Most working artists make a living by creating valuable one-of-a-kind or limited-edition pieces.  They then hand those pieces to a stranger to sell or display.  Entrusting artwork to a gallery, auction house, or museum is an intimidating process, but artists, buyers, secondary-market sellers, and agents all benefit from a common understanding of the language of art sales – where a common understanding exists.  Some terms and relationships are industry standards or generally-agreed upon.  Others are more strictly defined by law, and recent changes in the law have clarified some terms.

Most states have art consignment statutes.  (See, e.g., New Jersey’s and Pennsylvania’s Arworks Consignment Acts; California’s Civ. Code § 1738.6, Illinois’ § 815 ILCS 320/2, and New York’s Arts and Cultural Affairs Law Article 12.)   A consignment relationship exists when a merchant holds art for sale, but does not take title from the seller.  Under New York law, for example, when an artist gives his work to an art merchant (someone who is in the business of dealing fine art, including an art auctioneer) for exhibition or sale, that creates a consignor/consignee relationship.  The art is held in trust, as are the proceeds of any sale of that art.

The existence of the trust relationship, however, does not mean that art dealers do not get paid.  Generally, dealers take commissions as high as 50% (or more) from the seller’s portion of the proceeds.  Some auction houses charge buyer’s commissions, over and above the sale price, which are paid directly from the buyer to the auction house and do not directly affect the seller.

Much of this can play out in relation to art galleries, exhibition spaces that generally double as salesrooms.  As we described on this blog recently (Art of the Deal, October 24, 2012), when an artist delivers fine art to a gallery, a consignment trust relationship is established.  A recent change in the New York Arts and Cultural Affairs Law provides that the artist can enforce that relationship in the courts in the event that a gallery fails to pay properly, and can even be awarded attorneys’ fees in addition to other damages.  In the case of Koenignes v. Woodward, 183 Misc.2d 347 (Civ. Ct. of N.Y.C. 2000), the court found that certain photographs taken of the artist Willem de Kooning, which themselves qualified as fine art, were improperly held by a gallery.  After two years of litigation the photographs were finally returned to the artist, but he was not awarded attorneys’ fees, as the court could not find the legal justification for doing so.  The amendment to the New York law would change this outcome, permitting the artist to obtain attorneys’ fees to, in the words of the court, “fully remedy the wrong.”