19 March 2019 - Article
Art collectors, take note: if you wish to sell one or more of your artworks by way of auction, you may be surprised to learn that the consignment agreement you receive from a major auction house, such as Sotheby's or Christie's, is not set in stone: that boiler-plate language you are handed is amenable to modification in your favour in terms of both legal issues and aspects of the deal itself. Below are some aspects of the written consignment arrangement you may wish to modify.
Although the auction house generally has complete discretion over the marketing and promotion of the art it is presenting for sale, you may want to secure a favourable catalogue placement for your property, as well as requesting the auction house to feature your property in any special advertisements published about the upcoming auction, or in any special literature mailed to targeted prospective bidders. If you are consigning for sale a large number of works at the same time, you might want to request that the auction house produce a separate stand-alone catalogue solely of your works for distribution at each auction where at least one of your works will be offered for sale. You may want to negotiate that the auction house pays for all advertising, promotion and marketing of your property.
Assuming you are consigning artwork of some value, it is worth prevailing upon the auction house to assume as many of the other expenses as possible incurred in the consignment, cataloguing and offering for sale of your property: such expenses would include the packing and shipping of your property to the auction house – and back to you, if your property does not sell; storage; any applicable customs duties and customs user fees; all costs and expenses of catalogue illustration; all costs of any restoration procedures and framing; all costs of any tests or procedures the auction house may require to verify the authenticity, attribution or quality of your property; adequate insurance coverage for your property from the moment it is picked up for transport to the auction house until it is either sold or returned to you; and in the event your property is unsold, no service charge should be payable by you.
In the event you are consigning property of considerable value, the auction house should pay all of the above expenses – and should charge you a greatly reduced seller's commission.
Special selling arrangements
For big-ticket items and/or property the auction house is extremely eager to acquire from you on consignment, you might in rare instances be offered more than 100% of the sales proceeds – meaning that the auction house will pay you the full hammer price plus a small percentage above the hammer price so you receive, say, 102% of the hammer price. Or you might ask for a guarantee (meaning that the auction house will pay you a sum for your property whether or not it sells at auction). In the event your property fails to sell, you would receive the agreed-upon sum (which may be below or above the reserve price) and the auction house would then take title to the property. If you, as a consignor, are the executor of an estate that is consigning art, and the estate has to pay tax, you might ask the auction house for an upfront advance. The amount of interest payable on the advance – and the time of accrual of the interest – are negotiable.
As a seller, you will be required to make a variety of representations and warranties to the auction house about the artwork you are offering for sale. While certain of these provisions – such as that you have good title to the artwork and that your title is clear and unencumbered – are, as a rule, not negotiable, other representations and warranties can be modified to your advantage. Among such modifiable provisions are representations and warranties relating to international transport, copyright and authenticity. Moreover, the indemnity you are required to give the auction house can also be watered down.
Among other legal provisions that can be modified in your favour are withdrawal and rescission. Where you consign a work of art to the auction house, it deploys its resources to examine, photograph, attribute and properly catalogue the work and place it in the appropriate auction. Accordingly, you are ordinarily never permitted to subsequently withdraw the work from an auction – and if you do so, you will be subject to financial penalties. However, the financial penalties may be reduced, by negotiation, in both amount and scope, and the auction house's right to withdraw your work from auction may, likewise, be modified – though not eliminated – through negotiation.
Similarly, an auction house reserves the right to rescind – that is, cancel – a sale under certain circumstances, even after you have been paid the sale proceeds due and owing you. Again, through negotiation, the auction house's discretion to rescind a sale may be modified (though not eliminated).
In summary, the potential to modify an auction consignment agreement in your favour can result in greater legal protection to you as a seller – and perhaps additional favourable exposure to the artwork you are offering for sale, as well as the realisation of a bigger payday.