Things Have Changed
Covid-19’s devastating impact on the visual art world has required lockdown of artists at home; closure of art schools, galleries, museums, art fairs and auction rooms; and, in common with most of the rest of the world, increasing use of online communications.
A remarkable digital communication was published online on 14 May 2020: UK Art Market Expert Guide – How to Respond to the Covid-19 Crisis? Freely downloadable, this 60-page document was the brainchild of ArtTactic, the London-based art market analysis firm, working in partnership with other art-world professional specialists from law firms Constantine Cannon and Kindleworth, insurance brokers Hallett Independent, and accountants Rawlinson & Hunter.
The publication does not attempt to predict the long-term impact of the current crisis, but focuses on how best to tackle the short- and medium-term survival challenges for the UK’s art world and commits to keeping the guide regularly updated by inviting contributions of new material (firstname.lastname@example.org). Written by expert professionals in accessible plain language, there are nine sections, of which Legal is the largest, addressing 11 key questions.
I will struggle paying rent and rates in the foreseeable future. Can I suspend making payments? What is the risk that I shall forfeit the lease if I do not pay? Although the guide has ‘gallery tenants’ in mind when answering, many others – including artists renting studio space – are business tenants and will benefit from considering suggestions including: negotiation with the landlord for, say, a rent-free period; temporary reduction of rent; deferral of rent; or monthly (rather than quarterly) advance rent payment.
Covid-19 emergency laws have been protecting businesses from eviction by court order if they fail to pay rent (initially up to the end of June 2020, and extendable by government). Immunity from eviction, however, does not erase rent arrears that must be paid when protection expires. Negotiated agreements should be recorded in writing.
I hear that one can rely on ‘Force Majeure’ as a way out of a contract. What is ‘Force Majeure’ and how does it work? Force majeure is a well-established legal defence, recognised by the laws of most developed countries: it deals with the impossibility of fulfilling contractual performance through no fault of contracting parties. Nowadays, force majeure clauses are included in business contracts as a matter of course, specifying circumstances where further contractual performance would not be required – because of, say, natural disasters such as earthquakes, floods or, indeed, pandemics.
Whether Covid-19 amounts to an event of force majeure that may exclude further performance of a contract depends on the specific terms of a (preferably written) contract: if there is a force majeure clause, careful legal interpretation of its wording would determine whether an extraordinary external event such as Covid-19 excuses further performance; if there is no such clause, no force majeure excuse would apply.
The guide warns: ‘In the art world, there is often no written contract. In that case, the contract will be oral. Force majeure is rarely addressed if the contract is oral. Even if the contract is recorded in writing, it is unlikely to contain a force majeure clause because few art-related contracts do. Unfortunately, if you cannot point to a force majeure clause in the contract, force majeure will not come to your rescue. You must look elsewhere.’ And elsewhere might include ‘frustration’, as follows.
Can I suspend or cancel a contract concluded before Covid-19 became a pandemic and that I cannot perform in the current climate? In circumstances where force majeure does not offer a legal remedy, the further legal doctrine of ‘frustration’ may be available. Frustration applies when it would be ‘unjust and unreasonable’ to oblige the parties to perform their contractual obligations because circumstances have arisen that were not foreseen by them. It is difficult for lawyers to assess what supervening events would amount to legal frustration, but UK courts have developed legal criteria for assessing whether specific circumstances are legal frustration: events must occur after the contract has been formed, strike at the root of the contract, be beyond the contemplation of the parties when they contracted, not be due to the fault of either party, and must make further contractual performance impossible or illegal or radically different.
The guide again stresses that a written contract will help lawyers assess and advise clients whether the language of the contract may amount to legal frustration and would therefore completely discharge further contractual obligations (temporary suspension of further performance is not legally available). However, where legal frustration does discharge parties from further performance of their obligations, the guide explains other related laws that might enable parties to recover money paid before discharge, as well as recovering non-money benefits.
In the art world there are probably countless numbers of contracts that have already been – and probably will become – thwarted by the impact of Covid-19, including for example: art schools unable to fulfil their course obligations for which students’ fees have been paid; artists unable to pay their studio rent and/or occupy their paid-for space; artists unable to complete and deliver commissioned artwork; galleries and museums unable to open their doors to visitors; auction rooms unable to offer physical pre-viewing of consigned lots; transportation of artwork bought, borrowed or loaned. Contracting parties would be wise to speak to each other to negotiate their own ‘just and reasonable’ solution before gambling further resources pursuing what may turn out to be an unsuccessful claim for legal frustration and contractual discharge.
Further key legal questions are dealt with, including sale price negotiation, shipping and shipper insolvency, selling online, non-payment, loan and delaying payment. The HR section covers staffing and managing costs. Tax & Finance looks at strategy, cash flows and grants. Insurance deals with business interruption, unoccupied premises and working from home, art fair cancellations and reducing insurance premiums. There is a wealth of further useful information in the sections on Links and Resources, Emergency Funds, Crowdfunding Campaigns, Artists Initiatives, and Petitions.
Although the guide appears to come from a commercially oriented secondary-art-market perspective, its contents are evidently driven by an admirable altruistic aim to inform and help as many as possible operating in the UK art world – including especially practising artists based in these islands, and those who support contemporary art activity. Free download: www.arttactic.com/product/how-to-respond-to-the-covid-19-crisis
© Henry Lydiate 2020