By Joseph Gergel
To dissect the often esoteric language of consignment and representation agreements between artists and dealers and conflicting practices, the Center for Art Law hosted "The Essentials: A Guide to Artist-Dealer Relationships and Contracts" on January 25, 2023.
The program examined common questions and sources of conflict between artists and dealers, including issues regarding storage and transportation fees, payment deadlines, installation costs, and consignment commitments. Panelists considered common practices of handshake agreements and informal communications, and they outlined best practices with formal, written contracts that outline clear obligations of both parties. The panel included Megan Noh, Esq., co-chair of Pryor Cashman's Art Law Group; Sara Maria Salamone, gallerist and director of Mrs., a contemporary art gallery; and Onyedika Chuke, an artist, archivist and founder of Storage Gallery. The panel was moderated by Jessica Wessel, Esq., Director of Business Development, Northeast at Gurr Johns.
Jessica Wessel introduced the panel and stressed the keyword of "leverage" in contract negotiations, where the party in relative power in the transaction will dictate the terms of the agreement. The discussion was broken down into four scenarios of issues art world players commonly face. Within this framework, the panelists gave perspectives from their positions as lawyers, gallerists, and artists.
Scenario #1: An artist is approached by a gallery to exhibit a work in a group summer show. The gallery sends a van to pick up the artwork, without any written agreement other than emails back and forth between the artist and gallery.
Onyedika Chuke stressed the importance of the consignment agreement at the outset of any artist-gallery relationship. Chuke pointed out the difference between the retail value of an artwork versus the material costs of an artwork, and artists should consider whether the gallery's insurance for loss or damage covers the retail price. By contrast, insurance that only covers material costs would be valued at substantially less. In this scenario, Chuke stated that the gallery should have already sent the consignment agreement before any art exchanged hands. Sara Maria Salamone added that these forms are typically facilitated by the gallery's registrar, who keeps a record of all artworks coming in and out of the gallery.
Megan Noh explained that even without best practices in place, such as a written and signed agreement, states such as New York still provide laws that protect artists' rights in these situations. The New York Arts and Cultural Affairs Law states that galleries must act as fiduciaries for their consignments, which places a duty of trust by treating the artwork and sales as "trust" property. Thus, the consignment relationship is assumed and the artist is entitled to its proceeds. Even though this law protects the artist in receiving proceeds, the absence of a consignment agreement leaves open questions, such as the commission split and the length of time which the artist must be paid.
However, there are many problems that could go wrong along the way, such as loss or damage to the artwork. Without more documentation in a consignment agreement, there is no indication of the scope of the insurance policy, such as who pays the insurance and how much the artwork is insured for. In an ideal world, the artist will receive a Certificate of Insurance (COI), which outlines what insurance is covered. In addition, it is important for the gallery to make a Condition Report, which includes images of the artwork when the gallery receives it, to have a baseline documentation for comparison if any issues arise. It is important that the artwork is insured under the gallery's insurance policy, which should be a commercial fine art policy, rather than only the shipper's policy, which generally only covers federally-mandated limits.
Scenario #2: An artist agrees to a solo exhibition with a gallery. However, after the artist agrees by email and gives a pick-up date, the artist gets cold feet and doesn't make the paintings and disappears.
Onyedika Chuke pointed out that this is a sticky situation, because the gallery has incurred costs associated with planning the projects. Communication between the gallery and artist is key, as there should have been discussion throughout the artistic process, such as artist sketches and studio visits. He also stated that in some instances, artists should be liable for expenses incurred after permanently backing out of a project. Sara Maria Salamone would have a conversation about postponing the exhibition if such a scenario occurred. She said that there has to be a base level of trust, and this scenario has the potential to ruin the relationship.
Megan Noh suggested considering a Liquidated Damages clause, or a Kill Fee on the artist if they pull out after a certain date. While this is not common, a gallery may consider such a clause if there is cause for concern. The gallery could sue the artist for damages, including expenses and projected profits, having to prove in court the extent of its damages based on the artist's non-performance. Noh also raised a scenario where the gallery paid for some of the production costs. Under the New York Arts and Cultural Affairs Law, a gallery is not entitled to interest in the artwork even where they have advanced production costs themselves. See Case Review: Art Works, Inc. v. Diana Al-Hadid. However, it would still be a debt that the artist has to pay. Before running to court, it is important to consider business-oriented solutions, and contracts can help frame the solution.
Scenario #3: A mid-career artist is asked to make a large-scale public installation in Central Park, but would only receive $5,000 for the commission and must pay for shipment, storage, and transportation fees.
According to Sara Maria Salamone, this situation happens often, where artists are expected to cover many aspects of a public installation. Even though organizations are often well-intentioned, many aspects such as shipping should not be the artist's responsibility. A budget needs to be put in place from the outset that covers production, transportation, and installation. Even large budgets end up getting diminished quickly. Salamone stated that sometimes these scenarios are more trouble than it is worth. Onyedika Chuke said that the $5,000 commission fee is still standard, and he has even seen fees for $2,500, which can be contradictory when an institution approves a proposal knowing that it will exceed this amount. The issue may begin with an artist not asking for enough money in the proposal, and then there is pressure to make something great that cannot ultimately be accomplished within the budget limitations.
Megan Noh raised the issue of artists' rights. It is important to consider the copyright ownership scheme in the contract. If it is a commissioned work, it should be clear whether the commission was a "work for hire," which will dictate if the organization owns the artwork. Apart from owning the actual artwork, who owns the copyright? Noh also brought up the issue of moral rights of an artist. The Visual Artists Rights Act (VARA) gives artists the right of attribution to be credited as the author for the artwork, and for the artwork's integrity in not being destroyed or used in a manner that is detrimental to the artist's reputation.
Scenario #4: A major global art gallery approaches an emerging artist who is gaining traction, and offers worldwide exclusive representation with only a handshake offer. The artist had previously been selling artworks from their studio and on Instagram.
Wish you were
Onyedika Chuke stated that he often speaks with artists to consider which gallery is the best gallery for them — not only which is the flashiest, but which gallery will create a community to support the artist's ideas. A good place for artists to begin is consigning one artwork and seeing how the relationship blossoms. When Sara Maria Salamone started representing artists in 2020, they did not have a lawyer, and then they realized they needed formal contracts. When it comes to a handshake offer, she stressed that it is best to follow up with a written contract.
Megan Noh considered contractual provisions that may be helpful for artists or galleries. From an artist's perspective, contract provisions that are helpful include a commitment to certain solo exhibitions, gallery locations, its publication program, and PR strategy. Artists can stipulate that the gallery is working on institutional placements, potentially implementing resale restrictions, sharing a percentage of secondary market sales, and restrictions on who the artwork may be placed with. From a gallery's perspective, contract provisions that are helpful include exclusivity (though some would say that exclusivity is not necessary), in addition to a commitment to a certain level of inventory. Galleries can also ask the artist to give assurance that the artworks are owned by the artist and indemnify the gallery from having to pay defense costs in defending claims.
Conclusion
With over seventy participants in attendance, there was an immense amount of interest and participation. Center for Art Law will host its next Artist-Dealer Relationships Clinic on May 17, 2023, which will allow for artists, dealers, and attorneys to speak more in depth about the issues raised on the panel. Interested participants may register HERE.
Premium Members of the Center for Art Law can view the recording and archives of the event and of past Center events.
About the Author
Joseph Gergel is a Legal Intern at the Center for Art Law in Spring 2023. He is a second-year law student at Fordham University Law School, with a focus in art law, intellectual property, and international law.
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