Artists and dealers have a unique relationship. After creating a work of art, artists commonly give that piece to an art merchant to exhibit, and, sometimes, sell on their behalf. However, confusion often surrounds the dealer’s responsibilities and the terms required in consignment agreements.
Protecting artists in their business with art dealers is a longstanding legal responsibility, especially in one of the greatest global art capitals, New York. Understanding this legal landscape is necessary to support the arts as a vital resource in the state.
An Art Dealer’s Responsibilities
When an artist entrusts their artwork to an art dealer for display or sale, it establishes a consignment relationship. This relationship is automatically created, regardless of whether there is a written or oral agreement to consign the work at issue. It is best practice to put consignment agreements in writing and seek guidance from an experienced art attorney.
It is important to note that the consignment relationship does not give the dealer ownership rights. Rather, the work and any proceeds from its sale are held as trust property on behalf of the artist or their estate. As such, the dealer owes both contractual and fiduciary responsibilities to the artist.
Art dealers have heightened duties of care and loyalty to artists. Regardless of the terms of a consignment agreement, the dealer has certain obligations, such as:
- Not commingling or misusing sale proceeds. Funds must be segregated in a trust account for the artist to protect them from claims by the dealer’s creditors.
- Paying the artist their share of the sale proceeds on demand.
- Providing them with an accounting of sales of their art, including supporting documentation, the sale price, and the name and address of the purchaser.
It is important to note that New York law applies to works of art (and their proceeds) consigned by artists, crafts persons, or their “successors in interest”. This includes personal representatives, testamentary beneficiaries, trustees of a trust or heirs.
Damages For Breach of Duties
If a dealer fails to meet one of its obligations under the law, that failure constitutes both a contractual and fiduciary breach of duty. In such cases, an artist can obtain monetary damages, injunctive relief and attorneys’ fees in a lawsuit to enforce the law’s requirements. In certain cases, dealers may even be subject to additional penalties under criminal law for commingling or misusing funds.
Protecting Artists and Dealers
To minimize the risk of working with an untrustworthy dealer, it is important for artists to be proactive. Artists should vet art dealers by consulting other artists or art attorneys for referrals to reputable merchants. Additionally, artists should keep a regular inventory of pieces and maintain good records on who has their work. Furthermore, they should not waive the right to have sale proceeds treated as trust property without legal advice.
Dealers can protect themselves from lawsuits by maintaining careful records regarding what pieces they have on consignment and up-to-date contact information. Additionally, all financial transactions must be properly documented and proceeds must be deposited with a bank in a segregated trust account.
Conclusion
It is important that both artists and dealers understand their rights and responsibilities to ensure a successful relationship. If you are an artist or dealer looking to enter a consignment relationship, contact the experienced attorneys of Romano Law today.
Carlianna Dengel is admitted to practice law in New York and California.
