Consignment Agreement Template
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What Is a Consignment Agreement?
A Consignment Agreement is a legal contract signed between a consignor (a seller) and a consignee (a distributor), upon which a consignor delivers goods to the consignment stock and stores them, and a consignee uses or sells those goods to a third party. A consignor pays a consignee a commission for their services (for selling the goods), while a consignee returns all the money received for the goods to the consignor. Most of the time a commission is presented as a percentage of the sales.
- Agreement to Consign Goods;
- Agreement to Sell Goods on Consignment.
Goods are the property of a consignor, if they are not sold, they are supposed to be returned to them if it is otherwise not stated in the agreement. Consignment stock is legally owned by a consignor as well, but operated by a consignee. You can download a Consignment Agreement template below or make your own using our online form builder.
How Does a Consignment Agreement Work?
A Consignment Contract is a good choice for those businesses who would like to sell their goods through others. With this document, they can specify the terms and the procedure of merchandise distribution.
There are two types of Consignment Agreements:
- Exclusive Agreement. This type of agreement means that only one consignee has the right to sell a consignor's goods.
- Nonexclusive Agreement. In this case, several consignees can attempt to sell an item, but the commission will be received only by the one who succeeds.
When a contract is signed, a consignor delivers items to the consignment stock. A consignee starts the distribution of the delivered items. Depending on the circumstances of the agreement, a consignee regularly makes payments to the consignor for the items sold, while subtracting a commission for their services. Different situations may occur during the period of the contract, like damaged goods, unsold items, late deliveries to the consignment stock - all of these can lead to disagreements between the parties, that's why it's vital to provide a solution to most of them.
How to Write a Consignment Agreement?
The document must be formulated carefully so that there wouldn't be any place for doubts on any provision. A simple Consignment Agreement must include the following:
- Parties. Names and addresses of a consignor and a consignee.
- Merchandise. The goods for sale must be identified and described. Usually, the agreement contains a statement about the ownership of the goods.
- Price of the Merchandise. The document should state prices for the items depending on their condition. If a consignee is allowed to sell goods with a discount it should be included in the document, as well as if the consignee needs to get approval for a discount from a consignor;
- Fees, Commission, Expenses. The contract must state how often a consignee is supposed to make payments to the consignor for any goods sold. It must also indicate the amount of commission a consignee is supposed to subtract from the payments they make to the consignor. If a consignee is responsible for any other expenses it should be stated in the document as well.
- Delivery of the Goods. Parties should state how often the goods will be provided by the consignor, which party will bear the delivery cost, etc.
- Rights and Responsibilities of the Parties. It's important to thoroughly describe all rights and obligations of each side in order to avoid any disputes regarding the subject of the contract. For example, a document should include a statement that a consignee is responsible for damaging any goods in their possession.
- Unsold Items. A contract should include an explanation of what is supposed to be done with the items unsold, should they be returned to the consignor or should they donate them to charity, for example.
- Termination of the Contract. The document should provide information about when and how the contract will be terminated.
A written and signed Consignment Agreement will help to prevent confusion and protect both parties in the case of any disputes.
Related Forms and Templates:
Download Consignment Agreement Template