Consignment Agreement

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A consignment agreement is a legal document in which a third party sells the goods. The party that sells the goods on consignment (the Consignee) receives a portion of the profits, either as a flat rate fee or commission for selling the goods on behalf of the Consignor who owns right and title to the goods. Download this free legal template in PDF in one click and tailor it to your needs.

Template Description

Paper named "Consignment Agreement," client and builder are talking and standing near boxes

A simple consignment agreement template is a self-help contract drafting tool that memorializes the promises made between a consignor and consignee. The legally binding sample consignment contract includes comprehensive terms and conditions and important language for commission rates, consignment period, marketing responsibilities, inventory control, and property return process.

Lawrina designed this template exclusively for businesses to save the time, money, and effort of drafting their consignment agreements from scratch.

What Is a Consignment Agreement?

Our standard consignment agreement template outlines how a business entity will receive, store, market, ship, and return another party’s goods. Sellers receive a commission for their work and pay residuals to commodity owners after deducting their share. When the consignment period of the contract ends, the seller returns any unsold goods to the owner unless the terms of the retail consignment agreement provide for a contract extension or disposal of the owner’s property by other means.

Parties of a Consignment Agreement

A basic consignment contract template generally identifies two parties — the consignee and the consignor.

  • Consignor — a person or entity that owns goods and authorizes a consignee to sell those goods in a physical or virtual store.
  • Consignee — a person or entity that sells consigned property and collects a commission for each sale.

Key Terms

Consignment forms must use absolute terms to be enforceable in court. Those terms include the following:

  • Party introduction — Identify the “consignor” and “consignee,” their legal names, places of business, and contact information.

  • Preamble — Introduce the background facts, express the parties’ intent, and describe the purpose of the contract.

  • Consigned assets — Give a detailed inventory of the items to be sold (number of units, serial numbers, etc.) and include the assets’ insurable values. The language here memorializes which items the consignee will sell and their respective selling prices.

  • Delivery method — Outline the consignor’s duties for delivering the consigned property to the consignee. The consignment agreement template may also include terms describing the method of transportation, shipping costs, and insurance coverage. Here, the parties indicate who will pay for delivery costs and who will cover any loss or damage occurring during transport. 

  • Consignment period — Specify how long the consignor’s property will remain in the consignee’s possession and note whether the consignment agreement will automatically extend until all items are sold.

  • Consignor duties Describe the consignor’s obligations and fiduciary duties owed to the consignee.

  • Consignee duties Memorialize the consignee’s storing, marketing, and selling responsibilities and any fiduciary duties owed to the consignor.

  • Ownership of goods — Declare that the consignor retains ownership of the consigned items until the consignee sells or returns them. As such, a free consignment agreement should ensure that the consignor holds proprietary rights throughout the consignment period.

  • Consignee commission and payment — Outline how much the consignee will receive in commission for each item sold. The consignment agreement template will also affirm the timing and method of payment, commission rate(s), payment terms, and legal consideration to the consignee.

  • Loss risk, damage, and indemnification — Explain the consignee’s responsibilities regarding lost or damaged property in the consignee’s possession and whether the consignee needs insurance to cover potential losses. The consignment agreement template may also include hold harmless and indemnification clauses to protect both parties from unforeseen liability.

  • Goods returned: Include language in the free consignment agreement describing how the consignee must return unsold goods to the consignor or return stored property after receiving reasonable notice. Also outline the timing and method of returns and who will pay for any transportation costs or delivery fees imposed.

  • Termination — Declare that either party can end the consignment agreement “at any time for any reason.” Also set forth the conditions and procedures for termination, including how unsold goods will be returned or disposed of and any liabilities or obligations that may remain after termination.

  • Rescind or default — Explain the liability and remedies available after a breach of the consignment agreement, non-performance, or default by either party. Also outline the consequences of such termination.

  • Waiver Affirm that delays in a party’s enforcement of certain rights or remedies in the consignment agreement do not constitute a waiver of those rights.

  • Severability Declare that, if one or more conditions is illegal or unenforceable, the remaining provisions of the consignment agreement will remain enforceable.

  • Governing laws — State which jurisdiction’s laws and regulations the court will use to interpret and enforce the terms of the signed free consignment agreement.

How Does a Free Consignment Agreement Work?

Suppose you want to sell commodities but don’t have the resources to maintain large inventories or market numerous products. In that case, examples of consignment agreement templates may be useful for you. A consignment agreement authorizes another business to stock and sell your goods in its store (e.g., Amazon Fulfillment Services). 

Working on consignment benefits the consignee because the entity earns a commission on every sale without having to purchase goods. Similarly, consignors don’t need to invest in marketing to sell their products or bear the costs of storing inventory.

The consignment contract clearly lays out the responsibilities and obligations of each party, from purchasing inventory and selling the items to disposing or returning unsold items to the owner.

Types of Consignment Arrangements

Our printable simple consignment agreement in PDF allows users to custom draft contracts to meet their business needs with any of the following types of consignment arrangements:

      1. Outward consignment — Consignors send their items to consignees that do business in a different country.

      2. Inward consignment — Consignees sell items domestically from another country.

      3. Exclusive consignment — Consignees hold exclusive rights to sell the consignor’s items.

      4. Non-exclusive consignment — Consignors hold the right to sell their items using multiple consignees.

      5. Ordinary consignment — Consignees receive a fixed percentage of gross sales.

      6. Del-crede consignment — Consignees receive additional commissions paid directly from the consignor to cover credit sales costs (i.e., bad debt and POS fees).

      7. Comprehensive consignment — Consignees receive additional commissions from a sale that benefited from “extra” marketing efforts by the consignee.

      Key Components in a Consignment Agreement Template

      Consignment formats must have the following elements for the signed contract to be enforceable:

            • Identification of the parties involved (consignor and consignee)

            • Description of the goods being consigned

            • Terms of the consignment, including the length of the agreement and the commission rate

            • Obligations of the consignor and consignee, such as delivery and storage of the goods

            • Payment terms and procedures for handling returns, unsold items, and other consignment legal issues

            • Liability and insurance provisions that identify the party responsible for remedying loss or damaged goods

            • Dispute resolution mechanisms and any applicable laws or regulations

            How To Create a Free Consignment Agreement

            Either consignors and consignees can access Lawrina’s consignment agreement template and learn how to write a consignment agreement. During the drafting process, both parties can discuss their business needs and agree on the key terms, consignment arrangements, and legal components mentioned above. The parties can then input this information into the template to satisfy the legal requisites for making the contract enforceable.

            Afterward, the consignor and consignee can download a final draft in Word or PDF format for proper execution and endorsement. Consignors and consignees may also want to take note of the following tips before printing their contracts:

                • Read the power of attorney (POA) form. A power of attorney is a legal document that gives a designated person the power to act for someone else as defined in the document. When tied to a consignment agreement template, the POA authorizes one business entity to act as an agent when selling another’s property. Be sure to review the language in the POA before executing it to ensure that the document limits the agent’s power and authority to only selling the named property and nothing else.
                • Make it state-specific. To protect the interests of businesses, every US state has adopted the Uniform Commercial Code (UCC) rules and guidelines on contracts. However, most states have unique admin codes regarding consignment sales. For this reason, draft your free consignment agreement according to the rules of your jurisdiction.

                • Set the duration. The consignment period is important because it expressly reveals when the consignee should start selling the goods and when the consignee should return unsold items to the owner or dispose of them according to the agreement.

                Why Use a Consignment Agreement Template?

                Businesses use consignment agreement templates to reduce inventory risk and free up cash flow while also increasing their product offerings and expanding their customer base through third-party sales.

                Common Use Cases

                The top five businesses that regularly use consignment agreement templates are:

                1. Virtual retailers execute these contracts to diversify their inventories without bearing the financial risks of purchasing goods upfront. They only pay for the items that sell, freeing up cash flow to cover other business expenses.
                2. Artists often use free consignment agreements to make arrangements to showcase their works. Galleries act as the consignee, and the artist as the consignor.

                3. Clothing stores use consignment contracts when selling items from small fashion designers or local artisans.

                4. Antique dealers may enter into consignment when selling precious items from private collections.

                5. Bookstores use consignment agreement templates when making consignment fee meanings to sell books from local authors or self-published writers.

                When Not To Use the Consignment Agreement Template

                Consignors receive no money while their merchandise sits on shelves in a consignee’s store. Therefore, if cash flow is tight or if you can’t wait extended periods to receive payments, a consignment agreement template may not work for your business. Consignment agreements may not be legal or ethical when selling dangerous commodities (e.g., firearms, toxic chemicals, or explosives). Additionally, when consignors and consignees have a history of mistrust or disputes, there may be better options than consignment between the parties, as it can lead to further conflicts.

                Legal Disclaimer

                Please note that Lawrina does not provide any legal services. The information on Lawrina’s Site and its downloadable content, including legal articles and templates, shall not be considered legal advice and is not guaranteed to be correct, complete, and up-to-date. If you require legal advice on your issue, we recommend you contact a qualified attorney licensed in your state. You personally assume full responsibility for any consequences, damages, and costs associated with your use of any content of Lawrina Services available on Lawrina’s Site. 

                By using Lawrina’s Site you agree with mentioned above and give your irrevocable consent to comply with and to be bound by the provisions of Lawrina Service terms.

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                Frequently Asked Questions

                What is a consignment clause?

                Consignment clauses are legal provisions in a contract that define the terms and conditions of a consignment agreement.

                What are consignment payment terms?

                Consignment payment terms refer to the specific obligations and timeframes under which a consignor will receive payment for goods sold throughout a consignment period.

                What is the typical consignment split?

                A typical and fair consignment split in the US is generally 60/40 or 60 percent to the consignor and 40 percent to the consignee.

                Who is the consignee in a consignment agreement?

                The consignee is the one who accepts a consignor’s goods for selling to potential buyers in a physical or virtual store.

                Is a free consignment agreement a contract?

                Yes, a free consignment agreement can be used to create a legally-binding contract that memorializes promises made between a consignor and a consignee.

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