Art + Law + Blog : Art Law Lawyer & Attorney : Bryan Cave Law Firm : Chicago IL Consignment & Art Dealer Agreements

The courts are filled with people who avoided the difficult conversations necessary to clarify their relationship in writing, up-front:

What are you obligated to deliver and by when?

Which events trigger your right to a check?

Who owns the copyright?

What can your publisher do with your work, where and for how long?

Consider Gregory Armento, an illustrator in North Carolina. He agreed to draw some maps for a publisher, but his contract neither prescribed which party owned the copyright nor defined the maps as "works made for hire" (which would have conferred the copyright on the publisher). Mr. Armento even obtained a certificate of registration from the U.S. Copyright Office; unfortunately, so did the publisher. In litigation over who owned the copyright, the judge, unpersuaded by Mr. Armento’s copyright certificate, and compelled by a contract that conveyed all ownership in the maps to the publisher, awarded copyright to the publisher. Mr. Armento did many things right, but still lost on one loose detail — that he didn’t specifically reserve his copyrights for himself.

Like any contract, you and your publisher are adversaries, but also partners whose cooperation and compromise will likely be mutually beneficial. When approaching the contract, consider:

• Which parts of the contract are negotiable depends upon the artist’s negotiating power. An unknown invited to illustrate a New Yorker cover may want to smile and sign. If you have some renown, you may be able to dictate your own terms. And, scarce opportunities for publication could tip the balance toward even a small publisher. 
• If you sense your position is unsteady, test the waters — mention that you would like to propose some changes to the contract, or that you need your attorney to review it. The response may be that the publisher provides a take-it-or-leave-it form contract, or that it only negotiates on price or certain other terms.

Your contract must clearly describe what you are required to deliver and by when.

This advice may appear trite, but you would be surprised how many people — from artists to major conglomerates — fail to identify all the business obligations in a contract.

Here are some guidelines to consider when negotiating and drafting contracts with your publisher:

• Describe specifically the work to be delivered, including any specifications, style, size, medium and format.  
• Write into the contract any other expectations the publisher has for the work.
• Never assume certain details are understood, "generally accepted," or too basic to write down — all expectations need to be clearly described to prevent later litigation over differing unspoken assumptions.
• Make sure your signature is needed for any changes to the contract.

You and your publisher should clearly define what "completed" means. Beyond business concerns (meeting your expenses), you have artistic interests, as well. Your contract should anticipate artistic differences between artist and publisher, which can have terrible consequences.

For instance, a graphic designer in Connecticut agreed to produce a brochure for a health spa. The spa, a seemingly nightmare client, eventually fired and refused to pay the designer because the spa did not like any of the designer’s seven successive versions. Fortunately, a kindly judge decided that although the spa could have clearly stated in the contract that payment is conditional upon approval, it failed to do so.

Incorporating a succession of approvals into the contract can prevent surprises:

• Agree to present the work to the publisher at different stages. The medium and style might be submitted first; then the composition can be reviewed through submission of a sketch or rendering, leading through refinement of perspective, and choice of the color scheme, to the complete work.  
• Payment and termination rights can be triggered upon any one or more of the approval stages. Of course, while increasing the chance you will be paid, this also might sacrifice artistic integrity. 
• If the publisher insists upon conditioning full payment upon its discretionary approval of your artwork, negotiate for approval and payment mechanisms to balance the publisher’s subjective standards. For instance, the contract can limit the number of revisions you need to provide, or provide you with payment for revisions.

A prime issue is who will hold the copyright — do you keep it, or assign it to the publisher? Although artists generally keep their copyrights in publishing agreements, in recent years it has become more difficult for an artist to retain the copyright in their works, as a result of the Supreme Court’s 2001 decision in New York Times, Co. v. Tasini. There, the high court ruled that publishers cannot use their license to publish in print to also publish in electronic databases. As a consequence, publishers have strengthened their efforts to get copyright assignments from artists.

If you do retain the copyright, the publisher will require you to grant licenses to use the work. Conversely, if the image is a work for hire or you assign the copyright to the publisher, you will need the contract to give you back certain rights if you want to use the work in the future.

This area — copyright licensing — is a hotbed of litigation and strife. For instance, Leslie Atkins, an advertising illustrator, agreed to design branding materials for Redneck Beer’s entrée into the alcoholic beverage convention circuit. Two years later, Ms. Atkins spied Redneck Beer bottles bearing labels that resembled her original designs. After she sued, the judge found a reasonable basis to conclude that Ms. Atkins had not granted rights to distribute the designs beyond initial branding.

Here are some guidelines to consider when working on ancillary rights issues in contracts:

• Seek to keep the copyright and file an application with the Copyright Office.  
• Specify whether it is a "work made for hire". 
• Imagine every potential type and form of use that your work could be put to, now and in the future, and across geographic areas — and specify who has the right to any of those uses. 
• Consider carefully and address clearly your rights to commercially exploit the work, if any. If the publisher refuses to permit you to use the artwork commercially, then at least you have realistic expectations with which to make decisions. 
• If you relinquish copyright, your best result is an exclusive unlimited license allowing you to use your work for all purposes for all time, and excluding all others except the publisher — essentially giving you all the rights other than the copyright itself.
• At the very least, insist upon portfolio rights – the right to copy, exhibit, display and distribute a copy of the work as part of your portfolio, in print and on the Internet.
• Fight for attribution rights — the right to have every use credited to you with a copyright notice.

Failure to clarify in writing which rights you want to keep — even when it might seem obvious — can be devastating. For instance, Vargas v. Esquire presents any artist’s nightmare. An Esquire airbrush and watercolor artist named Vargas had been providing images to Esquire for a number of years, in a series known as the "Vargas Girls." Although the images were originally credited to him, Esquire later reprinted the image as the "Esquire Girls" without crediting Vargas. The court found that Vargas had assigned his copyright to the publisher, so he could no longer control how the images were used leaving Esquire free to omit attribution to the artist.

Warranties are promises about the works. Lawyers spend an enormous amount of time limiting the language and danger of warranties. But, warranties are a critical part of every contract and a way of appropriately balancing both risk and fairness.

Warranties should be made, and risk accepted, by the one who created the risk. If the publisher asked you to render a drawing or photograph of another artist’s sculpture, you should insist that the publisher clear the rights and indemnify you from any risk of suit. But if you have free reign over the content of the image, it may be more fair for you to promise that nothing in the image will violate anyone else’s rights. Your promise would generally accompany an indemnity to pay for the publisher’s legal fees and damages if sued because of your image.

Here are a few things to think about when negotiating the warranties and indemnification:

• The publisher will ask you to promise that the work was originally created by you and/or your employees — confirm you can make good on that promise. An empty promise would be a high-stakes gamble; adding indemnification to the mix would move you to the no-limits table. 
• If there is any possibility that the image could infringe a copyright (for instance, if it or a portion of it is derived from someone else’s creative work), the contract should specify who needs to obtain the permissions and clearances to ensure that the illustration can be published, and who bears the risk of infringement.
• Purchasing insurance is a prudent strategy for managing risk. Work closely with your broker to confirm that your policy will cover your contract loss.
• Try to limit your risk by negotiating an expiration date or monetary cap on your indemnity obligation.

A cogent and forthright negotiation will either help you craft a comprehensive agreement or reveal warning signs about your prospective business partner. However, the essential points we have outlined are often postponed out of the optimism of a new business and artistic relationship. Some people choose to avoid controversy in negotiations, and, instead, gamble on finessed language and contract loopholes. These strategies are both undependable and unpredictable. To start out, and stay on a solid footing, make clarity the first priority when negotiating a contract with your publisher. Or, like a seasoned gambler, trust your friends — and cut the cards.

The thing about oral agreements . . .

You may prefer to keep things informal to give yourself an out. But it is likely that your oral promise will be a legal contract. Most agreements do not need to be written or signed, and only require:

• that the parties be competent;
• a proper subject matter;
• legal consideration (something of value given or promised in return); and
• mutual assent to the contract.

Generally, once you and your client show agreement to exchange a commissioned artwork for something in return, you and your client are bound by your handshake. However, a particularly knotty set of laws called the statute of frauds may make your bargain unenforceable if not in writing and signed. The general rule is that neither party can be bound to an oral agreement if it cannot be performed fully within a year, or requires payment of $500 or more for goods. But the devil is in the details. Many states focus on your unique and valuable services rather than on the tangible end result — making your oral contract enforceable. It can also be enforceable if your state upholds oral contracts for specially manufactured products and:

• you made the artwork specially for the buyer;
• the artwork is not suitable for sale to others; and
• you begin to create the artwork before your client cancels the commission.

If the commission agreement was made with an out-of-state buyer or at an out-of-state exposition, determining which state’s law applies makes these exceptions even more devilish. Further, you should be extra careful when considering a commissioned job with a municipality. Courts generally find that an oral contract cannot be implied against a municipality.

Finally, even if your contract is unenforceable, you or your client may still have quasi-contractual rights, based upon the expense and time committed in reliance upon promises made, under a legal claim for estoppel. Estoppel prevents one party from taking action that is opposite to his prior actions or statements if it would harm the other party.

So you do have a contract . . . what does it say?

Assume the handshake did seal an enforceable deal. Exactly what are you and your client bound to, besides creating the commissioned piece and paying for it? Perhaps the greatest risk in the informal deals you make is defining your bargain. The terms of your deal depend on what you and your client remember, and which side’s version of the facts is more convincing. Uneven memories lead to frustrating cases of he-said, she-said. Without words on a page, a contract dispute often finds its way to lawyers and the courthouse. The high cost of litigation should be weighed in your decision whether to put a commission in writing, as well as in deciding whether to enforce a contract, or get out, if things go badly.

Things go badly. Can you get out?

Many things can happen to make you want or need to break your deal — thieves could steal the piece, or the shipper could drop it; you could break your arm, or the cost of materials could skyrocket. Your commercial success could impair your ability to finish on time. Will this alleviate your obligations under the contract?

Generally, none of these events are a legal basis to escape from the contract. But, you may find an escape hatch from your contractual obligations through the legal defenses of impracticability or unconscionability.

The law may completely excuse you from the contract if a surprise makes it wholly impracticable for you to deliver the commissioned work. However, this is a rare defense, usually limited to illegal contracts or the death of a person, or destruction of a thing, necessary to perform. For instance, if you were commissioned to sculpt from a rare wood found only in a nation that is subsequently embargoed, a court may find the contract impracticable and excuse you from producing a sculpture in that wood. Note that neither a better offer nor a mere increase in material costs makes a contract impracticable.

A court can also excuse an artist from a contract if the contract is unconscionable. For the defense of unconscionability, you need to prove you were essentially forced into what was a bad deal from the start — that the contract’s terms are unreasonably favorable to the client and that you did not have a meaningful choice in the bargaining process about whether and how to enter into the deal.

Once you finish, you may change your mind about selling or prefer to sell the work to another buyer. It is possible that the client might let you walk away from the contract for nothing more than return of the fee you already received. But he also can bring you to court and demand either damages or specific performance, which would be a court order to deliver the artwork. Specific performance is only possible when a contract involves something unique (it is usually used to force the seller of real estate to complete a sale contract), but if you have not completed the work, your client generally cannot force you to finish.

In some cases, the client may try to get out of the contract and sue you for money damages — perhaps the difference between the price you had agreed to and the price demanded by another artist to create a similar work. However, it can be difficult for the buyer to prove that the other artist’s work is comparable to what you would have created, giving you defenses to the amount of damages you are obligated to pay.

Is there justice for a crooked client?

What happens if your client hates the piece? Maybe he declares it is "too weird" or not the "right colors." Maybe he takes the work, but the check bounces or never arrives. These complaints may not be a legal excuse for him to escape the contract. After you give your client a reasonable opportunity to accept and pay for the work, ask your new lawyer to prepare and send a certified letter demanding payment or offering a compromise. Hopefully, the letter will shake loose good will or fear from your client, bringing him to the bargaining table or the bank. Consider the substantial expense and time saved by avoiding litigation and make sure your settlement agreement is written by a lawyer.

Sometimes litigation becomes inevitable or at least the right choice. Both sides will have a chance to tell the court their recollection of the oral contract, and why the finished piece conforms, or fails to conform, to its terms. It is possible that neither side will be happy with the litigation result, particularly after paying legal fees. Even if you win in court, you won’t be winning the lottery. Legally, you are entitled to recover only the benefit of your bargain — enough to return you to the position you would have been in had the client upheld his end of the bargain. And, win or lose, you will have to pay your own legal fees.

If, after litigation, you have not delivered the work to your client, you will probably not be able to recover the commission price and keep the artwork. You may be required to make reasonable efforts to sell the painting for the best possible price in order to mitigate your damages. Following sale, your damages would be any amount by which the commission price exceeded the actual sale price, plus potentially your reasonable costs to store and sell the work.

However, if the artwork cannot be resold (for example, if it is ephemeral, like an ice sculpture), you may be entitled to receive damages valued at the entire commission price. Finally, if your client has the work, but refuses to pay, you could seek to recover the commission price, or fight to get the work back through a legal action for replevin, but not both.

The least you can do . . .

There are some steps you can take now to try and minimize problems resulting from your commission without a written contract. Although none of these will reduce all of your risks, they may help you manage them:

• Write down all of the details you remember about your conversations with your client and what you think you and your client agreed to during those conversations. Consider whether you should confirm your understanding of your bargain with your client by e-mail.
• Maintain full insurance coverage for studio, materials, works in process and finished artwork, and keep insurance schedules of your works up to date.
  Arrange to show your work to your client one or more times while it is in progress to avoid any surprises at the end.
• Resolve all issues about copyright ownership, including entitlement to registration.
  Provide your client with instructions for restoration and maintenance of your artwork in accordance with the Visual Artists Rights Act, to preserve and protect your work to the fullest extent of the law.
• Most importantly, make sure you get an experienced, art-savvy lawyer to help you sort through these issues — and draft your written contract for the next commission. 

William F. Zieske, Coco Soodek & Matt Petersen, Bryan Cave LLP Art Law Group
www.bryancave.com.  This article is for informational purposes only and is not legal advice.