Consignment Agreement Template

What is a Consignment Agreement?

In a consignment agreement, the seller or manufacturer (the consignor) places goods on consignment. The buyer (the consignee) then has the ability to sell these goods and receive a certain commission.

The consignee agrees to keep the consignor’s goods at a facility or warehouse where the merchandise can be controlled by one of the parties in the contract or a third party. Goods belong to the consignor. The consignee doesn’t take the title and instead acts as an agent who passes the title to those items to a buyer on the consignor’s behalf.

Put simply, a consignment agreement lets someone else sell goods you own on your behalf. The consignee handles the marketing and sales and takes a commission for it, so you keep most of the sale price with minimal effort.

Types of Consignment Arrangements

A consignment arrangement is either exclusive or non-exclusive, and the difference is how many sellers may offer your goods. Pick the type that matches how widely you want your items to be sold. There are two types of agreement for putting merchandise on consignment:

• exclusive (the consignee becomes the only person who is authorized to sell goods on the consignor’s behalf)
• non-exclusive (the consignee is not the only selling party of the consignor’s goods)

Types of Consignment Merchandise

Items that are most often consigned are clothes and household items. The main difference between a regular store and a consignment store is who owns the items. A regular store that sells, for example, used clothing buys the clothes directly from manufacturers, becomes the owner of the items, and then resells them. A consignment store pays manufacturers only once their items are bought.

It is also common to sell vehicles with the use of consignment agreements. For example, a used car can be placed with a dealer to be sold on consignment. The owner of a car keeps the ownership and can also sign a consignment contract with several dealers at a time letting the one who will be the first to sell the car make a deal.

It is a good alternative to selling a car to a dealer as in this case, it is usually sold at a price below market value. With a consignment agreement, a vehicle can be offered at a purchase price closer to the market value. This is how the owner of a car can make more, even after paying the consignee’s fee or commission.

Benefits of Consignment Selling

Consignment lets the consignor put goods in front of more buyers without selling them outright to a store. For most sellers, the main benefits are extra exposure, less idle stock and a better final price. The consignor gets these benefits when putting their merchandise on consignment:

1. The document allows a manufacturer to place their goods in wholesale and retail outlets and get additional exposure to buyers, instead of having it in a warehouse waiting for buyers’ orders.
2. It can stimulate wholesalers and retailers to keep goods in stock as their capital is not tied up in stock.
3. Wholesalers and retailers can be encouraged to keep seasonal or new merchandise which they may not usually sell due to lack of demand.
4. Even after the consignor pays fees or commissions to the consignee, they can get a better price for their goods.

Are There Any Disadvantages to a Consignment Agreement?

It depends. For example, one of the disadvantages is that once you enter into a consignment agreement, you will get money only if your items are sold from the shelves of the consignee’s facility. It means that you should have a sufficient amount of cash on hand to wait till you get profit from consignment sales.

Other disadvantages that sellers run into include:

• Shelving. You also don’t have a lot of control over the shelving strategy. It might lead to retailers and wholesalers placing their owned inventory in more advantageous places than yours. It is especially relevant if consignees have invested capital in the inventory, and they want to get a fast ROI if your merchandise does not sell well.
• Damage and losses. The absence of retailers’ investments in the consigner’s merchandise also leads to possible negligence regarding shopper abuse. Some consignees will be putting sales of their own merchandise in the first place, so you, not having any physical control over damages, might not be getting expected profit.
• Promotion. Along with that, sellers might put more effort into the promotion of their own goods.

What a Consignment Agreement Should Include

A consignment agreement works best when it spells out who owns the goods, how they are priced and what happens when an item sells. A basic consignment agreement includes the following information.

• Information about the parties. It should include details about the consignor and the consignee (names, addresses) and date of the contract.
• Description of the merchandise provided by the consignor.
• Method of pricing, sale price, terms and conditions. The cost can be determined by the consignor, consignee, or both of them. It also applies to setting any discount for the goods.
• Division of the proceeds by parties. It should state the percentage of profit the consignor and the consignee will get.
• Consignee’s payments to the consignor. It should state how much the consignee shall pay to the consignor or manufacturer for every item sold and in what way (company or personal check, money order, cash, etc.) after the consignee’s fees or commission is subtracted. Here, the consignor and consignee should also state how many days the items will be held and displayed.
• Expenses. The provision should state whether there are any expenses the consignee is responsible for.
• Termination of the contract. It should state how many days written notice should be provided by either of the parties if they want to terminate the agreement. Or, there might be a specific date by which the contract terminates.
• Governing laws of the state where agreement takes place.
• Ownership. The clause should include the information about the actual owner of the goods (most often, this is the consignor), the party possessing them, and who bears responsibility for their loss or damage (usually, this is the consignee).
• Merchandise records. Here, it should be clear who is responsible for keeping records in regards to the consignment.

You can easily find a consignment agreement template on the net and use it to write your own contract. But the important thing here is that it should comply with your state laws and completely protect you.

To be confident in getting a legally binding document that will cover all the information needed, use our online document builder. It will help you get an attorney-verified form in just 5 minutes.

Create a free high-quality Consignment Agreement online now!

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How to Fill Out a Consignment Agreement

The consignment agreement template you download from this page has 15 parts to complete, and the steps below follow its own order. Tick only the options that match your deal and leave the other boxes empty.

The screenshots under each step show the FormsPal Consignment Agreement template filled with sample entries in blue, so you can see where each answer goes. The names, addresses, dates and amounts are examples only.

1. Parties, date and business location. Enter the agreement date, then the name and address of the Consignor and of the Consignee. Add the address of the Consignee's business in the recital below.

   

2. Items placed on consignment. List the items the Consignor is delivering in the lines after 'the following items'. These become the Products in the rest of the agreement.

   

3. Who pays delivery costs. Tick Consignor or Consignee for the shipping, freight, transport and postage costs of delivering the Products.

   

4. Price reductions (Section 2). Under 'Select applicable box', tick the rule that fits: Consignor approval before a lower price, Consignee reduces at its own judgment, or an automatic reduction every thirty days.

   

5. Reduction schedule and retirement days. If you want a custom reduction schedule, tick its box and write the schedule on the lines. Then fill in the number of days after which unsold Product is retired.

   

6. Removal by the Consignor: days in advance. In Section 4, tick the first box if the Consignor may remove Product, and enter the number of days in advance the Consignor gives.

   

7. No removal or in/out privilege. Tick the box for no removal without Consignee's agreement, or for an in/out privilege. For the in/out privilege, write the details on the lines provided.

   

8. Sales commission: percentage. Under Section 5, tick the box for the percentage of each sale that goes to the Consignee or to the Consignor.

   

9. Fixed fee and remittance timing. Instead of a percentage, tick a fixed fee to the Consignee or to the Consignor and enter the dollar amount. Then write any remittance timing other than monthly on the lines below.

   

10. Return rights and the end of the agreement. In Section 7, tick whether the Consignee may ask for Products to be returned. In Section 9, enter the number of days in advance, in writing, that either side gives before the agreement ends.

    

11. Reporting and delivery. In Section 10, tick monthly, quarterly or other and specify. In Section 12, write how reports, remittances and other messages between the parties will be delivered.

    

12. Contact details for the Consignor. Enter the contact name (Attn), telephone number and email for the Consignor.

    

13. Contact details for the Consignee. Enter the contact name (Attn), telephone number and email for the Consignee.

    

14. Consignor signature. The Consignor signs and adds a printed name and title in the signature block on page 7.

    

15. Consignee signature. The Consignee signs and adds a printed name and title in the signature block on page 7.

    

Frequently Asked Questions

Sellers often ask the same few things before they hand over their goods. These short answers explain the roles, the types of agreement and what to do once the template is filled out.

What is the difference between a consignor and a consignee?

The consignor owns the goods and hands them over to be sold. The consignee holds the goods, handles the marketing and sales, and takes a commission on each sale.

What is the difference between an exclusive and a non-exclusive consignment agreement?

In an exclusive agreement, the consignee is the only person who is authorized to sell goods on the consignor’s behalf. In a non-exclusive agreement, the consignee is not the only selling party of the consignor’s goods.

Which items can be sold on consignment?

Common examples include:

• Clothes
• Household items
• Vehicles

List the items you hand over in Section 1 of the template.

Is there a separate form for selling a car on consignment?

Yes. FormsPal has a separate Vehicle Consignment form for selling a car through a dealer.

Can I fill out the consignment agreement template online?

Yes. Click Create My Document to answer a few questions and build the agreement online. You can also download the PDF and fill it in with the PDF editor.

Is it worth keeping a copy of the signed agreement?

Yes. Keep a signed copy with your records, along with the list of items and their prices. It helps both sides check what was handed over and what each item is priced at.

General information, not legal or tax advice.

Jennifer M. Settles

Author & Attorney

With over 25 years of experience as a business and transactional attorney, Jennifer has mastered the craft of closing highly successful deals for her clients. Through her wide-ranging expertise in commercial contracts, real estate transactions, M&A and corporate law, Jennifer secures results that are second-to-none.