>Artist Protection Could Create Legal Headaches for Dealers

>Over at the new and very informative Georgetown Patch, Editrix-in-Chief Shaun Courtney draws our attention to the practical impact of a bill making its way through the D.C. City Council. The Artist Protection Act of 2009 has several key provisions which are designed to protect an artist from situations where, for example, an art gallery becomes insolvent during the period of time in which it is in possession of an artist’s work for sale or the proceeds from a sale. If the reader will forgive my wandering into statutory interpretation, I will try to summarize my understanding of the key provisions of the proposed legislation, for I think it is an interesting way of protecting the work of artists in an uncertain marketplace.

The language of the proposed Act makes clear that the dealer is to be considered both an “agent” and a “trustee” of the artist, holding the property in trust on behalf of its creator. The work is held in trust by the dealer until such time as the piece is sold to a bona fide purchaser. In addition, the artist’s portion of the sale of such a piece is held in trust by the dealer, and therefore cannot be seized by the art dealer’s creditors. This would not apply, of course, to situations where the artist has sold his piece to the dealer, thereby transferring title to the piece.

Another provision of the Act requires that if a dealer accepts a piece on consignment – in other words, to act as an agent on behalf of an artist – for a fee, commission, or other type of compensation, the agreement to do so must be put in writing. I know from experience that frequently such agreements are subject to a handshake or gentleman’s agreement, growing out of the habitual and customary relationship that often develops between an artist and a dealer. This will no longer be possible if and when the Act is passed, for every work of art consigned for sale will have to be the subject of a written agreement, and the agreement will need to include information regarding the value of the work of art; the time by which the artist must be paid if the work is sold; and the lowest price which the artist is willing to accept for the sale of the work.

A potential area of confusion is that the proposed Act does not indicate whether it is possible to enter into a contractual agreement for a “lot”, i.e. group, of works to be consigned. The Act does not specify whether each individual piece must be the subject of an individual contract, or whether an artist consigning, for example, five paintings can enter into a single contract with the dealer and enumerate the required information as to each piece in that document. I could foresee situations where an artist and a dealer decide to sign a single contract listing several works, things go pear-shaped, and the parties end up in court, only to find that by not listing each consigned piece as the subject of a separate contract, the dealer has unwittingly violated the Artists’ Protection Act.

The proposed Act does not lay out what is to be considered a reasonable amount of time for the consignment of a work, nor does it specify that such language must be included in the text of the consignment agreement. This would then appear to be left to the parties to decide among themselves, though I could also foresee problems with the Act’s silence on this issue. For example, if an artist has consigned a painting to a dealer, and then later is asked to send that painting to an exhibition, is the dealer entitled to hold the piece hostage, given that he is now to be considered a trustee of the painting on behalf of the artist as beneficiary? After all, when one creates a trust with a beneficiary and a trustee, the trustee has a legal duty to prevent the destruction of the property that is the subject of the trust.

Is the dealer’s fiduciary duty as a trustee, which the proposed Act makes him, vitiated by the actions of the artist as beneficiary if, in the process of removal of the painting to send to the exhibition, the painting is accidentally destroyed? The Act does not give an indication of what would happen if, for example, the artist himself physically marches into the gallery and removes the painting to send for display in an exhibition. We can presume that under normal circumstances, a court would find that by so doing the artist has breached his contract of representation with the dealer. Yet the Act creates certain ambiguities in terms of remedy, because the relationship is now one of trustee and beneficiary. Does the trusteeship then come to an end, under these circumstances? Does the gallery then continue to have a breach of contract claim against the artist, or is this waived because he is now considered a trustee?

The proposed legislation seems to alleviate a number of risks faced by artists, but it also creates a number of potential ambiguities for both sides in the artist-dealer relationship. Some portions of it – such as that requiring the artist’s permission in writing for his piece to be put on display by the dealer – are only common sense. Other portions are less clear, and could lead to more litigation. As evidenced in the Georgetown Patch piece, some dealers are reluctant to support this Act, because it creates layers of bureaucracy and red tape which do not, in the end, end up helping anyone.

I would be curious to learn from any of my readers who are familiar with similar legislation in other jurisdictions, and how enactment of it is affecting the art market locally.

Patron at an art gallery, 1957

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