Consignment Agreement Template

In plain language: Identifies the consignor and consignee by their full legal names and addresses, and states the purpose of the agreement.

Common mistake: Using trade names instead of registered legal entity names. If the consignee's legal name differs from their shop name, disputes over insurance claims or unpaid proceeds become harder to enforce against the correct legal party.

In plain language: Lists the specific goods being consigned — including quantity, description, condition, and any identifying marks or serial numbers — so both parties agree on what is covered.

Common mistake: Describing goods vaguely (e.g., 'assorted jewelry'). Without itemized descriptions and quantities, proving what was delivered — and what was lost, sold, or returned — becomes a credibility contest rather than a contract question.

In plain language: Confirms that the consignor retains legal title to the goods at all times until a third-party buyer completes a purchase — the consignee acquires no ownership interest.

Common mistake: Omitting the title-retention clause entirely. Without it, a consignee's creditors may treat the goods as the consignee's assets and seize them — particularly in bankruptcy.

In plain language: Sets the agreed retail selling price or pricing range, the minimum price below which the consignee cannot sell without approval, and any markdown authority granted.

Common mistake: Granting unlimited markdown authority or omitting a floor price entirely. Consignors have discovered goods sold far below their value when no minimum price was documented, leaving them no contractual recourse.

In plain language: States the consignee's commission as a percentage of the actual sale price, defines deductible selling expenses if any, and calculates net proceeds payable to the consignor.

Common mistake: Agreeing on a commission percentage verbally without specifying what base it applies to — gross sale price, net of credit card fees, or net of returns. This ambiguity routinely reduces remittances below what the consignor expected.

In plain language: Sets the frequency of accounting statements and remittances — typically monthly — and requires the consignee to provide a sales report with each payment.

Common mistake: Setting no reconciliation schedule at all, or stating 'payment upon request.' Consignors who rely on self-reporting without a fixed schedule frequently wait months between payments while the consignee uses their capital interest-free.

In plain language: Allocates responsibility for insuring the goods while in the consignee's possession and specifies which party bears the risk if goods are damaged, stolen, or destroyed.

Common mistake: Making insurance optional or leaving risk of loss unaddressed. When a consignee's premises are damaged by fire or flood with no clear contractual obligation, the consignor loses their goods and has no contractual claim — only a tort argument.

In plain language: Sets the start and end date of the consignment, states what happens to unsold goods at expiry, and allows either party to terminate early with written notice.

Common mistake: No defined end date or return obligation. Open-ended consignment agreements result in goods sitting on shelves indefinitely, making it practically impossible for the consignor to reclaim inventory or place it with another seller.

In plain language: Requires the consignee to return unsold goods in the same condition as received and to document any damage that occurred while in their possession.

Common mistake: Accepting a vague 'reasonable condition' standard with no damage-reporting obligation. Consignors receive goods back significantly deteriorated with no record of when the damage occurred and no claim to compensation.

In plain language: Specifies which jurisdiction's law governs the agreement and how disputes are resolved — litigation, arbitration, or mediation.

Common mistake: Choosing a governing law with no connection to where the goods are stored or sold. Enforcing a judgment across jurisdictions is costly and slow — choose the law of the state or province where the consignee operates.

A consignment agreement is a contract between a goods owner (the consignor) and a seller (the consignee) under which the consignee agrees to sell the goods on the consignor's behalf in exchange for a commission. Title to the goods remains with the consignor until a third-party buyer completes a purchase — the consignee never owns the inventory. The agreement governs pricing, commission, insurance, payment reconciliation, and the return of unsold goods.

Artists placing work with galleries, clothing designers supplying boutiques, antique dealers accepting estate goods, wholesale suppliers placing product with retailers on a trial basis, and auction houses managing estate sales all use consignment agreements. Any arrangement where goods change hands for selling purposes without a transfer of ownership should be documented with a signed agreement — verbal consignment arrangements leave both parties exposed on pricing, insurance, and payment obligations.

A sales agreement transfers ownership of goods from seller to buyer at the point of contract — the buyer takes title and bears risk of loss immediately. A consignment agreement does not transfer title at all; the consignor retains ownership until a third-party sale is completed. The consignee is essentially an agent, not a buyer. This distinction has major implications for tax, risk of loss, and what happens if the consignee becomes insolvent.

Notarization is not required for a consignment agreement to be legally valid in most jurisdictions. A signed agreement executed by both parties is generally enforceable without notarization. However, for high-value goods — particularly fine art, jewelry, or luxury goods — some consignors opt for notarization to deter disputes about when or whether the agreement was signed.

Commission rates vary significantly by industry. Art galleries typically charge 40–60% of the sale price. Retail consignment shops commonly charge 30–50%. Auction houses often charge 10–25% of the hammer price, sometimes with a buyer's premium on top. Wholesale consignment arrangements with distributors typically range from 10–30%. The right rate depends on the consignee's costs, market positioning, and the expected sale volume.

In the US, a consignor who has not filed a UCC-1 financing statement risks having their goods treated as part of the consignee's bankruptcy estate — meaning secured creditors may have priority over the consignor's ownership claim. A timely UCC-1 filing establishes the consignor's priority interest and protects the goods or their proceeds. In Canada and the UK, similar personal property security legislation applies. Always file the required security interests before delivering high-value goods.

The consignment agreement should explicitly assign insurance responsibility — it does not arise automatically. In most commercial consignment arrangements, the consignee is required to insure the goods at the agreed value and name the consignor as an additional insured. If the agreement is silent on insurance, risk-of-loss allocation is determined by the contract or default law, which may not favor the consignor. Always require a certificate of insurance before delivering goods.

The consignor's right to reclaim goods depends on the agreement's termination clause. A well-drafted agreement allows either party to terminate on written notice — typically 14 to 30 days — after which unsold goods must be returned. Without a termination clause, the consignor may need to wait until the consignment period expires. In some jurisdictions, consignors have statutory rights to demand return of their property, but relying on statute rather than contract is slower and costlier.

No. A distribution agreement typically transfers title to the distributor, who buys goods outright and resells them at their own risk and profit margin. A consignment agreement never transfers title — the consignee sells on behalf of the consignor and remits proceeds minus commission. The financial and legal risk profiles are fundamentally different: distributors bear inventory risk; consignees do not purchase the goods and theoretically bear less financial risk, though they do bear risk of loss for goods in their care.