Art consignment can be generally described as a work of art being delivered by its owner â€”the consignorâ€” to a specialist art vendor â€”the consigneeâ€” for the purpose of being sold at some time in the future. Vendors include art dealers and auction houses. Owners might prefer that the vendor actually purchases the work outright, but the consignment system provides owners with the professional services of the vendor, who should have an extensive client list of possible customers as well as a much better publicity and distribution system than owners could typically achieve unaided. Vendors usually do not charge owners for accepting works on consignment, making their money from a commission in the event of a sale.
Cautionary tales from consignment
When it works as planned â€”and it typically doesâ€” consignment is a convenient way for owners of art works to have the works sold in an efficient and effective manner, and a low-cost method of providing art vendors with inventory. However, things can go horribly wrong.
Art works can be sold by unscrupulous vendors without notifying the owner. When this is discovered the vendor may apologize profusely and remit the proceeds, but in the meantime has had access to those funds. Worse, the artwork may have been sold, the money spent, and the vendor is unable to pay the owner. This may constitute fraud and result in criminal prosecution, but that will be of little comfort to an owner who has lost both the art and the money.
The artwork can be lost, damaged or even destroyed while under consignment. When that happens, a close reading of the consignment agreement â€”hitherto probably ignored by the ownerâ€” might reveal that the vendor no responsibility or limited responsibility for insurance. To make matters worse, the ownerâ€™s insurance policy might (and probably will) exclude losses arising while the work is on consignment.
Practical considerations for consignment:
Art consignment is a common practice for the good reason that it benefits both parties to the agreement. However, artwork is frequently consigned and then ignored by the owners. Here are some basic considerations for owners contemplating consignment:
Before consigning artwork a seller should determine the most appropriate venue for sale, whether it should be a gallery, a private dealer or an auction house. Art consultants can assist with this decision, and Chartwell Insurance Services would be pleased to provide a list of consultants, from whom Chartwell receives no payment.
Demand a strongly written consignment agreement which includes your right to sell, a description of the work, the term of the agreement (typically no more than one year, and preferably for six months) an agreed upon sales price, the agreed commission split, when and how payment is to be remitted, and when the seller is to be notified of a sale.
- Explore whether there is a possibility of an escrow account for a sale. An escrow account helps ensure that valid payment has been made and immediately distributes the sales proceeds to a seller. This is not customary, but some banks may agree.
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Chartwell Bulletins address issues of general interest and since coverages vary by company and by state should not be taken as an interpretation of a particular policy or advice on any individual situation.
A representative of Chartwell Insurance Services will be pleased to discuss all aspects of your personal insurance. Contact: Rebecca Korach Woan 312-645-1200 or email@example.com