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Q&A: Everything you want to know about commissioning artwork

Collectors are commissioning more artwork—from self-portraits to site-specific sculptures—for their property and offices. Working with an artist brings many arts enthusiasts closer to the creative process, yet few think about the details that might need to be negotiated. To facilitate a successful collaboration, I spoke to Amy Goldrich, a lawyer with a specialty in transactional art law, to learn more about the logistics of commissioning artwork and hear her advice for collectors.

 

Q: Can you explain exactly what a commissioned work of art is?

 

Amy:  In the most basic sense, a commissioned artwork is one that you ask the artist to make for you. It will be made to specifications negotiated in a contract between the artist and buyer, called a Commission Agreement.

There may be a standard agreement that the artist uses. You’ll want to look carefully at the agreement to see when risk of loss transfers, which may not be exactly the same time that work of art legally becomes yours. If you are unclear, you might consider seeking the counsel of a legal representative.

A lawyer can also help with other important language. For instance, if you live in a different state than the artist you are commissioning, a lawyer can help add language making it clear that any dispute would be heard in the courts of your home state and governed by your state’s law, or, if you prefer, be heard privately in arbitration.

 

Q: It sounds like a collector should consider many contractual provisions. What else should a Commission Agreement include?

 

Amy:  Both the artist and the buyer (the person requesting the commission) benefit when there is a clear understanding and agreement between the parties. When these details are worked out ahead of time, you can take the contract, keep it for safekeeping and (hopefully) never look at it again. But if I could give one piece of advice; the more time you spend up front getting these details straight, the more smoothly things will go once work begins.

For instance, larger-scale sculptures and other artworks that need to be installed (which can sometimes be treated like very small-scale construction projects themselves) might include the elements below:

  • A clear description of what is being made, ideally with drawings and renderings of some kind;
  • A set price or budget for the entire project;
  • A realistic timeline for completion and installation;
  • Insurance provisions: Does your artist have general liability, property, finished products insurance? Does he or she have coverage to protect the work during production, transit, installation?;
  • A plan for installation; and
  • Standards for acceptance of the artwork.

 

Q: So, say two individuals enter into this type of private contract. Are there any tax implications?

 

Amy: Yes, there are tax implications that should be understood before the commission agreement is concluded. One consideration in particular is what tax may be due on the transaction and who is responsible to pay it. Sales or use tax can be close to 10% of the artist’s asking price. More states are now passing new laws that place the burden on the artist (as the seller) to collect use tax upon the sale of an artwork to a buyer, because states don’t trust that the buyer will pay the use tax to the state him or herself.

 

Q: These commissions sound like they can be very complex…

 

Amy: Absolutely. On one end of the spectrum, a painter can complete a commissioned painting in perhaps a few months. At the other, I have worked on multi-million dollar commission agreements for corporations that involved lawyers for real estate developers, fabricators, engineers and for the corporation itself. Those commissions can take years. In my own practice, I have certainly seen an increase in the scope and scale of commissions over the past few years.

The most complex commissions involve artwork that is installed during the construction of the new home or a corporate office. This means you have, simultaneously, an open construction situation and an artwork being fabricated that is timed to be installed at a very late stage in the construction process.

For such artworks, there are process milestones and progress payments, with payments set up to match what is needed to pay for fabrication at each milestone. The fabrication budgets alone can be half a million dollars, or more. Materials like corten steel, bronze, resin and specially manufactured steel are of course more complex than paint and canvas. They are commodities with fluctuating prices. Given these considerations, such a commission agreement could treat the artist as a general contractor.

 

Q: What about insurance during the fabrication/creation of the artwork? Should that be handled by the artist?

 

Amy: Insurance is a critical component of commissioned artwork. If you are treating the artist as a general contractor, then the artist starts out with the insurance obligation. If it is a painting and the artist is working in his or her own studio, the sums insured may be modest. But if it is a large-scale sculptural work—something that will require many hands to fabricate—then the buyer should consider whether the artist carries general liability, workers’ compensation, property and umbrella liability insurance.

Editor’s Note: Most collectors will add a commissioned artwork to their insurance schedule once the artwork is delivered. At Berkley One, we provide additional peace of mind by providing up to $100,000 in coverage if the work you’ve commissioned is damaged or destroyed prior to being completed as part of our Collectible SuiteTM policy.

 

Q: Okay, the collector, gallery and artist have agreed on the artwork, price, insurance and delivery date. So exactly when does the title pass to the collector?

 

Amy: This is also something that can be negotiated in the contract. Ideally, the buyer will want the contract to specify that title and risk of loss pass to the collector, and payment is made, at the time of completion. If this Is not the case, it can present conflicting interests: the artist wants to be paid, and the collector does not want to pay until she or he is sure that the work is satisfactorily fabricated and installed.

 

Q: What about copyright issues? Since it is a piece specially created for the collector, what needs to be considered?

 

Amy: Unless you negotiate otherwise, the copyright will remain with the artist. This means that images of the work can be shared only if the artist grants a license (which means he or she needs to give consent and might want to be paid a fee). If you, as the collector, want the copyright, you will need the artist to sign a separate agreement. Depending on the contract and who is commissioning the artwork, the license can be very expansive, or very narrow. The rise of social media and the sharing of images makes it even more important to make copyright ownership clear.

 

Q: Interesting. So, what if our hypothetical collector wants to use the commissioned artwork as the image on her holiday card?

 

Amy: If I were a collector who had commissioned an artwork, the first thing I would do would be to look at my commission agreement to see what the copyright section of the agreement allows me to do! If there wasn’t anything in the agreement, I would call my lawyer. It also might help to ask myself these questions: Is the holiday card list 50 people or 500? Is the card going to be an image just of the artwork, or will it be a photograph of your family standing in front of the artwork, where the artwork is partially obscured and just in the background? I’m a risk averse person, so I’d probably call my lawyer to get advice specific for my own holiday card photo!

 

Thank you, Amy. After this conversation, we have certainly learned that a commission agreement should be “saying” a lot!

 

Amy J. Goldrich is a New York-based lawyer representing artists, collectors, arts organizations and a select number of art-related businesses. Her practice focuses primarily on counseling, transactions, dispute resolution, and general private client representation in the contemporary art world, both domestically and internationally.

Katja Zigerlig is Vice President, Art, Wine + Collectibles Advisory at Berkley One (a Berkley Company).