Consignment: This is how you avoid problems

Publication date: 21 November 2019
If you take a work of art on consignment and it is sold, the owner is entitled to the proceeds. It is important that you also have the arrangements you made on paper in the form of a consignment agreement. This agreement contains the rights and duties of both parties.

kunsthandel

For a seller who is not so familiar with the art trade, it is a good solution: consignment. He gives a painting to an art dealership who then tries to sell it for him. In this way, he benefits from the network and the public visibility that you have and he does not. This is an attractive option, especially for sellers who want to sell a work of art for which there is mostly a demand on the Dutch market. And you get a percentage of the return, without any risk of loss. A win-win situation, in other words. What can go wrong?

Consignation issues

Quite a lot, as can be seen from a recent case before the Amsterdam Court of Appeal. In 2010, a collector had given several paintings, including two by Jan Sluijters and Dirk Smorenberg, on consignation to an art dealership. When she wanted the paintings back in 2018, it turned out that the Sluijters and the Smorenberg had already been sold in 2012 and 2014. However, nothing of the proceeds of € 35,000 had been remitted.

Excuses

In order to get her money, the seller attached the art dealership and instituted proceedings. The art dealership tried in different ways to get out of payment.

When it was attached, the art dealership, a general partnership (v.o.f.), no longer existed, due to the death of one of the two partners. The claim was therefore null and void.

The remaining partner also stated that he had never interfered in the course of business and that the art dealership was a one-man business. Business had been made solely by the art dealership and not by the general partnership.

He also stated that the partners were only entitled to an amount of € 5,000. Therefore, the company could not be held liable for the commitment of € 30,000 which the deceased partner made when taking the Sluijters painting on consignment.

No excuses

The court of appeal put an end to all these defences. The estate of the v.o.f. had not yet been settled, so the v.o.f. could still be addressed.

The existence of the art dealership as sole proprietorship was not plausible. All correspondence from the art dealership referred to the v.o.f.

With regard to the partners’ power of disposal, the court of appeal found that if it was accepted that someone could sell a painting for € 30,000, it also had to be accepted that he was authorised to enter into an agreement, which obliged him to pay this amount.

In short: The v.o.f. had to pay the sales proceeds of the paintings on consignment.

No agreements on compensation

But how much did the art dealer have to pay? The seller did not succeed in clarifying which arrangements had been made about the compensation the art dealer should receive after the sale of the paintings. Therefore, the court looked at the percentage the art dealer had received from the proceeds of other paintings of the seller. And thus the art dealer was therefore allowed to keep 20%. The rest of the proceeds (€ 28,000) had to be paid as an advance. The final amount of the seller’s claim can be determined in the proceedings on the merits.

Consignment agreement

Three legal proceedings (preliminary relief proceedings, expedited appeal, and proceedings on the merits) means a lot of hassle. This could have been avoided if the arrangements had been put on paper when the paintings were taken on consignation.

Important elements of a consignment agreement are:

  1. Competence of the “owner” to give the work on consignment
  2. Minimum price at which the work of art may be sold
  3. Amount of compensation for consignee
  4. Obligation to consult prior to sale
  5. Term of consignment
  6. Regulation of liability for insurance, risk and possible costs of restauration
  7. Choice of law and competent court.

This will enable you, if necessary, to demonstrate that a consignor did not comply with the arrangements made.

More information

Would you like to consign a work of art? We will be happy to draw up a consignment agreement which can help you avoid lengthy discussions. Or do you have any other questions about art and law? Please contact us:

    Share on social media

    • Art

    Art and Law: The importance of a consignment agreement

    8 March 2017

    Why is it so important to conclude a sound consignment agreement? In what cases can such an agreement be helpful?

    read on
    • Art
    • Contracts

    When does a collector become an art dealer?

    24 June 2019

    A collector will sometimes sell artworks in order to be able to buy new objects. If this happens a lot, he can be regarded as a an art dealer rather than a consumer. When is that the case? And what are the consequences?

    read on
    • Retail
    • Employment law and dismissal

    Questions and challenges during COVID-19: Dutch employment law, tenancy law and contract law

    13 September 2021

    In this article, we will discuss several questions and challenges in the field of Dutch employment law, tenancy law and contract law during COVID-19.

    read on
    • Corporate law

    Is a management agreement an employment contract or a contract for services?

    26 August 2021

    Do the new rules of the Supreme Court for the assessment of employment contracts also have consequence for management agreements? Case law has not decided yet. This can be seen from the judgments of the Arnhem-Leeuwarden Court of Appeal and the District Court of Midden-Nederland about the management agreement of the CFO of Volksbank.

    read on
    • Franchise, distribution and agency
    • Contracts

    Beware of vague wording in franchise agreements

    24 June 2021

    It is important to use clear and unambiguous language in agreements. This has once again been demonstrated by a recent judgement of the Supreme Court. Because of ambiguities in franchise agreements, franchisees of Albert Heijn may have lost millions.

    read on
    • Fashion and luxury
    • Litigation

    The advantages of arbitration

    19 May 2021

    Proceedings do not always have to be in court. There are other ways to resolve legal disputes. An important and often also appealing alternative is arbitration. In particular if you are doing business internationally. What are the advantages of arbitration?

    read on
    • Art
    • Employment law and dismissal

    Russell Advocaten recommended by The Legal 500 2021

    20 April 2021

    Russell Advocaten has for the 17th consecutive year in a row been included in The Legal 500. We are pleased with the recognition for the quality of our legal services by experts and clients. Please read what they say about us:

    read on
    • Art

    New rules restitution policy also apply to old cases

    30 March 2021

    The Dutch restitution policy returns to its original principles and is rightly becoming more generous. Cases that have already been settled can also be resubmitted. What will change in the policy?

    read on