The Uniform Commercial Code, also known as the UCC, governs all sales of goods in the United States. Under the UCC, whenever an artist brings a work to a gallery for sale, that work is considered to be a consignment. What this means is whatever rights the artist has, the gallery also has. This includes the right to sell the work, to display it, etc. It also means that under bankruptcy, that work is also an asset of the gallery and is fair game for the bankruptcy court to sell in order to pay the gallery’s creditors. There have been several spectacular examples of galleries going into bankruptcy, and artists losing their work. Perhaps the most famous was the Salander O’Reilly Gallery in New York City. When it declared bankruptcy in 2007, it had over 4,000 works of art in its possession. During the bankruptcy proceedings, it became public that the Gallery was engaged in all sorts of malfeasance.
What resulted was a plethora of lawsuits from artists, collectors and estates attempting to reclaim their property. Unfortunately, many were unsuccessful because the law under the UCC was clear–once consigned, the works became assets of the Gallery. In order to protect their assets, the artist/owner should have filed what is called a UCC-1. It is form filed with a state’s secretary of state that puts the world on notice that you have a “secured interest” in a piece of property that is superior to all other claims. A non-art example would be if you owed money on your car to a creditor. That creditor has a UCC-1 on your vehicle for as long as you owe them money. Mortgage lenders and other creditors don’t think twice about filing a UCC-1; but many artists do not know such a thing even exists and that in order to protect themselves from a gallery bankruptcy they needed to file one. And for those that do know about the UCC-1, they are often dissuaded from filing by the gallery because of a prevailing belief that such a filing shows an inherent distrust in the relationship on the part of the artist.
As a result of Salander-O’Reilly debacle, New York rewrote its artist consignment statute to specifically override the application of the UCC. New York has some of the finest protections for artists in the nation. But it stands with only a small handful of states that have enacted such legislation. And for many, this legislation has never been tested, so the strength of the protections are unknown. Massachusetts once thought that its artist consignment statute adequately protected those who wished to sell their art, but the many holes were revealed in litigation.
If your state does not have an artist consignment statute, or you are concerned about the strength of the statute, you must file a UCC-1 with your state’s secretary of state. If you are consigning multiple works, you usually can just file the one form, and list all of the works together, but always check with your state’s UCC office. One simple form may mean the difference between the return of your work or the loss of your livelihood.