Severance

“'There must be some way out of here',
said the joker to the thief,
'there's too much confusion,
I can't get no relief.
Businessmen they drink my wine,
ploughmen dig my earth,
none of them along the line
know what any of it is worth.'”*

Galleries are equally coy about whether they have a stable of retained artists and, if so, what standard or particular arrangements they make. Myths, mists and misunderstandings abound, tales and sagas of outrageous experiences are protean – from both sides: the truth is hard to find. But what is clear is that gallery deals are made, albeit described variously as gentlemen's agreements and informal honourable arrangements not worth the paper upon which they're not written, on the one hand, and serious detailed binding and exclusive contracts on the other. On the basis of abundant evidence that deals do exist, are they legally binding and what happens when artist or gallery wishes to part company – mutually or unilaterally? A true case has recently arisen. Here are the facts, suitably disguised to protect those currently involved.

The written consent

1 Nature of the Deal
Gallery to be the exclusive agent and representative of the artist throughout the world for sales, consignments, commissions, exhibitions and all other commercial exploitation including copyright.

2 Which Works
Paintings, sculptures, drawings, photographs, prints and ceramics owned by the Artist at the time of the agreement, and all such works created during the agreement.

3 Time
Indefinite, subject to one year's written notice of termination by either party.

4 Gallery's Obligations

  • to use its best endeavours to promote and further the Artist's career by achieving sales, commissions, exhibitions and so on.
  • to negotiate copyright in accordance with terms agreed with the Artist.
  • to make contracts in accordance with terms agreed with the Artist.
  • to collect payments for the Artist
  • to pay the Artist amounts due on a monthly basis
  • to send the Artist quarterly statements of account showing money held, commission taken or to be taken, and details of purchasers / commissioners / other clients.
  • to allow the Artist to inspect the Gallery's records and accounts
  • not to assign or delegate the Gallery's rights under the agreement
  • to consult the Artist as to publicity and promotional material
  • to arrange insurance of the Artist's works in the Gallery's possession or control against all risks
  • to be liable for damage/destruction of the Artist's works in the Gallery's possession or control
  • to pay the Artist's professional expenses reasonably incurred

5 Artist's Obligations

  • to use his best aesthetic skill and judgement to create works
  • not to contract any deals with any other Gallery while this one is in force
  • to refer all enquiries and offers to the Gallery
  • not to negotiate with any person without the express consent of the Gallery
  • to pay reasonable framing expenses
  • to insure work in the Artist's possession and control against all risks
  • not to trade with any other person with whom the Gallery has traded on the Artist's behalf, for a period of two years after the end of the agreement
  • to allow the Gallery first option during the agreement to buy all the Artist's works made during the agreement, at half the market price

6 Finance

  • the Gallery to take 50% of all the Artist's income generated through the agreement
  • the Artist to be paid £200 per calendar month during the first year, as an advance against income to be derived under the agreement; thereafter, to be paid each calendar month one twelfth of the previous year's net income

Artist's problems
There are specific complaints about the gallery's failures to perform their obligations properly, but they generally amount to one grievance: after two years, the relationship has been and is now non-productive and stale; the artist wants to disengage and make a deal with another gallery as soon as possible. For our purposes, since the artist has raised problems, we will deal with the case from an artist's viewpoint, although the correct legal approach to the issue of disengagement applies equally when a gallery wishes to sever ties. The approach is this: what is the evidence; what are the legal implications; what is the legal assessment; what can be done?

Evidential matters

1 How was the agreement reached?
Matters to consider are: the age, experience and reputation of the artist at the time the deal was made, whether he/she was knowledgeable about contractual negotiations generally and gallery deals in particular, and whether she sought and received independent legal/professional advice; similarly, the relative status and experience of the gallery in dealing with such matters; whether the deal was made after detailed negotiations of each matter until both parties were genuinely satisfied with the terms apparently agreed, or was there simply a standard form of gallery agreement used without discussion, negotiation and compromise. In essence, what were the relative bargaining positions of artist and gallery; was the deal a genuine bargain? Or was it a take it or leave it situation?

2 What are the terms and conditions?
In a case where nothing was put into writing and signed by the parties, what was said at the time, were notes made and kept, letters written and copies filed, witnesses available to corroborate things said, done and agreed, or any other evidence in support? In the case mentioned at the outset, the terms and conditions were written down and signed, and that was a prudent and exemplary course of conduct; but were other things said and done at the time which were not contained in the written agreement – if so, what are they?

3 How have the parties performed?
Since the deal was made, what has each side done to fulfil their respective agreed obligations? Again, what records, documents, witnesses and so on are available to prove these matters – for both sides?

Legal implications

1 Is there a valid contract and was it made fairly?
This question appears to be posed in two distinct parts; it is and it isn't! It is, because if there is no real evidence that the parties agreed anything at all, or that what they agreed was so uncertain, unclear or not seriously intended by them to be mutually binding, then in simple terms there will have been no legally enforceable agreement made. Note: 'no real evidence' does not mean, as is often wrongly believed, one person's word against the other's because one person's word is evidence – as much as the other's is evidence -in which case it is for the court to decide which is the more credible witness. In our case, though, there was clear evidence of an agreement intended by both to be binding on each other. That (is there a valid contract?) is one distinct question. If the answer is negative, then one need not proceed with the separate second part: was it made fairly? If, as in our case, there appears to have been a valid contract made at the outset, then we must examine the fairness or otherwise of its making. If this agreement – a contract for exclusive personal services for an indefinite period – was not made fairly, then in law it could be void and therefore invalid. That is why the evidence of how it came to be made is so important. The issue is this: was the deal made freely between the parties bargaining on equal terms which have been either negotiated or approved by an organisation representing the interests of the weaker party? In other words: have the terms been dictated by a party who enjoyed superior bargaining power? All such contracts can be scrutinised by the courts to see whether the bargain made was fair. The philosophy behind this judicial approach is the protection of those whose bargaining power is weak against being forced, by those whose bargaining power is stronger, to enter into bargains which are 'unconscionable'. What this word means depends on the terms and conditions which were agreed.

2 Were the terms and conditions fair?
The test of fairness is: were the restrictions imposed on the artist both reasonably necessary for the protection of the legitimate interests of the gallery and commensurate with the benefits secured to the artist under the agreement? Look at the terms of the agreement in the case set out above, and judge for yourself. Keep in mind this legal criterion: could the restrictions on the artist be used by the gallery to sterilise the artist from earning anything unless the gallery allowed it? If so, the agreement is one described by the courts as being in unreasonable restraint of the artist's trade, is contrary to public policy, and is therefore invalid and void. What the law sets out to achieve here is the protection of the public interest which requires that everyone should be free as far as practicable to earn a livelihood, and thereby to give the public the fruits of their particular abilities. If, of course, the bargain was fair, then we must next consider its performance.

3 Have the parties properly performed?
Clearly, proper performance only requires discussion where there appears to be a valid agreement obliging the parties to perform its terms; see1 and 2 above. In all cases it is essential to review the performance of both sides. It does not make any difference that only one side is aggrieved, as in our case; it is myopic to consider one side's performance in isolation – it may be, for example, that the aggrieved party has seriously failed to perform and, thereby, caused the other party's behaviour now in question. Therefore, the respective lists of obligations should be considered, item by item, searching for any evidence of serious neglect, failure or refusal to perform by either party; and for evidence of either party's awareness of any such flaws and their reaction to them. The reason for this exercise is that such failures could be so fundamental to the agreement as to amount to a breach of the whole deal i.e. a breach of contract. This, in turn, would entitle the aggrieved side to regard the agreement as having been wrongfully and unilaterally terminated, and to claim damages/compensation for any losses arising from the breach – and naturally enable them to stop performing their own obligations. Knowledge and awareness of any fundamental failures, if they exist, is crucial; if one side is informed but chooses nevertheless to continue to perform under the agreement, that continuance may well be relied upon as a condonation of the misbehaviour. In other words, the aggrieved side may appear to have waived the breach, and any remedies available.

Legal assessment
Having weighed the evidence and the legal implications together, an assessment can then be made of the legal possibilities.

1 Validity of contract
From the issues discussed above, it can be seen that the absence of any real evidence of an agreement, its terms and conditions, can mean that there is no legally enforceable contract. Alternatively, if there is clear evidence of a deal, but evidence that it was not made fairly or its terms and conditions are in unreasonable restraint of the artist's trade, the law will not enforce it. In either case, the validity of the agreement can be tested at law by seeking a declaration from the courts – before taking any unilateral action to disengage. How to approach this is considered below (see Approaching Severance)

2 Fundamental breach
Again, from that discussed so far, it's clear that serious uncondoned breaches can justify unilateral termination of the agreement. This is also considered below (see Approaching Severance).

3 Severance
What has not yet been discussed is where there is valid contract for personal services properly being performed, but where one party wishes to disengage in any event. (This situation is important to consider even where there is evidence to support invalidity of fundamental breach just in case those arguments do not win the day.) A vital point to note is that such contracts – for exclusive personal services – are not generally enforceable under English law by requiring the parties to perform their specific obligations against their will; for example, the courts would not normally consider it appropriate to order an unwilling gallery to continue acting as exclusive agent for an artist, but would rather order the payment of damages to compensate the artist for any losses arising from the gallery's breach of the agreement to provide such services – and vice versa. That being so, and both sides therefore being free to discontinue providing such personal services, this does not mean both should feel able to terminate the agreement at will. The pressures for each to continue are great, if only through the financial threat of compensation they might be required to pay. In these circumstances, the parties may wish to try negotiating a mutually acceptable termination – or severance.

Approaching severance
Nobody involved in gallery deals should, as a result of this discourse, consider themselves free to walk away from such relationships – without first contacting the other side; even where there is no real evidence of a valid contract or real evidence of a fundamental breach. The other side should always be approached, preferably through solicitors, and especially where there is a valid contract properly being performed, and severance is desired but not justified. The dangers of not doing so are obvious: unilateral disengagement is likely to cause the other side to take legal proceedings, and bring emotional and financial stress which should be avoided – at all costs! The way forward, therefore, is to approach the other side and discuss the situation with the aim of achieving an agreed settlement i.e. severance. If the case to be made is invalidity of contract, so be it; the other side is, in fairness, entitled to know why, and be enabled to make arrangements accordingly. Likewise, where fundamental breach is alleged. In the third situation (valid contract; no breach) where severance is desired but not legally justified, there may be a clause of the agreement allowing written notice of termination to be given (as in our case: see clause 3). Should the contract not make provision for such termination, or does so with notice but one party wishes immediate severance, then immediate disengagement is still possible but will entitle the other side to be paid compensation for any loss, damage without more ado (especially where the deal has become a burden they felt honourably – if not contractually – obliged to carry). Nothing should be lost, and everything can be gained, by entering into open, frank and professional negotiations for mutual severance with/without compensation, or for unilateral severance with notice and with/without compensation – remembering always that neither party can be forced to continue the personal relationship against their will. What should never happen is for the party (say, the artist) wanting severance (for whatever reason) to enter into discussions and negotiations with another (say, gallery) before seeking severance of the existing gallery deal. To do so not only creates evidence by the artist, but also generates evidence of the second gallery's unlawful inducement to the artist to breach the first unsevered deal – this could land both artist and second gallery in court and paying damages to the first gallery. Furthermore, the unprofessional nature of such double dealing is likely to cause serious harm to the professional reputation of the artist and second gallery, respectively. Finally, severance negotiations are essential and should be seen by both parties not as a dishonourable, dirty discontinuance discussion, but as a natural facet of professional life: not 'till death us
do part; rather, so long as we both feel it's doing us both some good.

Problems in perspective
Having introduced this subject by expressing concern about the myths and truths of gallery deals and despite, or perhaps because of, the issues explored, at least one area has come more sharply into focus. If galleries do not use standard forms of contract, or if they do but the terms and conditions have not been agreed by a body representing the interests of artists so as to ensure that they are fair and reasonable terms and not in restraint of trade, then any such deals made with artists in an inferior bargaining position will only be valid in law if their terms are in fact fair and reasonable. In this country to date, there does not appear to be evidence of any standard forms of gallery agreement (written or oral), nor evidence of any organisation representing the professional interests of artists in such matters – let alone agreeing fair and reasonable terms on their behalf. It is in these circumstances, and in this perspective, that this piece may serve some useful purpose.

© Henry Lydiate 1985
*© Dwarf Music 1968

Gallery deals are a thorny and sensitive issue: many artists see them as their ultimate goal, others as the last thing on their minds; those who do achieve them are often unwilling to discuss their terms and conditions, but a few are quite open about the arrangements and how they are achieved.

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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.