Paper Promises, part 1

Exhibiting and selling work, one-off and generally, has not been a high priority in these columns over recent years, especially since we explored these areas pretty comprehensively in the first five.

But last month’s deliberately provocative prayer for, and exploration of, broader and more vigorous marketing of work caused a number of correspondents to invite what for them would be the first constructive discussion of deals where agents and other administrators are involved in exhibiting and/or selling artists’ work.

Tne gallery proprietor in particular has written probing for answers to some hoary old chestnuts, the responses to which might be of equal use to artists and administrators. The correspondent runs the only commercial gallery in the heart of a developing part of the country, and is experiencing many situations for the first time.

Question 1

We have found a demand for renting works, some of which belong to the artists, some to the gallery. What rental arrangements are best and what should we pay to the artist?

Response: Ownership of the work is important and raises more issues than it answers. They are these:

Gallery’s ownership

How was this achieved: was it a gift/purchase/inheritance; where is the documentation to prove it? Someone (including the artist) may claim ownership against the gallery. Were there any conditions attached to the gift/purchase/inheritance, prohibiting/circumscribing the lending/renting of the work – what do the relevant papers say? Assuming there are no valid legal conditions in inhibiting such hiring out, does the gallery have any other legal obligations not to do so? For example, is the gallery a registered limited company (or any other special legal creature) whose legal objects and powers allow/prevent its doing so?

Are there similar restrictions in the gallery’s lease/freehold, or in its funding/sponsorship/investment arrangements? Assuming there are none, has the gallery entered into deals with anyone (the artist in question or others) undertaking not to hire out that (or any other) artist’s works? For instance, it may be that the artist in question has an exclusive contract with someone else (say, with greater or more specific expertise) to do such hiring; in which case it would be essential for that artist to preserve that separately achieved exclusivity for hiring by persuading the agent/gallery in question not to do so. All of this is said, notwithstanding that the gallery, and not the artist, owns the work intended for hire. Before examining the best rental arrangements, we must consider the alternative ownership question.

Artist’s ownership

How was this achieved – by making the work and keeping it, or selling then buying back? Many artists who possess much of their work do not in fact (and in law) also own it: Why? Artists are notorious for selling/donating/lending their works, then ‘borrowing’ or ‘taking’ or ‘having’ them back – for ‘a while’, and for all kinds of purposes – as the fancy/need arises. It would be a foolish agent/dealer or collector who took possession of works from an artist’s studio in the naive belief that none had in fact been legally sold/given/lent – and either never delivered or borrowed back! Documentation between artists and their own buyers/donees/borrowers is vital at the outset; then the agent/dealer will receive the first written proof, leading to the eventual provenance, for subsequent written sales/gifts/lendings, be they months or, as is often the case, years later. Assuming, then, that the artist owns the works consigned to the gallery, on what terms was that particular deal made? Is there proof of the agreement itself; and were there conditions for or against hiring the work – if so, what were they? Here is a basic check list of points to be discussed and agreed, in writing of course, between the artist and agent/gallery when considering renting works – be they owned by the artist (gallery acts as artist’s agent), or by the gallery (gallery acts in own capacity as
owner).

Rental Agreement
  1. Parties: on the one hand the gallery as lender, or as agent for the artist as lender; on the other, the borrower – or the borrower’s agent.
  2. Nature of the deal: works for hire; or, perhaps, for hire and later purchase i.e. hire-purchase. This is a tricky distinction: true hire-purchase agreements (paying by instalments whilst in possession as borrower, until final payment which purchases the work for the borrower) are circumscribed by strict statutory requirements with which lender-cum-seller must comply to make such contracts legal and proper; whereas simple hire deals, conditional or credit sales (paying, as purchaser, at the outset, but by instalments), are less circumscribed by the law. True hire-purchase – an attractive selling arrangement – can be fraught with more problems for lender-cum-seller than for the borrower-cum-buyer. Expert legal advice would be the most sensible course, especially for agents/galleries considering such ventures. Simple hiring is more straightforward, and written agreements should therefore proceed to tackle the following:
  3. Work(s): which work; title, dimensions, medium, method of production and, of course, selling price (both as a kite flown throughout the hiring and as a statement of the insurance value – as to which, see below).
  4. Term: whether for hire indefinitely until written notice either way is given; or a fixed term, renewable or not.
  5. Placement: whether the hire is tied to a place/space and, if not, whether movement outside the region/country/continent/hemisphere is restricted.
  6. Fee: how much, method and manner, and frequency of payments, and to whom.
  7. Insurance: written evidence of the borrower’s having achieved sufficient ‘nail to nail’ insurance cover for the work (out from the gallery’s ‘nail’ and back to it), including transport to and from the nail; insured value to be the selling price.
  8. Care of the work: arrangements for care of the work whilst on hire e.g. hanging/installation/environment; artificial/natural lighting, direct/indirect; humidity; temperature; and arrangements for access from time to time by the gallery, to check these things.
  9. Viewing: whether public viewing is desired/required/prohibited, and on what terms (fee or not, from the public); days and times for public view; borrower’s keeping of records of names and addresses of public/private visitors, for disclosure to lender.
  10. Damage/destruction/theft: immediate notification by borrower to lender; reasonable arrangements for compensation e.g. borrower pays lender full selling price (with/without deduction of hire fees paid to date of incident).
  11. Option to buy (not as part of a true hire-purchase agreement): whether the borrower has – if so, how and on what terms – a first option to buy the work at, say, a previously agreed price (possibly reduced to seduce the hirer into exercising the first option). This would not mean that the lender had to sell; it would simply give the borrower first refusal to buy i.e. the guarantee of being offered the work before anyone else.
  12. Addresses: agreement for mutual exchange of any changes.
  13. Breaches: which terms, if broken by the borrower, would give the lender right to terminate the deal forthwith (or on written notice) -and re-possess the work. For instance, failure to pay the hire fee, at all or on time; damage/destruction/theft; negligent care/control; denial of access to check installation; and so on.
  14. Proper law: where the parties respectively reside/trade in a country foreign to the other, arrangements as to which country’s laws will be used to settle any disputes arising from interpretation/breach/performance of the agreement. For example, where the parties are British and Australian: ‘all disputes arising from this agreement will be governed by English law’. This would mean that both parties would know, and neither party need argue over, whether the contract was made (let alone governed) by English law or the laws of New South Wales, Victoria, Western Australia, and so on. This is a pretty standard and sensible measure which helps, rather than hinders, especially where the mutually foreign parties make the deal in a third foreign country, as is often the case: e.g. British gallery and Australian gallery do a deal at an international art fair in Houston, Texas; in the absence of a ‘proper law’ clause/term/agreement, few lawyers (let alone the parties) would easily be able to say which law governed the contract.

Question 2

What is the position when a buyer buys directly off an artist during an exhibition that the artist is having at my gallery?

Response: Well, it depends: what is the contractual relationship between the artist and the gallery?

One-off exhibition deal
Say the gallery has no pre-existing agency/gallery deal with the artist (nor the artist with any other agent/gallery) giving exclusive selling rights either of those works exclusively, of any works for an exclusive period, or of all those works indefinitely over an exclusively defined geographical area. In these circumstances both artist and gallery should be legally free to make a one-off exhibition deal: the world is their oyster for making whatever arrangements suit, including the artist’s giving the gallery exclusive selling rights at least for the duration of the show and, sensibly, for a few months thereafter. Were this arrangement made as part of the one-off exhibition agreement, the artist would not then be free to sell works directly to anyone else (nor to give them away) and all sales would sensibly be forced through the gallery.

Agency deal
Artists covertly selling their own work separately from their agents/galleries/dealers – to whom express/implied exclusive selling rights have been given – is, sadly, still prevalent. This is one good reason why express written exhibition agreements have been successfully developed and introduced, especially in the public sector. In the absence of such writing, particularly including the exclusive selling rights term, much genuine confusion/misunderstanding or plain dishonesty can and does occur. Say the artist and gallery have already established an on-going deal through which the gallery has been given exclusive selling rights as artist’s agent. Such a deal should have involved a term foreseeing the possibility of the artist being approached directly, probably covertly, by a buyer; such a term should, therefore, have provided, say, that so many works each year could be sold directly by the artist – but only by putting the paperwork through the gallery – and that a lower rate of commision would be taken by the gallery, or none at all; or by simply requiring all sales to be conducted by the gallery and that the artist refer all potential clients accordingly.

Question 3

What rights does an artist have to the gallery’s guest list when exhibiting at my gallery?

Response: The answer follows on from the response to Question 2. Whether or not there is a one-off exhibition deal or an on-going agency/gallery deal – in either case – initial negotiations should sensibly have tackled this point, hopefully reaching a balanced arrangement whereby the artist has the right to see a guest list and to add names and addresses. In the absence of such a prior agreement, the artist would appear to have no rights in the matter save – after the event – to check to discover whether and if so how the gallery fulfilled its obligation to invite appropriate guests; but only where few people have in fact attended. The best course is for the point to be taken at the onset of negotiations, thereby avoiding all doubts and leaving both sides clear and confident about the future execution of the deal – or free not to commit themselves to it, if they cannot agree and feel this to be an area of fundamental importance.

Question 4

Artists often wish to have names and addresses of people who buy their work from the gallery. We have always complied. Is this correct? (Addendum 2013 – please note the law has changed since the article was written. Read this up-do-date FAQ)

Response: Here is the question the answer to which can be clear and positive. Yes. Whatever the arrangements between artist and gallery (one-off exhibition or agency/dealership), the selling of works owned by the artist (i.e. not when selling works bought-in, which the gallery therefore owns and sells in its own right – not as artist’s agent) obliges the agent/gallery to disclose to the artist all details of such sales, including names and addresses of buyers. This definite response is grounded on the fundamental principle of the law relating to all ‘Agencies’; briefly, it is this: all Agents (i.e. galleries selling works they do not own) are obliged to disclose to their Principals (i.e. the owners of the works) all the information about such sales which would enable the Principal to check whether the Agent has performed properly in accordance with the terms of the Agency. Hence the right to know who the buyers were and other details of such sales. However, the parties to the Agency deal (Principal/Agent i.e. Artist/Gallery) are free to make arrangements (as part of their one-off exhibition or agency/gallery deal) to protect the gallery’s future commercial interests, and without circumventing the fundamental right to full disclosure in the artist’s interests. For example, the gallery might sensibly want the artist to agree that in the event of sales through the gallery of works owned by the artist, the artist undertakes not to conduct transactions with such buyers for a period of, say, two years after such sales. Such a term must by law be ‘reasonable’, which means that it should in no way unreasonably restrain the artist from earning a living. Accordingly, such a term might go on to provide that if the artist did conduct such a transaction directly with a buyer – ostensibly in breach of the agreement not to do so – the gallery would be entitled to a reasonable percentage of the sale price, say, an amount fixed at the time such a term was agreed at the outset of the agency deal. In summary, therefore, artists are entitled to names and addresses of buyers, but only where the gallery sells as agent (i.e. for a commission) works owned by the artist; not where the gallery owns works brought-in/received as gifts/inherited, and re-sells them not as agent (i.e. not for a commission).

Addendum 2013 – please note the law has changed since the article was written. Read this up-do-date FAQ. 

Question 5

Is there a point during an exhibition when work commissioned from the artist by a customer gives the gallery a right to a percentage of the commission fee?

Response: From all the responses thus far, the answer must depend on the original agreement between artist and gallery. A one-off exhibition deal would not normally, but could if the parties so wished, include a term giving the gallery a right to a percentage of any commission fee for a commission achieved during the course of an exhibition. Conversely, an agency/gallery dealership would normally, but could not if the parties so wished, include such a term. The point is, of course, that in the absence of an express written agreement between the parties giving the gallery such rights, there are no legal provisions available and so the hard answer is that such galleries would not have such rights.

Respective Perspectives

The past ten years have seen in this country some really constructive developments in the market-place: artists and agents/galleries/dealers have achieved an increased awareness and understanding of their freedom to negotiate, then make professional arrangements which were not previously regarded as binding contracts – deals such as one-off exhibitions, general or specific agencies, full-blown gallery deals, commission agreements, one-off sales and even rental agreements; they accept that not putting things in writing does not prevent such deals being valid in law; and they also know that to put things in writing, therefore, does not make such deals more valid – it simply avoids doubts, bad memory, misunderstanding and, at times, obviates dishonesty. The ‘Paper Promise’ is now acknowledged as a concrete and reliable piece of evidence, and a far more professional method of practising both for artist and administrator. Most professionals have recognised that paper promises are not inflexible; they can and should be arrived at after full and frank negotiations freely and respectfully entered into; they can be varied at any time – by the same process; and they promote a real sense of certainty and security for both parties. It is common ground that visual artists are the greatest and most imaginative hustlers who, experience shows, will stop at nothing to achieve income from their work. This, in the absence of paper promises, can, has and does bring out the hustler in them; and leaves galleries and others professionally involved, relying on trust – the belief that the artist will honourably perform their oral obligations. This is foolish and commercially dangerous – for both parties.

Paper Promises

Finally, therefore, artists and administrators undoubtedly benefit in practice from a concrete approach to professional dealings. How should these best be achieved?

Both parties to a professional agreement should sit down to discuss all the likely facets of the proposed relationship, noting any agreement reached, and then at least write each other letter’s confirming the details; some, ideally, use standard forms of written agreement which form a basis for negotiation and agreement, checking and amending line by line; both are free to withdraw at any stage. This process is best embarked upon with a check list of points for debate.

© Henry Lydiate 1986

 

 

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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.