Beware of Art Gallery Cash Flow Problems!

by guest blogger Anne Dalton

Congratulations! You have achieved your heart’s desire. Your work has been accepted into the gallery of your choice. OH NO! You drop by to admire your work and….find a sign on the door that says “out of business – bankrupt!” What do you do now?  How do you get your work back?

 

woman with cash

 

When a gallery files for bankruptcy, it is the job of the bankruptcy trustee to gather all the assets of the gallery. The trustee will not necessarily know that your work belongs to you rather than the gallery. You may have to apply to the bankruptcy court to try to get your work back. Sometimes a bankruptcy means that the business is closing and the creditors ask the court to sell the assets of the business. Sometimes it means that the business just needs the court to help give it a breather in its debts…. including its debts to you!

A savvy artist protects herself upfront. Before you drop off your work, be sure you have a good contract with the gallery! Here are some simple tips and tricks:

  • Who is signing the contract? You may think you are dealing with the nice lady or man down the street. However, you might really be dealing with an LLC or corporation in another state, or even another country, that has nothing to do with the gallery employee you have worked so hard to develop a rapport with.  If you don’t recognize the name of the other party, ask before you sign.
  • How can you make plans upfront to escape this disaster? Make sure you can terminate the agreement and get your artwork back immediately if the gallery goes bankrupt, is insolvent, is out of business, fails to pay you within a specific time, moves from that location, or otherwise breaches the agreement. The gallery will probably want reciprocal commitment from you.
  •  Words, words, words.  Try to give the gallery a “license” only. Have the gallery be your “agent” for sales. These types of arrangements are signals to the bankruptcy court and to the bankruptcy trustee that the gallery owner does not own your work. Your work should not be used to pay off debts the gallery owes to other people.
  • Dark is not a good place to be.  Include a requirement that the gallery owner must notify you about a pending bankruptcy and the storage location for your work. Keep yourself informed about their operations!  Don’t be kept in the dark.
  • Filing proper financing forms with the state to create your “security interest”. Under some circumstances, filing a “UCC-1” financing statement with your Secretary of State offers additional protections. It notifies the public that you have a financial interest in your works held by the gallery owner and have a claim superior to other creditors. This should be done with the assistance of an attorney.
  • Google “consignment laws for artists” and put in your State.  Thirty-one states have enacted laws to protect artists when the gallery goes into bankruptcy or has other money troubles. If your state has this law, you may be automatically protected in financial dealings with a gallery.

 

Anne DaltonAnne Dalton, Esquire, has been a creative arts attorney for 37 years.Her legal credentials may be viewed on her website.  Nothing in this blog posting is intended to be legal advice and no attorney-client relationship is created hereby. Consult an attorney for information specific to your situation.

 

 

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