A Consignment Agreement Explained

Standardized Legal Documents A Consignment Agreement Explained

Draw Up Your Consignment Agreement Effortlessly

If you have an item you want to sell, but you are too busy to deal with it and being a salesperson is not your forte, let professionals do that for you. Whenever you let someone else resell your goods, make sure to draft a legal document to define every detail of the cooperation. A consignment agreement is the best contract for this type of business.

If you’re not sure how to compose one, let DoNotPay help you with this task the easy way!

What Is a Consignment Agreement?

A consignment agreement is a contract between a supplier of goods (the consignor) and reselling business (the consignee). You make a consignment agreement if you want to sell goods and retain ownership until they are sold.

Under a consignment agreement, a consignee is an agent getting a commission for the goods he/she sells on behalf of the consignor. 

Other names for a consignment agreement are:

  • Agreement to consign goods
  • Consignment form
  • Agreement to sell goods on consignment

Until sold, goods are stored at a facility or warehouse, under the control of the consignor, the consignee, or a third party.

What Should a Consignment Agreement Template Include?

If you need to create a consignment agreement, the following aspects are a must:

  1. The names and addresses of the consignor and the consignee
  2. Items for sale—Describe in detail what you are selling
  3. Expenses—Define which expenses the consignee is responsible for
  4. Pricing—State the sale price of the item. This agreement could give the right to the consignee to discount the item’s price with or without the consignor’s approval
  5. Payment—The consignee has the right to take money from the buyer and pay the consignor the balance due after subtracting the commission. It should also state the time frame for the payment
  6. Ownership—The contract should state that the consignor is the owner of the item for sale, and the consignee is responsible for its sale, loss, or damage while in his/her possession
  7. Record-keeping—All the records related to the consignment are the consignee’s obligation
  8. Consignment period—Both parties should agree on the time frame of the consignment, and if this period automatically extends or not, and for how long
  9. Insurance—Usually, the consignee has insurance that covers the consigned item
  10. Return of products—The consignor may request the consignee to return the items during the consignment process. He/she must do so by giving notice. The agreement should also include how and when to give notice 
  11. Termination—Define the contract termination rules. What happens if the item is not sold by a certain date, the consignee goes bankrupt, he/she leaves the area or dies, or the consignor dies?

Regulating every detail benefits both parties and prevents disagreements and misunderstandings.

Advantages and Disadvantages of a Consignment Agreement

Drawing up a consignment agreement comes with benefits and drawbacks affecting both the consignor and the consignee. We’ve selected the most important advantages and disadvantages of this agreement and put them in the table below.

A Consignment AgreementConsignorConsignee

Benefits

  • Saving inventory holding costs by sending goods to the consignee
  • Avoiding a retail storefront
  • Saving time on creating listings to sell items
  • No need to pay for the goods upfront 
  • The risk is reduced because the unsold goods can be returned at no cost
  • You can pay for the goods after the end-user paid and consignee commission is subtracted

Drawbacks

  • The profit is smaller than when selling directly to end-users
  • Goods on consignment may not get enough promotion of visibility
  • If large quantities of goods are unsold, inventory holding costs are high
  • It may be difficult to manage inventory related to consignment

Types of Consignment Agreements and Consignment Merchandise

There are two types of consignment agreements:

  • Exclusive
  • Non-exclusive

An exclusive consignment agreement gives the right to one consignee to sell the consignor’s item. A non-exclusive type of consignment agreement means that several consignees may attempt to sell the consignor’s item. An example of a non-exclusive agreement is hiring a few consignees to sell an oldtimer car for the best price.

People often choose consignment agreements to sell the following:

  • Clothing
  • Furniture
  • Cars
  • Books
  • Movies and music
  • Magazines and newspapers
  • Christmas decorations
  • Potted plants
  • Garden seeds

DoNotPay Can Draw Up Legal Documents for You

If legal terminology is too much for you and you hate drafting contracts, the good news is you don’t have to. We can help you make a contract in no time. All you need to do is:

  1. Open DoNotPay in your browser
  2. Type in the name of the contract you want to make
  3. Converse with our chatbot to provide the information we need

That’s all! We’ll generate your contract in a minute. Once you get it, sign or notarize it to make it official.

Check out the list of customizable templates we offer at the moment:

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