If you are an art collector, the decision to consign a valuable piece of art that you own will likely bring in more money than if you were to sell it outright. The same holds true for an artist whose works may be on display after a public showing. Conversely, if you have just opened a gallery, you may be thinking of taking on consignments. Oral agreements between parties, once the norm, were found to be problematic since they are difficult to enforce, so there are now laws governing art consignment.
Consignors Are Protected by Three Types of Laws
Unfortunately, things happen. It is essential to determine who is financially responsible if, for example, a piece of art is damaged in a gallery, or if a gallery declares bankruptcy. If each party’s obligations are spelled out in writing, disputes can be avoided should any kind of court action be required. Furthermore, written consignment agreements are required by many states.
Work With the UCC
The Uniform Commercial Code, or UCC, has pros and cons. If the artwork you put on consignment is damaged through the gallery’s negligence, you must be compensated for your loss. However, when it comes to a bankruptcy, your consigned artwork can be seized in order to help pay the gallery’s creditors, all of whom are in line for recompense before you. You do have recourse, which is to file a UCC-1 form in the county where the gallery is located. This will create a lien, which moves you to the front of the line in bankruptcy court and gives you a better chance for compensation. You must remove the lien at such time as your artwork is sold.
Depend on State Consignment Laws
Laws have been enacted in more than half the states in the nation to protect artists and art owners from creditor seizure of their consignment goods as the result of a gallery bankruptcy proceeding. In order for this protection to exist, however, many of these states require a written consignment agreement between the artist or art owner and the gallery involved. It is recommended that an attorney be hired to assist in enforcing the state protection laws and to properly file claims in bankruptcy court.
Draw up an Art Consignment Agreement
Traditionally, art consignment has been handled through a simple oral agreement between the gallery owner and the individual who wishes to place artwork there. However, as far back as 1677, an English law, which spoke to the “Statute of Frauds,” formed the basis for the requirements of current written contracts. Such contracts are valuable in showing the obligations of each party in the event of a court action. Written art consignment contracts should include these points:
- The duration of the agreement
- The inventory of consigned works
- The retail price for each piece of art
- The gallery’s consignment fees, pricing and pricing terms
- The method by which the artist or art owner is paid
- The accounting method
- The gallery’s liability for damages to the artwork
- Requirement for the gallery to post a notice about consignment as protection for the artist or art owner in case of gallery bankruptcy
- Promotional responsibilities, if any
- Responsibilities as to copyrights and artwork duplicates
- Confirmation that artwork ownership belongs to artist or owner until sale
- Statement as to who pays attorney’s fees in case of a legal dispute
An Attorney Can Offer Advice and Guidance
In order to protect your artwork to best advantage, you need to have all the facts concerning consignment and understand the legalities involved. You may want to consider seeking the counsel of an attorney experienced with business and commercial law. In fact, it is a good idea to have an attorney look over a consignment agreement before you add your signature to the document. It will give you peace of mind and likely save you a financial headache or two.
Legal Disclaimer
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.