[Jewelry making - Article 00209] - Re: [Orchid] Consignment and insurance

[Peter W . Rowe]

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>        Any work consigned to a reputable gallery should definitely be
>     considered as a part of their declared inventory for insurance
>     purposes. All of the venues where my work is represented have
>     specific paperwork and procedure for entering consigned items in
>     or out of their inventory. This is the way in which they can show
>     their insurance carrier exactly what is physically present in their
>     establishment at any given moment. 

    True.  But you MUST also be sure that you've protected yourself
    against the store showing your items in inventory if they obtain
    financing based on the value of their inventory.  Cases have occured
    with artists having work on consignement to a shop which then
    declared bankruptcy after having obtained routine financing wherein
    the business loan application used inventory as part of the business
    value counted as collateral for the loans, a common practice. The
    bank, having used the value of the consigned jewelry as part of the
    inventory value, is then able to claim those works as collateral
    which they then own, even if the work was only consigned.  In some
    cases, artists have actually had to turn back over to the bank work,
    or even pay to the bank that works value,  which had already been
    returned to them from the store/gallery, because it had been in
    inventory at the time the store took the loans, if the return occured
    too soon before bankruptcy was declared.  The artist is then
    considered a creditor as with any other in the bankruptcy
    proceedings.  In some cases, artists have literally had to buy their
    own work back from the bank to regain possession, even if the work
    had never been paid for by the store. 

    It's a rare situation, of course.  But a dangerous one.  Be sure to
    check out the legalities in the state in which you're doing business. 
    You may wish to consult a lawyer on this stuff before getting too much
    into consignment. The laws were written with big manufacturers in
    mind, for whom loosing some unpaid inventory to an account's
    bankruptcy is no different from having an unpaid loan or credit
    account go bad.  For artists, of course, it's not quite the same. 
    You can avoid these liabilities by filing UCC forms for consignment
    goods, but it can be a royal pain in the rear.  Like I said, check
    this out before it bites you.  Be sure the issue is part of what
    you've protected yourself against in your consignement contracts. 

Peter Rowe 

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