Consignment Agreements: Your Complete Guide

A consignment agreement is a contract in which one party (the consignor) agrees to sell goods with another party (the consignee) but retains ownership until the goods are sold. The store then displays the items on behalf of the owner until sold. Upon sale, the profits are divided according to the consignment split agreed upon. A consignment agreement is also referred to by various other names such as a consignment shop contract, consignment inventory form, consignment contract, or a consignor/consignee agreement.

The primary purpose of the consignment is to allow you to sell your goods without having to pay for retail space and storage costs. As a result, all parties involved benefit from this arrangement: the owner makes money off his items and the consignee profits from his sales commissions and storage fees.

Below, we discuss what a consignment contract is, how it works, and provide tips and templates to write a consignment agreement.

consignment agreement

Types of Consignment Agreements

There are two main types of consignment agreements:

  • Consignment Shop Contract: In this type, the owner puts his goods up for sale in a store he does not own. All items remain under the ownership of the original owner until they are sold. The title changes hands at that point, and the new owner pays any sales tax if required by law or otherwise agreed upon between all parties involved.
  • Consignee/consignor agreement: When both the consigned item and any profits from its sale belong entirely to one party (the consignee), who then shares profits with another party (the consignor). There may be an option to buy back unsold merchandise before an agreed-upon date at a negotiated price.

The consignee/consignor arrangement is the most common form of consignment agreement in use today, and rules for this type are easily adaptable to other scenarios.

How Consignment Agreements Work

How does a consignment agreement work? When selling articles through consignment, you should talk about the contract with your consignee. The items will go to a store that has agreed to sell them for you. You should have precise details about what the other person is going to do to display and promote your article(s) and how they will do it. Then there needs to be a payment plan in place before anything happens.

  • consignment shop
    When receiving items through consignment, think of this as being similar to renting or borrowing things from someone else so you can sell them for money. You need a written contract for everything to work correctly and make sure that both sides understand what is happening and how it will happen.
  • An example consignment agreement is one where you are selling something for someone else. You can purchase items from a wholesaler, sell them at your store or online shop and then send the money back to the product owner after taking out your commission fee. The amount that both parties have agreed upon should be clear up front, so there are no misunderstandings further down the line.
  • The consignee will usually take care of selling the items through their storefront or website, which means that you should not be responsible for any losses if something doesn't sell as expected and is just sitting in a shop gathering dust. You can also choose to have an open-ended contract with no set time frame, which means it continues as long as both sides agree to leave the contract open.
  • With a consignment agreement template, you should list out all of your expectations and requirements, so there is no confusion later on about what either party wants from the relationship. If you need help with creating such an agreement or any other type of contract, it would be a good idea to contact a lawyer who can help you with the process.
  • You should also make sure that all of your consignment agreement terms are fair and in line with market standards for this type of transaction, so there is no room for misinterpretation or confusion further down the road once things get underway.

Components of a Consignment Agreement Template

A consignment agreement template contains several consignment terms. They include:

  • Date and parties involved
  • Description of goods and terms for selling them
  • The consignee's responsibilities when it comes to the sale, including where they will be sold and when
  • The consignee's commission rate on each sale, along with the payment plan for receiving their money from sales
  • Any limitations on the time frame for selling goods
  • Other contact information, including how to get in touch with each party if there are any issues or disagreements down the road

The Benefits of Making a Consignment Agreement

Why make a consignment agreement? There are many benefits associated with entering into such an arrangement. They include:

  • It is good for the consignee to drive sales and get commissions, especially if they own a shop or website.
  • You can sell the items in your store without having to pay anything upfront. This is great when you are starting out because it will allow you to purchase more stock than usual while still making money from selling things that other people own.
  • Restock as it sells, without the need to purchase more goods upfront.


consignment contract

What is Consignment in Contract Law?

What is consignment in contract law? It is also known as a bailment or a transfer on trust, which means that one person has possession of an item owned by another person for a certain amount of time. The owner can decide when to give the items back if they do not sell in that time frame, so there are no set terms attached to consignment agreements.

Consignment agreement templates are usually easy to find online, but if you need help creating one for your consignee or supplier, it would be a good idea to contact a lawyer who can offer their legal expertise and experience in this area.

Tips for Writing a Simple Consignment Agreement

Writing up any agreement takes some effort, but it does get easier over time as long as you write things up correctly without leaving anything out or including unnecessary clauses that could cause issues further down the road.

Working with a lawyer familiar with consignment agreements and other contract laws would be beneficial if you are unsure how to proceed. They can assist in the entire process so that everything goes smoothly for everyone involved.

Consignment Agreement Templates

There are many types of consignment agreement templates out there that cover almost any situation where someone needs help making a transaction like this flow as smoothly as possible without running into legal problems later down the road.

You should look over your options carefully before settling on one option in particular because every template will include different terms based on what both parties want from each other at any given time during this type of arrangement—consignment Agreement Template PDFs. There are also some free consignment agreement templateWord and PDF documents that you can print up and use right away.

If you are looking for an established reputable consignment partner, contact us today for more information on working together for our mutual benefit. At Around the Block, we take pleasure in what we do. We only accept and consign high-quality goods that we are confident will sell. You can count on the finest level of customer care in the business.