In Tuesday’s blog entry we provided an overview of artist-dealer contracts. Today we focus on some of the key issues that the parties should heed in entering artist-dealer contracts.
Scope of Agency. What is the scope of the dealer's duties as a consignee of the artwork? For example, is it an exclusive arrangement, or will the artist have the right to work with other dealers? If it is an exclusive arrangement, is it exclusive in just one city or region, or for the entire country, or even the entire world? Both parties should consider the description of the scope of the dealer's duties very carefully to make sure the contract meets their respective needs.
Duration. How long is the dealer's consignment going to last? Both sides may have an interest in limiting the length of their obligations to each other. The artist may want the right to cut off the dealer's rights in the artwork in the event the dealer is unsuccessful in selling the art. One way of doing that is providing that the artist may terminate the relationship if the dealer does not meet a certain sales quota. The dealer, similarly, may want to limit the duration of the consignment if the artwork doesn't sell. The length, or term, of the relationship should be stated clearly in the contract.
Sales Price. The artist and dealer often both have a say in the price at which the art sells. The contract should state in some way the price for the artwork or the manner in which the price can be established. The dealer may want the right to adjust pricing for different circumstances or for different customers. The dealer also may want the right to purchase the work outright from the artist at a favorable price.
Commission. One of the most important provisions of the artist-dealer contract is the commission -- the amount to be paid to the artist upon sale of the art work by the dealer. The commission usually is a percentage of the dealer's sales price. Depending upon the reputation of the artist or of the dealer, the commission may vary greatly. Another way of calculating a commission is to set a price that the artist receives, and to allow the dealer to keep any amount in excess of that.
Accounting. The contract should describe clearly when the artist is to receive commissions. Contracts often provide that artists will be paid commissions on sales that occur on some periodic basis, such as quarterly or monthly. Almost as important is the dealer's obligation to provide information and documentation from which commissions are calculated. The artist should have the right, for example, to get a summary of works sold, sale dates, and sales prices.
Promotional Duties and Exhibitions. A potential area of conflict is how much the dealer is supposed to do to promote the artist's works. If the artist wants the dealer to promote the artist's works in specific ways, the contract should say what they are. Promotional activities can include things like exhibiting at a gallery, catalogs and other advertising materials, and website promotion, among other things.
Damage and Insurance. As the artist's fiduciary, the dealer is obligated to take reasonable care of the artwork. But each party's interpretation of what is reasonable is likely to differ from the other party's. To avoid disputes the artist may want the dealer to undertake specific steps to care for the art works and keep them from harm. Or the artist may ask the dealer to warrant that the dealer will carry sufficient insurance to insure the artist against the risk of injury to the art work. It is not unreasonable for the artist to ask the dealer whether the dealer carries insurance against the risk of damage to art work.
Identify of Purchaser. It may be useful to the artist to know who is purchasing the artist's work -- for marketing purposes, for example. Artists should consider whether to require the dealers to disclose the identities and contact information of purchasers of their art work to them.
Disputes. Sometimes disputes can arise despite the best efforts of the parties to avoid them. The parties should consider including a clause in the contract that provides for a dispute resolution procedure. For example, the parties may choose to mediate or arbitrate their dispute rather than to court by inserting an appropriate clause in their contract.
California Lawyers for the Arts maintains an arbitration and mediation service for this very purpose: providing for out-of-court resolution of conflicts between or involving artists. Artists and dealers can take advantage of this service by including a clause in their contract that mandates that disputes arising out of their contractual relationship must be resolved by mediation or arbitration under this service. For more information go to the California Lawyers for the Arts website.
An Overview of Artist-Dealer Contracts
An art dealer is anyone who buys, sells, or trades in works of art. Artists who commercially sell their art typically do so by entering contracts with dealers. But many artists, and even some dealers, often pay little attention to the contracts they sign. That’s a mistake for both parties. Understanding what sort of contracts they sign benefits both artists and dealers and assists both sides in knowing their rights and avoiding disputes.
Today’s blog entry provides a short overview of the two different kinds of artist-dealer contracts: sale contracts and consignment contracts. The next blog entry will highlight some of most important issues that arise in artist-dealer consignment contracts.
Is it a sale or a consignment?
Artist-dealer contracts, generally speaking, fall into two categories: sale contracts and consignment contracts. A sale contract is one in which the dealer buys the work of art outright. Once the dealer buys the artwork, the relationship between artist and dealer ends.
In a consignment contract, on the other hand, the dealer (the "consignee") accepts the artwork from the artist (the "consignor") for the purpose of exhibiting or selling it for the benefit of both the artist and the dealer. The artist remains the owner of the artwork. The dealer becomes the artist’s agent, and as an agent the dealer has a number of duties to the artist.
Most contracts between artists and dealers are consignment, not sale, contracts. The advantage of a consignment is that the dealer does not accept as great a risk by having to pay the full purchase price. Under California law, a contract between an artist and a dealer is considered a consignment contract unless the dealer pays the artist the full purchase price for the artwork.
A dealer/consignee has fiduciary duties to the artist.
Once a dealer accepts an artwork under a consignment contract with an artist, the dealer has a fiduciary duty to the artist, which imposes a variety of specific duties on the dealer. These duties include the following:
- The dealer has the duty to care for the artist's artwork.
- The dealer has the duty to deal with the artist fairly and honestly.
- The dealer has the duty to provide an accounting to the artist of any money received by the dealer for the purchase of the artist's artwork.
A dealer/consignee cannot waive its duties under California law.
In contract negotiations, parties sometimes try to change or even waive the duties they otherwise would have under law. But under California law, a dealer cannot waive the dealer's duties. Any attempt by the dealer to waive such duties is void -- meaning of no effect -- as a matter of law. That means a dealer cannot avoid its fiduciary duties to the artist, even if the dealer wants to, and even if the dealer convinces the artist to sign a contract that appears to waive the artist's rights.
In the next blog entry, we'll deal with some of the specific key issues that arise in artist-dealer consignment contracts.
The newly expanded Crocker Art Museum officially reopened yesterday, October 10, 2010, marking one of the biggest events in the Sacramento art scene in years. The addition of the new space more than triples the museum’s exhibition space, and it particularly increases the museum’s temporary exhibition space. It will provide considerably more space to display the works of California artists.
From what I’ve read and seen from pictures, the new space also looks good and is visitor-friendly. I’m looking forward to going as soon as possible.
For more information, go to the Museum’s website at www.crockerartmuseum.org.