The gallery will not be able to recoup the £175,000 fabrication costs for Antony Gormley's work Domain Field unless the work is sold by September, according to a spokeswoman for the artist.

Normally, the commissioning gallery would recoup fabrication costs if the artwork is sold after the exhibition, but reports in the press last month said the gallery had not issued a contract for the work.

A spokeswoman for the artist told Museums Journal that a fax sent in August 2002 from Gormley to Sune Nordgren, the Baltic's director at the time, stipulated that the artist would reimburse the costs of fabrication only if the work was sold within three years of the end of the exhibition.

The exhibition ended in September 2003, which leaves two months before the agreement expires in September 2006.

The spokeswoman added: 'Antony asked for a contract, but it was not forthcoming. However, there were extensive discussions and correspondence between the Baltic and the studio, in which the matters of the ownership and fabrication costs were outlined and agreed.'

Domain Field is now valued at £1.5m, and, according to the spokeswoman, is for sale 'should a suitable institution express an interest'.

Gormley, who is currently in Australia and unavailable for comment, is in a difficult position because he is also a trustee of the Baltic, which means a potential conflict of interest.

The National Audit Office (NAO) held an inquiry into the Baltic's financial situation early this year.

In a letter to Alan Beith, MP for Berwick Upon Tweed, Edward Leigh MP, the chairman of the Committee of Public Accounts, said that the NAO had recommended that Baltic ensure any potential conflict of interest regarding transactions with Gormley be explicitly considered and addressed. Both Gormley and the gallery said that he would not be stepping down as a trustee.

The inquiry also highlighted the case of another artist, Chris Burden, whose work Tyne Bridge had been commissioned by the Baltic for £100,000. Again, no formal contract was issued and the gallery had to threaten legal action to claim back the commissioning costs.

A spokesman for the Art Council England, which will fund the gallery to the tune of over £1m a year in grant-in-aid over the next two years, said that concerns over contracting at the Baltic were 'no secret' and that a condition of its funding was that the Baltic would 'recoup costs or make a profit from the resale of any work commissioned'.

Patrick Steel