The art world thrives on trust. Dealers, artists and collectors often work together in relationships built on mutual understanding, and in that context, it seems that it is not uncommon for there to be no written record of what has been agreed. As we noted in a previous article on contracts in the art world, this may work well if everything goes according to plan. But if that trust breaks down, the absence of a written contract can lead to costly disputes, legal battles, damaged reputations and even criminal proceedings.

New Zealand cases, including Agam v Moon, Bambury v Jensen, and the failed criminal prosecution of art dealer Donald Cornes, serve as stark reminders of why written contracts are not just advisable—they are essential.

When Trust Turns to Litigation

In Agam v Moon, internationally renowned Israeli artist Avraham Agam found himself in a court battle over thousands of artworks held by his New Zealand fabricator, Outer Aspect IP Limited.

Mr Agam’s art includes lenticular works (or Agamographs), which are three dimensional artworks made of various materials, including plastic strips which can seem to change appearance from different angles. The court decision explained that parties had worked together for about 12 years, with the fabricator manufacturing and storing these works for Mr Agam in New Zealand. However, the relationship soured in 2022/2023 with a disagreement arising between the two about amounts said to be owed for fabrication and storage costs in excess of USD$3.6 million.

Liability for these costs was not determined in the judgment linked to above, which addressed the interim position before trial (including an interesting question about whether the fabricator had the right to sell any of the works under an artificer’s lien and how that interacted with the artist’s rights under the Copy Right Act – a story for another time perhaps). But in addressing the matters before the Court the judge had to consider the merits of each of the parties’ competing positions against the backdrop of a more fundamental issue as to what, if anything, had actually been agreed between them about these and other matters.

Unfortunately, this was far from clear to the judge. Although the fabricator claimed to have provided terms of trade to Mr Agam at the outset of the relationship, it was acknowledged that these were not signed. For his part, Mr Agam denied he had (or would ever have had) accepted these terms, which he claimed were only provided to him after invoices had been rendered. And while there had clearly been verbal agreements reached from time to time, there was disagreement between the parties about the detail of these. Without being able to reach a definitive answer to whether the terms of trade applied without a full hearing, and in the absence of any other clear written agreement governing matters in dispute, both parties were left to persuade a judge about what had actually been agreed upon at a future trial — likely an expensive and drawn-out process.

This is illustrated by Bambury v Jensen, a case involving a dispute between an artist and a dealer over numerous aspects of their business relationship, with the artist alleging that the dealer had failed to properly account for sales proceeds from artworks sold, mismanaged consigned artworks, and breached fiduciary duties; and the dealer bringing counterclaims for alleged failures by the artist to account for commissions due on works that were sold by the artist directly.

Unfortunately, their long-term working relationship relied on verbal understandings, jotted notes, and their respective interpretations of industry practices, rather than formal contracts. This meant that to resolve matters, the court was forced to untangle years of informal arrangements, conflicting recollections, and missing documentation. To do so, the judge fell back on expert evidence as to the industry norms as well as general legal principles of agency and fiduciary duty. While this allowed the court to unravel matters artwork by artwork, this was a complex, protracted (and likely expensive) legal process in which both parties had varying degrees of success. The time, cost, hassle and uncertainty of that may have been avoided (or at least limited) had there been a written agreement from the outset (along with proper record-keeping), and this may have also resulted in an outcome more in line with the parties’ original intentions (rather than one imposed by the court).

The case of Donald Cornes adds yet another layer to this discussion. While in many ways similar to the situation in Bambury v Jensen, matters went down a potentially much more serious path when art dealer Donald Cornes was charged by police with theft after artist John McLean accused him of failing to return or account for five high-value paintings that he had given to Mr Cornes to sell on his behalf. In his defense, Mr Cornes argued that there had been a handshake agreement that justified his dealings with the artworks. Ultimately, the Police agreed that the matter was a civil dispute over the terms of the agreement, rather than a criminal matter, and withdrew the charges. But not before freedom and reputation had been put at risk, with the matter having been called in court and drawing media attention.

Is the Cost of a Contract Worth It?

Many artists and dealers hesitate to formalize agreements, fearing the cost and formality of legal documentation will stifle creativity or strain relationships. But as these cases show, having a written agreement in place may have avoided many aspects of the three disputes outlined above, or failing that, could have allowed them to be resolved more efficiently and out of the public eye.

To reiterate what we have said in other articles about this, while nothing is failsafe, a well-drafted contract can go a long way towards helping to:

• Encourage the parties’ what needs to be done to help their relationship succeed
• Allocate risk and reward in advance
• Protect against unexpected costs and liabilities
• Provide clear remedies if disputes arise
• Strengthen professional relationships by ensuring mutual expectations are set out and met

No matter how strong a working relationship may seem, memories fade, financial pressures arise, and misunderstandings occur. Written contracts are not a sign of distrust; they are a tool for professionalism and clarity. Despite a traditional reluctance in the art world to document arrangements, this no different in the art market, and art market participants should view contracts as investments in their business, safeguarding both their finances and their creative work.

If you’re unsure where to start, consulting a lawyer about art transactions can help tailor agreements to your specific needs. The alternative—leaving it to trust—can end in protracted legal battles where no one truly wins.

The information on this website is general in nature and may not be up to date. It is not intended as legal advice for any specific situation or person and should not be relied on for that purpose. You should always seek up to date legal advice for your specific situation.

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