Artists have a long history of supporting charitable and social justice initiatives. In addition to traditional means of providing support such as establishing nonprofits, which have significant associated administrative costs, artists can incorporate charitable gifting into the sale of their works. As artists seek to lend support to those impacted by Covid-19 and to battle racial injustice and other social justice causes, new patterns are emerging. We discuss several recent artist-led initiatives below.
Many artists are collaborating with charitable organizations by selling works produced in multiples, such as limited edition works, and in many cases, open (i.e. unlimited) editions of photographic prints in small sizes. Where artists are not producing the prints themselves, artists can memorialize the grant of authority to create the prints as a non-exclusive license to reproduce the image in the specific size and manner approved by the artist. Certain laws apply to the sale of works in multiples (see New York Arts and Cultural Affairs Law “NYACAL” Art. 15), and those offering the works for sale should consider the disclosure required, including disclosing to consumers information concerning the size of the edition and whether the prints are signed by the artist. As the market practice is to create limited editions in different sizes, generally the small size of the editions created for fundraising efforts will not impact the artist’s ability to create editions of that work in the traditionally larger sizes sold as artistic prints.
Charitable Auction Consignments
Earlier this year, Paddle8, an online auctioneer known for hosting charity auctions of artwork, filed for bankruptcy. Several not-for-profit organizations that were supposed to, but did not, receive auction proceeds have asserted that such funds should be excluded from the bankruptcy estate under NYACAL § 12.01. That statute provides that, where an artist or artist’s estate consigns artwork of the artist’s own creation to an art merchant for exhibition or sale, the art merchant must hold the art and the sales proceeds in statutory trust, and such trust property may not be subordinate to any claims or security interests of creditors of the art merchant. Some have questioned whether this statute applies at all, as the artist’s delivery of the work to the charity could have constituted a transfer of title, rendering the statute inapplicable. While this issue is being tested by the Paddle8 bankruptcy proceeding, and the equities would certainly favor applying the law and the facts in the light most favorable to the artists’ charitable intent, cautious artists and charities should document the nature of the relationship as a consignment, not a transfer of title, and should consider specifically referencing NYACAL § 12.01 in the consignment agreement to highlight the artist’s intentions and the obligations required under that statute.
Unlike many other countries, the U.S. has no droit de suite, or law requiring the artist to receive a percentage of the proceeds of a resale of a work of the artist’s creation. (California is the only state that enacted a resale royalty law; it was largely ignored by the market and was ultimately deemed effectively preempted by federal copyright law, which affords no resale royalty right.) Recently, Kadist, a nonprofit organization, published on its website a template purchase agreement containing a resale royalty with a charitable twist. The template agreement is a revision of The Artist’s Reserved Rights Transfer and Sale Agreement created in 1971 by Seth Siegelaub and Robert Projanksy, a well-known but not universally adopted model sales agreement for artists containing a resale royalty clause. In the updated version, the resale royalty clause is revised to redistribute the royalty as a donation to a charitable organization designated by the artist. While the template agreement is drafted with artists and collectors as the contracting parties, and many artists sell their works through galleries, its resale royalty concept could be adapted for gallery sales. Additionally, for those few artists that are able to negotiate a contractual resale royalty with their gallerists for secondary market sales (i.e. resales), artists could negotiate that part or all of the artist’s resale “royalty” be donated to a charity selected by the artist.
Cooperative Sales Model
In May, the New Art Dealers Alliance (“NADA”) launched FAIR, a virtual art fair with a cooperative profit-sharing model in an effort to support the broader community of galleries and artists financially impacted by the Covid-19 crisis. For a typical art fair, a gallery pays money to the fair organizer to purchase a “booth,” with the gallery receiving all of the proceeds from the sale of the artwork and splitting it with the artist. For FAIR, the sales proceeds from the sale of each work are distributed as follows: (i) 50% to the gallery that offered the work for sale on the platform (to be split with the artist), (ii) 20% to a pool that will be shared evenly among all participating galleries, (iii) 20% to a pool that will be shared evenly among all participating artists, and (iv) 10% to support NADA and its efforts in producing the fair. While the long-term interest in cooperative-model initiatives remains to be seen, this model could be adapted in a broader sense to support emerging artists who lack resources to fund production costs, and as an alternative to seeking financial support from art financiers/patrons who may not have the artist’s long-term interests in mind.