Art Consignment Overview
Do you have valuable pieces of artwork that you'd like to sell, but aren't sure how to do it? You may want to consider art consignment. Perhaps you are a gallery owner and want to begin accepting consignments. Either way, you'll want to know the law before you do so.
When you consign art you stand to make more money when it sells than you do by selling it outright. However, the converse to consigning art is that you only make money when it sells. When it fails to sell, you don't make any money. The stronger the market, the better the chances the art will sell and the more viable consignment becomes.
Keep in mind, art consignment comes with a lot of risks. Three types of laws protect consignors: the Uniform Commercial Code, state consignment laws, and written art consignment agreements.
Uniform Commercial Code
The Uniform Commercial Code (UCC) is a set of acts that tries to harmonize state laws. The UCC states that if your artwork is damaged due to the gallery's negligence, the gallery must compensate you for your loss.
One of the more common issues in the art world concerns who is financial responsible in the event the gallery goes bankrupt. The UCC provides that the gallery's creditors can seize your consigned goods to pay for the gallery's debts. All of the gallery's creditors stand in line to collect before you. If there are funds left after the creditors are paid, the judge in bankruptcy court can award you compensation for your art. If the gallery has a lot of debts or there are too many artists to compensate, you may see little or no compensation for your art. The UCC protects artists in art consignment if the artists fulfill certain requirements:
State Consignment Laws
Many states have enacted their own art consignment laws to protect artists from creditors seizing consigned goods in the case of the gallery's bankruptcy: Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee, Texas, Washington, and Wisconsin. Many of these states require that a written consignment agreement exists between the artist and the gallery for these protections to exist. Artists will probably need an attorney to help enforce these protections and filing claims in bankruptcy courts.
Written Art Consignment Agreements
Until recently, artists have traditionally used oral consignment agreements. However, as more state laws require written consignment agreements in order to protect the artists, it is important to establish consignment agreements in writing. Furthermore, oral agreements can be hard to enforce, as parties can disagree as to what was contracted and agreements can change over time. Written art consignment agreements should include:
It is wise to ask similarly situated artists about galleries you are interested in. It is also a good idea to avoid large orders with new or unknown shops, until you have developed a trusting relationship with them.
Hire a Business and Commercial Law Attorney
Protecting your investment is important. Whether you are an art gallery owner seeking advice on consignments or are thinking of consigning your work, speak to a business and commercial law attorney to get the facts. There are several areas of law (UCC, state laws, and consignment agreements rules) you should be aware of before you agree to accept a consignment or decide to consign your art.