in a timely manner. The gallery, accountable to its clients, must look for artists who act in a businesslike manner while creating art of quality.

The artist should evaluate the gallery with equal care. It can be particularly helpful to check with other artists who are familiar with the gallery, since news of any problem tends to travel rapidly. A look around the gallery is revealing in itself. Are the exhibitions attractively mounted and changed at regular intervals? Is there an alarm system or other protective device in evidence? Are the artworks treated carefully? Are the objects on display kept dusted or polished, and are they identified with the artists’ names? Are the artworks compatible aesthetically with one’s own works? The type of client the gallery attracts and the kind of market it reaches will be significant to the artist, as will be the manner in which the gallery relates to its clients and to art in general.

The artist should certainly ask whether the gallery deals only in consigned works. If a gallery owns a sizeable proportion of its stock outright, will it use every effort to promote the work of consigning artists, especially if the success of these efforts might mean one less sale from its own inventory? It is reasonable, too, for the artist to ask how long the gallery has been in operation, to confirm that the business is reasonably sound fiscally, and to ask something about the background and training of the key personnel to gain a clear idea of their professional qualifications.

Once both parties decide to proceed, it is important that they discuss the arrangement fully, outlining procedures and responsibilities. A written receipt for those works accepted on consignment, with a full description of the works, their retail price, the gallery’s commission, its terms of payment, a statement that the work is on consignment, and a statement that the gallery assumes full responsibility for the artworks in its custody, is the absolute minimum written record that an artist should accept. (A sample of this type of receipt can be found in the appendix.) A much more detailed contract is preferable, however, to provide a clear-cut record of the terms to which the parties have agreed. For this reason, the heart of this book is devoted to a provision-by-provision explanation of a model contract suitable for use—the Standard Art Consignment Agreement. This discussion is designed to point out many aspects of consignment of which artist and gallery should be aware.

Having once entered into the consignment relationship, the artist and the gallery should work toward strengthening their professional association. They should continue to communicate openly and frankly with each other. It is the responsibility of the artist to provide the gallery with useful information about the artworks, including all materials used and any special care requirements. The artist should also feel free to suggest to the gallery how to display the consigned artworks to advantage, although of course the final decision on display of the artworks is the gallery’s. The artist should ask the gallery what its clients say about the work. Such comments can provide constructive criticism about the salability of the artworks which the artist would not otherwise hear. The gallery, in constant communication with potential buyers, may be able to pass on useful suggestions to the artist.

In the event of a disagreement, which is perfectly normal in any close and ongoing relationship, the dispute should be aired promptly and a solution sought without delay to minimize the effects of misunderstandings. By a willingness to share concerns and to work out differences, a truly amicable relationship can be nurtured. After all, people who create and those who sell art are both in business, but their connection to art is usually far more than just a financial one; it is aesthetic and often deeply personal. If, at the same time as the business relationship between gallery and artist develops, a friendship based on mutual respect can grow, both parties benefit.

2
Laws Governing the
Consignment of Art

Before going into the kinds of contractual arrangements that artist and gallery can make, it may be a good idea to look first at the law as it relates to the consignment of art.

In this country, business dealings in general, and the consignment relationship in particular, are governed primarily by case law and the Uniform Commercial Code (the UCC), a comprehensive statute that has been enacted by every state (except that Louisiana did not enact Article 2). A sample UCC section can be found in section D of the appendix. The function of the law is to establish legal parameters covering a range of situations that may arise in commerce. In the absence of a written contract between the parties involved, it details the obligations and responsibilities of each and sets certain guidelines to be followed in a court of law in the event of a dispute.

On the subject of consignment, the law does not usually differentiate among the types of goods being consigned, whether second-hand furniture, or horses, or original artworks placed on consignment by an artist. Herein lies a problem, for artists have less business experience than most people who deal regularly in consignment. In addition, artists are, generally speaking, in an unfavorable bargaining position when negotiating the terms of consignment with a gallery.

Also, the law, being a very general set of rules, is bound to seem arbitrary in some instances. In regard to the consignment of art, there are several important points about which artists and galleries should be aware. The first is that, unless the parties have agreed to the contrary, the consignee (the party taking goods on consignment—in this instance, the gallery) is responsible for loss or damage to the goods. However, the court decisions are not in agreement as to whether the gallery is liable regardless of the reason for the loss (strictly liable) or liable only in the event that its negligence causes the loss. Paragraph 6 of the Standard Agreement states that the gallery is to assume full responsibility for artworks while on consignment.

Another important provision of the UCC is that creditors of a consignee (i.e., a gallery) may seize the goods on hand to satisfy their claims, in spite of the fact that the consignee does not own them. In this case, not even a contractual arrangement between artist and gallery can protect the artist from the possibility that consigned works may be seized in the event of the gallery’s indebtedness to someone else, because a creditor of the gallery is considered a “third party” who is therefore not bound by the terms of a contract made between artist and gallery.

The UCC does provide a means by which consignors (in this context, artists) can protect their goods against the possibility of seizure by creditors of the consignee, if they have followed certain procedures outlined in the UCC. These procedures will be discussed in detail under paragraph 8 of the Standard Agreement. But, as can be seen there, the protective procedures are exceedingly cumbersome. They place an unfair burden on the artist—if the artist is even aware of their existence before being confronted with the situation.

The legal climate, however, seems to be improving. At the state level, there has been legislative activity dealing specifically with art. Our state lawmakers have recognized the fact that artists, and original artworks, need to be better protected. More than half of the states have already enacted statutes dealing with the special problems involved in the consignment of art.

At the moment, though, the laws vary from state to state. To assist both artist and gallery, this book includes a thorough discussion of the state laws and their differences in chapter 5, “State Consignment Acts.” In addition, all of the state laws now in force are included in chapter 6, but it should be noted that what is in effect at the time of this writing may have since been amended. The artist should be sure to check on the current status of the laws. To obtain up-to-date information about the art consignment laws in effect in your own state, write to your local state arts agency; for that address, contact your state representative or senator.

Because of these variations, it makes sense to look at the kinds of provisions which these laws contain, rather than to go through each state’s law separately. In this way, individual artists may gain a basic understanding of the degree of protection provided by the different statutes to help them as they study the specific laws in effect in their own states.

In general, art consignment laws provide that artwork left with a gallery is considered to be on consignment. It is not the property of the gallery unless it has been purchased and paid for. The laws also stipulate that the gallery is the agent of the artist, and must observe certain standards with respect to acting on the artist’s behalf.

One feature common to several of the state laws is the requirement that there be a written contract between artist and gallery. The contract must contain some specific elements (although, of course, it may include additional provisions to which both parties agree). Looking at Connecticut’s art consignment law, for example, one sees that the contract must include the minimum retail price for which the artworks may be sold, details as to the gallery’s schedule of payments to the artist upon sale of the artworks, and an affirmation that the gallery accepts full responsibility for the safekeeping of consigned artworks in its custody. This law also requires a statement to the effect that the artworks may be used or displayed only with the permission of the artist and only with an acknowledgment that the artist created them.

In some states, the gallery’s responsibility for the safekeeping of the artworks consigned to its custody is mandated by law, rather than through contract. Such laws state that the gallery is strictly liable to the artist in the event of loss or damage to the artworks, usually to their stated value. While artists dealing in states with a law of this kind do not need to incorporate the same provision in their own consignment contracts to be sure of adequate protection, reiterating the point through written agreement certainly does no harm.

Another provision in some laws is the imposition of a trustee role on the gallery. As a trustee, the gallery is held to particularly high standards of fair dealing. It must act in ways which benefit and protect the artist. The money that the gallery receives for sale of the artworks, for example, is trust property until the artist has been paid in full. Until that time, it should be kept separately from the gallery’s general funds. Money owed to the artist may not be applied to other uses, and it cannot be made subject to claims by creditors of the gallery.

One of the most significant aspects of the art consignment laws relates to the provision in the UCC which permits creditors of a consignee to seize goods on consignment in order to satisfy their claims. Some state laws now override that portion of the UCC, effectively eliminating any possibility that artworks or funds owing an artist can be taken by creditors of the gallery. Artists who deal through galleries in states with this level of legal protection need not bother with the preventive procedures outlined under paragraph 8 of the Standard Agreement. Lacking such a state statute, however, the artist should consider filing UCC form 1 (see Appendix E for a sample) to minimize the chance of losing consigned artworks following a gallery’s insolvency.

The state laws are not perfect by any means. For example, in Connecticut, the creditor clause of the UCC is not overridden by law. Instead, the consignor is encouraged to follow one of the procedures detailed in the UCC as a protective measure. Some state laws which impose gallery liability in the event of loss or damage to artworks create an ambiguity as to the amount owed the artist by using the term “stated value.” This presumably means retail price, but retail price is more than the artist would ordinarily receive were the artwork to be sold through the gallery. Yet another weakness in some state laws is that, while a minimum selling price for artwork must be agreed to by artist and gallery, upper price limit has been left open. And many states fail to set forth specific penalties for noncompliance with provisions of their laws.

The inconsistency among the various state statutes creates confusion. Nonetheless, these laws do represent a significant start at assuring basic legal protection to artists inexperienced in business dealings. If the consignment takes place in a state with such a consignment law, the relationship between artist and gallery will be regulated by its provisions. In states lacking special legislative protection, however, it is particularly important that the significant elements of the laws be incorporated into the agreement signed by artist and gallery, so that the parties can create through contract what has not been provided by law.

3
The Standard Art
Consignment Agreement

It is not uncommon for galleries and artists to begin their consignment relationship with only a simple verbal agreement. In many cases, this understanding is confirmed with no more than a handshake and a receipt for the works accepted on consignment. To be sure, a ...