A collector looking to lend artwork must negotiate a personalized and specific loan agreement with the borrowing institution prior to making any loans. This loan agreement is needed primarily because common law principles of bailment, which apply to the lender (bailor) and the borrower (bailee), simply don’t afford the lender sufficient protections in the event of loss or damage to the artwork. A bespoke agreement is necessary to expand the borrowing museum’s duty of care and to distribute some of the burdens that would otherwise be borne solely by the lender.

Though it’s a natural tendency to make such an agreement an overly exhaustive tome, it’s important to remember that the purpose of a loan agreement is to document the intention of the parties and to reduce the level of uncertainty in the event that problems arise. Hence, it should be kept as simple and to the point as possible.

Before loaning any artwork, collectors must reach an agreement with the borrowing museum on who bears the cost of insuring the artwork while on loan and at what value. They must also agree on who’s responsible for taking out the relevant insurance policy. In most cases, museums will bear the costs and responsibility of insuring the artwork for the amount specified by the lender. Lenders should seek current valuations of the artwork prior to agreeing to an insurance amount. The typical insurance coverage is nail-to-nail, which protects the lender from the time the artwork is removed from the collector’s wall until the time it’s unpacked and returned back to the collector at his premises.  

If the museum is responsible for the insurance cover, the collector should request a copy of the insurance certificate or policy from the museum for his records. If he chooses to rely on his own insurance policy for the duration of the art loan, then he’ll generally be required to add the museum as an additional party or to provide a waiver of subrogation against it to protect the museum in the event of loss. All specifics relating to insurance must be documented in the loan agreement.

Not all museums are equal in reputation and prestige. Collectors can inadvertently reduce the value and diminish the importance of their artwork by loaning it to a poorly run institution or one with a complicated history or dubious ties, which can in turn deter future exhibitors of the work. It’s critical to verify the reputation of the borrowing museum and ensure that your research is current and up to date. 

Before parting with their cherished asset, collectors should inspect the security measures and protocols in place at the borrowing museum and refrain from solely relying on a museum’s reputation and prestige. Collectors and their advisors may not always be able to unearth every detail in relation to a museum’s security, but it’s imperative that they investigate and ask the right questions.

To avoid misunderstandings and potentially irreversible damage, collectors must inform the museum exactly how they wish to be identified in the exhibition catalog and on the exhibition label, details of which should also be recorded in the loan agreement (noticing a trend yet?). Collectors must carefully weigh the pros and cons of literally going public with their art. To maintain confidentiality and avoid uninvited exposure, many collectors who elect to remain anonymous opt for the phrase “Private Collection” or the like.

The biggest risk of loss or damage to the artwork is while it’s being packed, crated and transported from one location to another. It’s imperative that collectors only entrust their artwork to reputable fine art shippers, who are experienced in transporting fragile and expensive works of art. There are plenty of horror stories that come to mind, even one in which a logistics company mistook an artwork for rubbish and shredded it with the packing material. Most fine art shippers don’t carry sufficient insurance, and it’s vital that the applicable insurance policy adequately covers any loss or damage to the artwork while it’s being packed, crated and shipped. The loan agreement must specify the party responsible for arranging the packing and shipment of the artwork and bearing the costs arising therefrom, as well as also outline all pertinent dates on which the artwork will be shipped and delivered. The borrowing entity usually bears the cost of packing and shipping.

Condition reports are essential in determining the point of damage to the artwork and remove any uncertainty around the question. Professionals must prepare a report recording the condition of the artwork each time it’s transported from one location to another. At a minimum, a condition report must be prepared immediately prior to packing and shipping the artwork from the collector’s premises to the museum, at the time of unpacking at the museum, repacking and shipping back to the collector and unpacking at the collector’s premises. A condition report should also be prepared if the artwork is placed in storage.

The collector must specify whether any atmospheric conditions need to be maintained by the museum while the artwork is being transported, stored and exhibited. He also must provide museums with any special installation instructions that may be applicable, and all such specifications and instructions must be documented in the loan agreement. Examples of special conditions or instructions include noting whether any direct sunlight can reach the work, specifying the temperature of the environment in which the work will be stored and exhibited and/or indicating the level of humidity and any appropriate levels of artificial and natural lighting. The loan agreement must also specify whether any special frames, nails or screws are to be used or avoided when installing the works and any special care that needs to be taken during installation.

The museum may wish to obtain photographs of the loaned artwork for use in their exhibition catalog and for other promotional materials. It may also wish to reproduce the image of the loaned artwork on items sold in the museum’s gift shop for commercial purposes. Before any such use is made, the museum must seek permission from the owner of the artwork, and if the artwork is under existing copyright, it also needs permission from the copyright owner. The artist, the artist’s estate or an artist’s collecting society (which may manage a deceased artist’s intellectual property rights) usually owns the copyright in an artwork.

The loan agreement must accurately reflect the reproduction rights granted to the museum by the owner and must explicitly state that the museum has the responsibility of seeking the appropriate consent from the copyright owner of the artwork and, where applicable, the image.

We advise collectors not to grant museums the right to repair or restore the artwork without the owner’s prior written consent, except in emergencies in which immediate action must be taken to protect the artwork or the health and safety of the visiting public and/or museum staff. If the borrowing institution undertakes any emergency repair or restoration, collectors must ask for full details of the work undertaken in writing. As with everything else, these expectations must be carefully outlined in the loan agreement.