Banking on Trust

‘Men keep their agreements when it is an advantage to both parties not to break them’.

This ancient saying by Solon, one of the Seven Sages of Greece, still resonates today in the arena of deal making and keeping. It sensibly suggests that if an agreement contains what in modern jargon are called ‘win/win’ terms and conditions, they are more likely to be fulfilled by both parties. Trust between parties is a further vital ingredient that both oils the wheels of an agreement and keeps it on track. ‘His verbal contract is worth more than the paper it’s written on’ was Sam Goldwyn’s praise for a trustworthy film industry colleague, usually misquoted as ‘A verbal contract isn’t worth the paper it’s written on’. Written agreements and trust both make business deals work successfully.

Relationships between artists and commercial galleries that represent them are unique and deeply personal. Mutual trust between the parties is of paramount importance: trust by the gallery in the quality and value of the artist’s work and future potential; trust by the artist in the gallery’s ability to support their practice, present work to appropriate audiences and potential collectors, secure sales, and have the necessary resources and infrastructure. But such relationships are also business deals and, despite deeply embedded informal deal-making, they would benefit from plainly written and balanced written terms and conditions that record the essential rights and duties of each party, and especially capture of the ‘what-if’ scenarios – good and bad and indifferent – that may arise in future.

Many contemporary artist/gallery relationships are based solely on trust, and deliberately exclude written agreements in the erroneous belief by gallerists that verbal contracts meet their needs very nicely. And artists, especially those with little or no bargaining power and/or experience, often acquiesce in the proverbial ‘trust me’ handshake arrangement. Although this state of affairs has prevailed for decades throughout the contemporary art eco-system, things are changing.

A new publication, Selling Contemporary Art: How to Navigate the Evolving Market (Allworth Press 2015), presents the results of primary research into ‘a range of emerging risks and rivals to the traditional contemporary art gallery model including: the rise of the mega-galleries; the maturing of online channels and social media; and the explosion of art fairs’. Author Edward Winkleman (New York-based gallery owner, Moving Image art fair founder, and prolific art blogger), asserts that contemporary art gallerists ‘must think carefully about what separates them from their competition, broadcast that to current and potential clients (including collectors as well as artists they seek to represent), and even revise their current artist contracts to account for these risks’. Co-authored with New York-based arts lawyer, M Franklin Boyd, legal recommendations suggest that contracts should be ‘written in plain English rather than in intimidating legal terms. This may seem risky to litigators, but for many smaller galleries the likelihood of either the dealer or the artist actually taking matters to court remains small (mostly due to limited funds). The huge advantage of asking artists to sign representation contracts lies mostly in forcing both sides to be very clear about expectations and responsibilities in their partnership’.

These clear and well substantiated recommendations are a welcome endorsement of the similar views expressed by art lawyers (including this column) over many years past. Their significance is not so much that they propose sound and good practices, as that they are now espoused by an experienced contemporary art market professional gallerist and dealer. Winkleman has not arrived at his new approach through moral or ethical or even legal principles, but as a pragmatic business solution for gallerists adapting to and surviving in the changing environment. Although New York-based, his research and analysis resonates with and is applicable to artists and their representing galleries in most contemporary art market situations.

The most persuasive arguments advanced for use of fair and balanced written artist representation agreements, relate to what Winkleman dubs a ‘mega-gallery’ – including Gagosian; Zwirner; Hauser &Wirth; Marian Goodman; Pace; and White Cube. The main threat such galleries pose to smaller galleries is the ‘need to increase their [artist] rosters constantly with what Belgian collector Alain Servais calls VBAs (very bankable artists) to finance their growing empires’. Mega-galleries ‘are not generally in the business of discovering new talent’, but of ‘poaching’ VBAs from the rosters of smaller galleries who do initial scouting, nurturing and representation. Winkleman buttresses his contention by citing data about the six mega-galleries: ‘over the past twelve years they have actively increased the size of their rostered artists by between 16% and an astonishing 189% … according to artists listed on their websites’. He further contends that mega-galleries do not find unknown artists in MFA programmes or open studios, but through smaller incubator galleries that have brought them to notice.

Gallerists know that they cannot prevent an artist moving their representation to another gallery; which is perhaps why many gallerists have traditionally relied solely upon trust, rather than a written agreement with their artists. Many artists customarily accept the absence of a written gallery representation agreement, on the basis that if nothing is signed they remain legally free to move on when they wish (and especially if the relationship with the gallery fails). Both parties are half right and half wrong. The laws of most developed countries are unlikely to require an unwilling party to perform specific personal services they have agreed to provide; but it is wrong to believe that such agreements are worthless, because laws may require a non-performing party to pay financial compensation for any loss resulting from their non-performance.

Written artist/gallery representation agreements can and do have legal effect and value, if only to regulate mutual accountability when the representation relationship ends. In this context, readers will recall that after Francis Bacon’s death in 1992, the executor of his estate had great difficulty in accounting for all his assets, largely because of the absence of comprehensive and clear written documentation recording the nature and extent of Bacon’s business relationship with the Marlborough Gallery London (that had continuously represented Bacon for four decades until his death).

This column observed in 1977 ‘rarely are written agreements used to tell both sides where they stand, and as a result, serious problems can and do arise’. Though still apposite nearly 40 years on, things are changing. Younger generation art market professionals are adopting a far more professional and ethical approach to business dealings; and Winkleman’s research reveals even ‘more traditional gallerists are coming round to the belief that the long-standing avoidance of representation contracts (to help keep the relationship with artists warm and fuzzy) is not worth it’.

Moreover, the more ‘mega’ the gallery, the stronger the imperative to hold onto its rostered artists who are its vital assets. It would be naive to believe that such highly competitive galleries do not use written contracts to secure the artist’s agreement at least to exclusivity of representation by the gallery (probably worldwide); buying-in new work from the artist at a discount; receiving all other new works on consignment for safe-keeping, exhibition, and sale; and termination of representation (especially on the death of the artist). The smaller incubator gallerists could do likewise, adopting pro-active game-keeping as protection against poachers.

© Henry Lydiate 2015

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This article is from the Artlaw Archive of Henry Lydiate's columns published in Art Monthly since 1976, and may contain out of date material. The article is for information only, and not for the purpose of providing legal advice. Readers should consult a solicitor for legal advice on specific matters. Artists can get free online legal information from Artquest.