Judd Grossman is a major player in the world of fine art, someone many art dealers, auction houses and even museums have to contend with. But he is not a collector, museum director or art advisor. Rather, he’s a Manhattan attorney, and many of his clients are high-end art collectors who turn to him when they’re thinking about buying, selling, or lending a high-value piece of art. Whatever these clients want to do with their art, they rely on Grossman or lawyers like him to legitimize the transaction, often with long contracts.
These sales contracts cover every eventuality, clause by clause. Does the seller own the artwork free and clear, with the right to pass the title? Who pays the sales tax? What happens if there is a change of attribute years after the sale? Does the buyer have the right to reproduce the image? Who is responsible for legal costs if there is a challenge to the title of the artwork? What is the price and how will the artwork be paid for… cash, Bitcoin or over a period of time? When does title pass to the buyer? Does the buyer, with a conservator, have the right to inspect the artwork before taking possession? Who pays for collection, shipping and labor insurance? Will the dealer guarantee not to reveal the name of the buyer and the price paid? What happens if this information becomes public? Who pays the commission to the art consultant? There are paragraphs dealing with warranties, provenance, condition reports, indemnities and escrow accounts. The list goes on and on.
“A big part of our practice is writing purchase agreements, consignment agreements and loan agreements,” Grossman said, describing the sales he’s been involved in as “documented.” A lot of paper. William Pearlsteina New York City attorney who also represents numerous art collectors told the Observer that the sales agreements he writes for gallery purchases “are usually about seven to twelve single-spaced pages.”
Welcome to the world of big-ticket art sales, where The traditional ‘handshake and a bill’ has largely disappearedreplaced by an invoice paired with an official contract that works per page and tries to account for every possible contingency. Driving this change is “a new group of collectors within the last 20 years, extremely wealthy people who are used to doing business a certain way, used to getting their own way and who want to spend legitimate money,” art advocate Susan Duke Biederman said the Observer. One of her clients was handed a contract for an art sale that ran to 27 pages (she called the buyer a “crazy one”), but more and more of the sales she’s involved in now involve buyers and sellers accustomed to “going through the motions.”
Our world is a litigious world. Lawsuits arise when the terms and conditions in a sales agreement are violated, but those disputes are likely to occur even if there had been no contract. “If the contract clearly defines the rights and obligations of the parties in these matters, this would tend to minimize the extent of legal issues that may arise,” he said. Amelia Brankova Manhattan attorney with a substantial art law practice. She noted that the most common disputes “generally involve which party is liable if the work is damaged in transit from seller to buyer, which party is liable if the work is later discovered to be a fake or forgery, or what happens if a third party later claims to be the ‘true owner’ of the artwork.” In the latter case, a work of art can be put up for sale while it is still collateral for an outstanding loan.
Megan Nohco-head of the art law department at the New York law firm Pryor Cashman, noted that some sales agreements also address anti-money laundering statutes, requiring “written assurance that the parties are not themselves (and are not affiliated with) sanctioned persons or entities and are not using the proceeds of criminal activity, and that the performance of any effect such as tax evasion is not unlawful.” The art trade can sometimes be murky, and a clause like this “can be particularly important” when one or both parties work through an agent and their identities are obscure, she added.
If buyers rely on their attorneys to draft sales agreements, art dealers must hire attorneys to review, approve, and negotiate those same contracts, all of which add to the cost of buying art. And there doesn’t seem to be any real alternative. As one New York gallery director put it, “people want it in writing, or there’s no deal.”
Of course, the gallerists themselves have become more legalistic in their work. A number of gallery owners require buyers of certain artists’ works in the primary market to sign agreements ensuring that the works are resold exclusively through them, not through an auction house. New York gallery owner Andrea Rosen noted that she has included those terms in every invoice since her gallery opened. Artists can set their own terms for the resale of their work, such as James Turrell AND Sol LeWitt have done, requiring owners to apply to them (in Lewitt’s case, his estate) for “transfer” documents that allow the artist to approve or disapprove a sale to a new owner. Both South African artists Marlene Dumas and Scottish-born artist Peter Doig they want buyers of their paintings to agree to donate the works to museums instead of reselling them. These terms are defined and enforced by their dealers. When collectors have gone against their will, lawsuits have followed. In 2010, Dumas directed the galleries that represented her work to refuse to sell any more of her paintings to a collector who had sold one to a New York gallery, and that collector filed a lawsuit against the gallery, essentially for theft. (That lawsuit was dismissed in federal court in Manhattan.)
“Sometimes, lawyers over-lawyer things,” Grossman said, and some lawyers have only a limited understanding of the art their contracts are intended to govern. Lucy Mitchell-Innesa former Manhattan gallery owner and now a private art dealer, recalled a sales agreement presented by a collector’s lawyer for a 1952 Barnett Newman the painting she was selling. In one clause, the agreement stated that the agreement would be voided if it was shown that the artwork had passed through the hands of the Nazis in Germany. “I had to tell the lawyer that Barnett Newman painted this after the war was over and that it was painted in the US,” she said. Trying to dot every “i” and cross every “t” can sometimes go too far.
“I’ve heard some dealers say, when they’re handed a 20-plus page contract, ‘Don’t you mind? That’s not the way we do business,'” Biederman said. “I ask clients who want me to write a contract for a purchase, ‘Do you want to piss off the dealer? Do you want this deal to close quickly? How much do you want to spend on legal fees?'” Still, she added, more and more dealers are concluding that these days “this is how you have to do business. It’s good for me. I make money.”
More for art collectors
