Associate Maria Angela Brusco recently spoke on a panel at the Art Law Institute of the New York County Lawyers’ Association (NYCLA), focusing on the legal implications of collectors’ promises to make gifts of artworks in the future.  Below, she summarizes some key insights from the event.

Why would a collector promise to make a gift in the future? 

Some artists make dozens of works per year; others just a few.  As a result, for popular and less-prolific living artists, galleries may have offers from many more collectors or institutions than it has artworks to sell, giving them the luxury of choosing to whom to sell a work.  In fact, sometimes disputes arise out of these issues of competitive placements of artworks (see one example here).  

To entice a gallery to sell a competitive artwork to him or her, a collector may promise to later donate or bequeath it to a prominent institution.  A collector might also promise to buy a second artwork at a later date and donate that.  Galleries and artists may appreciate this arrangement because the competitive artwork will end up in a desirable public collection; meanwhile, the private collector benefits from access to the competitive works (and ultimately will benefit again when making the high-profile donation).   

When making these multi-step gifts, clear contracts are key.  As time passes between the promise and delivery of the gift, circumstances for the donor, the artist, and the recipient may each change dramatically.  A contract must be clear and anticipate such possible changes to avoid later litigation.

A collector may also seek to build a connection with an institution by promising to donate artwork later in life or bequeath it in a will.  Such an arrangement benefits the institution by giving it time to plan for a major acquisition; research provenance; ensure the works are in good condition or can be restored; and align curatorial goals if necessary.  And the collector can still enjoy their collection during their lifetime, even as they strengthen their relationship with the institution.

Sometimes, collectors need to execute a will before they have chosen the specific institution they want to have their artwork.  In these situations, collectors can permit the executor of the will to choose among specific institutions or among institutions that have a particular mission.  And then, if the collectors choose an institution themselves later in life, they adjust their will.  Ultimately, the structure of a promised gift must reflect the donor’s wishes and give the donor flexibility if he or she needs it.

What happens when a collector does not make the promised gift?

A collector may promise to gift an artwork and then, as the years pass, decide not to go through with the gift.  In one case our team handled, a gallery sold a competitive artwork by Peter Doig to a collector, on the condition that the collector eventually donate it to a well-known museum.  The artist and gallery wanted the piece to ultimately be enjoyed by the public, rather than disappear into a private collection.  The market was very competitive at the time and the gallery had received dozens of offers to purchase the work.

As the years passed, the tax laws and the value of the artwork both changed significantly.  The collector attempted to sell the Doig artwork and make a different gift to the museum.  We represented the gallery in seeking an injunction against selling the work.

Another example of litigation arising out of a planned-and-then-reneged gift was the widely-covered Hoffman case (see our posts on it here and here).  The Hoffmans, a prominent Texas couple, had publicly announced their intent to bequeath their art collection to the Dallas Museum of Art in a nonbinding arrangement.  But when the husband passed away suddenly, his widow’s financial situation changed and she needed to sell a major Rothko artwork.  She did not want to alarm her family or suffer public embarrassment, so she sold the artwork privately—and on the condition that the work “disappear” into a private collection.  As a result, she received less for the work than she probably could have received in, say, a public auction.

But a few years later, the buyer sold the painting at a public auction anyway.  It was heavily advertised and by the eve of the auction, it was obvious to the public that Mrs. Hoffman had sold a painting that had been previously promised to the Dallas Museum of Art.  She sued her buyer for breach of contract for failing to abide by the confidentiality provisions.  After a trial, followed by a ruling largely overturning a jury’s verdict, and an appeal, the case ended largely in defeat for Hoffman; the Fifth Circuit concluded that the “aspects of" the transaction that the parties agreed to keep confidential did not include the fact of the transaction itself. 

On the other side of the donation equation, an institution also may refuse a promised gift when the time comes for delivery.  The curatorial goals of the institution—or its capacity to accept new artwork—may change between the promise and the gift.  Or it may turn out that the artwork has problematic provenance or its condition has deteriorated beyond the institution’s capacity or willingness to restore it.  With foresight that circumstances may change, clear contracts at the promise stage can avoid litigation over these issues later on.

What happens when an institution wants to deaccession a gifted artwork?

Institutions sometimes need to unwind a gift after it has been made.  We have represented an institution that simply found a more appropriate home for a gifted artwork, and we arranged for the amicable transfer to its new owner.

Other institutions may need to deaccession for financial reasons; selling a work can help them raise money to fund other acquisitions or cover operating costs.  As we have covered before in this space, museum governance associations have instituted rules for their members on this topic, and generally take a firm position against deaccessioning to cover operational costs.  Other types of institutions that do not belong to these associations, such as private foundations, may have more freedom to deaccession as necessary.

Educational institutions, of course, have priorities beyond curatorial goals.  In one recent example, Valparaiso University sought to sell artworks, including paintings by Georgia O'Keeffe and Childe Hassam, that were donated to the university’s museum or purchased with funds that had been donated for the purpose of art acquisition.  The University’s position is that it needs to build a dormitory for current students, among other operational priorities.  But alumni, including the child of the person who had donated the art museum, have sued to stop the sale.  Litigation is ongoing.

When deaccessioning gifted art, an institution must consider its obligations under deaccessioning rules as well as any terms and conditions that governed the original gift.  The institution’s decisions should balance curatorial goals and operational goals; its relationship with its past and future donors; expectations by the public; and even its relationship with a living artist or a deceased artist’s estate. 

Conclusion

Planning to gift an artwork in the future can have important benefits for collectors and institutions.  But as time passes, circumstances may change—sometimes drastically— for the artist or gallery, the collector and would-be donor, and the recipient institution.  Planned or promised gift arrangements must not only be clear, but must also account for the possibility of significant contingencies that may arise in the intervening years between the promise and the gift.