A consignment agreement is an agreement where the supplier (the consignor) agrees to provide goods to another business (the consignee), for the agreed purpose of selling the goods.
Pursuant to the consignment agreement the consignor remains the owner of all goods and services being provided by the consignee, until they are sold to customers.
Under a consignment agreement the consignee acts as an agent and will get a commission or an agreed upon amount for the goods or services they sell on behalf of the consignor.
When is a Consignment Agreement Needed?
If you are a supplier who is looking for an agent to sell your goods or services to third parties, drafting a consignment agreement is highly recommended.
A consignment agreement will not only protect the relationship between you and the consignee, but also assist your business in reaching sales objectives. By placing your goods in a retail business, a consignment agreement also enables an increased level of exposure for the products your business is selling.
The consignment agreement will outline many key terms of the relationship between the consignor and the consignee such as the fact that the consignor remains the owner of the goods until the consignee sells them to a third party.
The consignee obtains physical possession of the goods, allowing them to advertise, display and sell the goods. However, the consignor with the right to request their goods be returned to them at any time during the commercial relationship.
What’s Included in a Consignment Agreement?
A consignment agreement will contain a range of terms to protect your business and the commercial relationship with the consignee, including:
- The term of the agreement
- Payment protections
- Dispute resolution
- Warranties and liabilities
- Return of products not sold