Consignment Agreement

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What is it?

A Consignment Agreement is an agreement with someone who will sell your goods or products on your behalf but that allows you to retain ownership (title) of those goods during the process.

This is an agreement where a person or business (the consignor) ships or entrusts goods to the consignee for the purpose of selling the goods to the end customer. The consignee generally does not pay the consignor until the customer purchases the goods. Under a Consignment Agreement, the consignee does not receive ownership of the consignor's goods. Rather, the consignee is temporarily holding or controlling the consignor's goods for a specific purpose (to sell to the customer at their venue).

Why do you need it?

Businesses choose Consignment Arrangements for many reasons. For example, a business may want to test marketplace demand for a new product. A business can sell goods on consignment without investing initial capital in purchasing them outright; the store will remit payment only when the consigned items are sold.

A Consignment Arrangement may be profitable for both retailer and creator in the long run. Therefore, it is essential that at the outset the parties agree how the arrangement will work. A well-drafted Consignment Agreement must provide for some form of inventory control and a clear allocation of the rights and responsibilities of each party.

Key clauses to watch for:

When drafting a Consignment Agreement, it is important to focus on a number of key clauses, in particular:

  • Details of the consignor;
  • Details of the consignee;
  • Terms of agreement;
  • Address and description of where the consigned merchandise is to be sold;
  • Payment system;
  • Details of termination;
  • Commission percentage agreed between both parties; and
  • Product description.

This document is also sometimes called:

Consignment Sales Agreement, Consignment Contract, and Consignment Inventory Agreement.

Consignment Agreement Document

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