A consignment contract is an agreement made between a consignee and consignor. The consignee agrees to store, transfer, or sell a particular item that belongs to the consignor. The consignee is an agent who works to sell goods to a third party on behalf of the consignor. The typical consignment contract will include some type of sale or service fee paid to the consignee while the rest of the profits will go to the original party.
A consignment contract should be formatted similar to any legal contract. The contract should include the information for both parties, including contact information. Specific information about the goods should also be included, such as where the commodities will be stored, the sales price, what to do with the unsold goods, and what the consignee's fee is for each item. Any other detail about the consignment sale and the consignee desires should be included within the contract.
The consignment contract serves to protect both parties throughout the transactions, which may be ongoing. A good consignment agreement will also cover what to do if something goes wrong, such as a dispute resolution plan and the applicable law. The contract should contain information about insurance coverage and which party carries the risk of loss.
A consignment agreement is a written agreement between two parties, the consignor (the supplier) and consignee (the seller), who have entered into a business relationship for the storage, transfer, sale or resale and use of goods (consigned items or consigned goods). A consignment agreement is a legally binding contract in which the supplier (consignor) gives the seller (consignee) the legal rights to sell merchandise on their behalf. The consignee takes the consigned goods from the consignment stock for use or resale subject to payment to the consignor who has agreed to the terms of the consignment agreement. In a consignment arrangement, the seller (consignee) is not required to pay the supplier (consignor) until an item has sold. Unsold goods are generally returned by the consignee to the consignor.
A consignment agreement may may involve an agreement regarding a franchise, distributorship, or an original equipment manufacturer (OEM), a company whose goods are used as components in the products of another company, which sells the finished item to users; in the case of an OEM, the goods are stored with the distributor or a third party, at the distributor's disposal, but still belong to the exporter. The distributor and the exporter do not share interests. The distributor's interest is to increase the amount of consigned goods because doing so has no effect on their cash status. The distributor and the exporter should therefore agree on an amount of consigned goods that reflects market values/market demand, taking into account how fast the exporter can make and deliver additional goods to avoid disruption in the amount of goods in stock.
A consignment agreement should include the following sections:
Intro: This section should identify each party, including their role and responsibilities in the business transaction.
Commercial/Retail Purpose of the Parties: This section should define the consignor’s role as supplier of the consigned goods and the consignee’s role as the seller of the consigned goods.
Description of the Consigned Goods: This section should describe the goods the consignor is providing to the consignee, including the amount of consigned goods, model numbers, serial numbers, and factory codes.
Timeframe Between Consignments: This section should state the sales deadlines and amount of time/number of days between the consignment of goods, in case some or all of the consigned goods do not sell. This section allows the return of goods that are not selling to the consignor -- to create space for goods that are more popular.
Manner of Delivery/Delivery Costs: This section should include the dates of delivery, the pricing/retail purchase price of the consigned items, who is responsible for delivery costs, and the commission the seller (consignee) will receive for each sale.
Potential Loss & Damage: This section should outline the agreement between the supplier (consignor) and the seller (consignee) regarding goods that are damaged during transport or at the site where they are being sold, or stolen from that site.
Termination of the Agreement: This section should delineate how and by whom the agreement can be terminated, and how much notice/time must be given. The termination provision of this agreement should also outline how the consigned goods will be dealt with upon termination.
Warranties: This section should state the warranties offered by the supplier (consignor) or indicate that none are being offered.
Arbitration Clause: This section should state that disputes between the parties will be subject to arbitration and that the parties must agree on an arbitrator.
Severability and Waiver Clause: This section should state that if any clause/provision of this agreement is deemed unenforceable under the Uniform Commercial Code or the laws of the state in question, the rest of the agreement/other provisions of the agreement will remain in force. This section should also state that either party's waiver of any provision of this agreement shall not be considered a waiver of any other provision.
Signatures: The final section in the agreement should be for the dated signatures of the parties.
Agreement to Consign Goods
Agreement to Sell Goods on Consignment
Consignment Agreement Form
A consignment contract can be filled out by either the consignor or the consignee. Consignment agreement templates are available online for simplicity.
The consignment contract must contain important identifying information, including whether the parties are individuals or businesses and the parties’ contact information. The person who fills out the form must include the details of the agreement between the parties. Specifically, the contract should include details about payment and what happens if the consignee does not fulfill their duties.
The consignment contract should outline all of the parties expectations for their working relationship. It should be created, printed, and signed by both parties before the work begins. A copy of the agreement should be kept by each party.
In the United States, consignment contracts are governed by Article 9 of the Uniform Commercial Code (UCC). Consignment agreements are also subject to the governing law of the state that is specified within the agreement.