by Attorney Richard Stim

Who's responsible when artwork is damaged? What do you do when a gallery goes belly up?

Consignment sales come with plenty of risks. Consider the artists left holding the bag when a Minneapolis gallery filed for bankruptcy owing artists $97,000. Said one artist at the time, "We're the canaries down the coal mine. When the gas comes we're the first to die."

So what's an artist to do?

There are three types of legal protection for consignors: the Uniform Commercial Code, state consignment laws, and written consignment agreements. You may, however, find some of the laws difficult to comprehend, inconsistent, and expensive to enforce.

The Uniform Commercial Code

Every state has adopted a version of the Uniform Commercial Code (UCC), a set of uniform business laws that protect consignments. For instance, under the UCC, if damage to your artwork results from the gallery's negligence, the gallery must pay for the loss. If the damage is not the fault of the gallery -- for example, there's flooding or a fire -- the gallery may or may not be liable, depending on how the courts in that state interpret the UCC.

The UCC is not always so helpful, however. Under the UCC, if a gallery files for bankruptcy, the gallery's creditors can seize your consigned goods as payment for the gallery's debts! In other words, anyone owed money by the gallery can take your crafts as payment. You must stand in line behind the other creditors in bankruptcy court and hope that the judge awards you some compensation for your consigned goods.

You can avoid this unhappy outcome by fulfilling one of following three requirements under the UCC:

• File a UCC-1 form (known as UCC Form 1) at the time of the consignment in the county where gallery is located.
• Have the gallery owner post a sign telling the public that the goods are consigned (this option is not available in all states).
• Prove that creditors were aware that the gallery sold consigned goods.