Legal Fixation

New Massachusetts Fine Art Consignment Law

Chapter 104A of the Massachusetts General Laws governs the consignment of fine art. Many states have similar statutes, including New York and California (Cal. Civ. Code Section 1738 et seq.). Although the Massachusetts law does create a trust relationship between the consignor and consignee, the law does not provide any specific remedies and is mostly toothless. In a recent action filed by this firm we shoehorned 104A into a 93A unfair and deceptive trade practices claim. There were other counts based on some general tort principles, but the thrust of the action was that the gallery was in the position of a trustee and therefore had fiduciary duties to the artist which were breached.

Thanks in large part to the Massachusetts Volunteer Lawyers for the Arts, Massachusetts has recently enacted a new art consignment statute which I believe goes into effect in February 2007. The effort to pass the new law gained momentum from the Boston Corporate Art debacle.

The new law is a complete reworking of 104A. The text of the new law can be found here.

Some highlights:
1) Definition of “fine art” is greatly expanded. It will include such things as digital art, conceptual-based art (hmmm), sound work, and other works.

2) Consignor must provide a written statement to consignee which must include at a minimum: the artist’s name and the name of the owner of the work of fine art; the title, if any, of the work of fine art; the medium and dimensions of the work of fine art; the date of completion of the work of fine art; the date of delivery of the work of fine art; and the anticipated fair market value of the work of fine art. The effect of non-compliance with the written statement is unknown.

3) Consignee must maintain a copy of the consignor’s written statement as an acknowledged acceptance of delivery of the art work. If the work of fine art is sold, the consignee shall record the date it sold, for what amount it sold, and name and contact information of who purchased the work of fine art. If the consignor is the creator of the work of fine art or the artist’s heirs or legatees, the consignee shall disclose the name and contact information of the purchaser of the work of fine art to the consignor with payment of the funds owed to the consignor.

4) The consignee shall make all records pertaining to that consignee, including records of accounts, available for the consignor to review during consignee’s normal business hours, within a reasonable time after consignor’s request, and shall provide copies of the account records to the consignor when requested. The consignee shall keep copies of all books and records for at least 4 years after completion of the consignment.

5) The new law maintains the trust relationship, but greatly expands on what this means (due in large part to the BCA matter). The new law addresses the situation where a consignee purchases a consigned work for its own account, does not pay the consignor, and then resells the work to a third party. In this situation the resale funds must be held in trust for the consignor until the fiduciary obligation of the consignee with respect to the transaction is discharged.

6) Works of fine art, or funds received as a result of the sale of a work of fine art, held in trust are considered property held in a statutory trust as defined and contemplated by 11 U.S.C. section 541 and any other relevant bankruptcy law. A work of fine art received as a consignment, or funds derived from the sale of a work of fine art so received, shall not, under any circumstances, without the express written consent of the consignor, become the property of the consignee.

7) It is consignor’s responsibility to keep its contact information up to date with consignee. If the consignee has in good faith attempted to return the consignor’s work and has attempted in writing to notify the consignor of the intent, but has not been able to locate consignor within 1 year of the consignee’s decision to return the unsold artwork, the work shall be considered forfeited and the consignee may dispose of the property in a manner as the consignee considers appropriate. The consignee shall keep on file a record of attempts to contact the consignor.

Consignees should consider VARA when deciding what “appropriate” means.

8) Consignee must account separately for each consignor.

Now the teeth…

9) Failure of consignee to pay consignor within 90 days of receipt by the consignee of proceeds of the sale shall entitle the consignor to be awarded the amount owed to the consignor together with 5% yearly interest calculated from the date when the payment became due, together with court costs and reasonable attorney’s fees incurred by consignor in collecting monies owed. If payment is not made within 180 days, consignor is entitled to triple damages, fees, and costs.

10) Within 90 days of consignee’s business closing, consignee must notify consignor in writing, return consigned works, and pay amounts due.

posted by Aaron Silverstein @ 6:55 PM