What Is a Consignment Agreement?
A consignment agreement is a legal contract where one person or business (the consignor) gives goods to another (the consignee) to sell, but keeps ownership until the items are sold. The consignee stores and sells the goods, then pays the consignor from the sale and keeps an agreed commission.
Small brands, artists, and independent sellers use consignment to reach customers without running their own storefront. A consignment agreement sets the ground rules for sales, commission, and timing. It also explains who’s responsible if items are lost, damaged, or returned.
Selling the goods instead of consigning them? Use a purchase and sale agreement to transfer ownership right away.
When to Use a Consignment Agreement
A consignment agreement brings structure to shared selling. Consider using one when you’re:
- Placing items in a boutique, gallery, resale shop, or similar retail space while keeping ownership until they sell.
- Agreeing to sell someone else’s products and paying them only after each sale.
- Setting expectations for pricing, commission, reporting, and payment timing.
- Defining who’s responsible if goods are lost, damaged, insured, or returned.
- Making sure unsold goods are returned when the arrangement ends.
For example, you might place handmade jewelry in a neighborhood boutique or agree to sell locally made products in your shop on a commission basis. In either case, Legal Templates makes it easy to set expectations and protect both sides.
Always finalize a consignment agreement before delivering goods to a seller. Clear terms help protect your rights under consignment laws and the UCC. If a store closes or goes bankrupt, UCC filing or other state-law protections may determine whether consigned goods are returned or treated as creditor assets.
How to Write a Consignment Agreement
When goods are sold on someone else’s behalf, the agreement controls how everything works. Build it with these steps:
- Name the parties. List the consignor and consignee with full contact details.
- Describe the goods. Include quantity, condition, key features, and estimated value so everyone knows exactly what’s being sold.
- Set the price and commission. Decide who controls pricing, whether discounts are allowed, and the commission percentage. Many commissions fall between about 25% and 60% of the sale price, depending on the goods and the shop.
- Define when payment happens. State when the consignor gets paid after a sale and what happens if payment is late.
- Plan for returns and unsold items. Explain how customer returns are handled and who takes back goods that don’t sell.
- Address risk and protection. Note whether items are sold “as is” or with a warranty, if insurance is required while the consignee holds the goods, and how ownership rights stay protected.
- Include the core legal terms. Add dispute resolution, governing law, termination, and effective date.
A well-written consignment agreement helps both parties track ownership, sales, commissions, and payments while the goods are in someone else’s care. It also makes returns, losses, or payment issues easier to manage.
Insurance and a UCC financing statement help protect the consignor if goods are lost, damaged, or claimed by the consignee’s creditors. Consider putting both consignment protections in place before any inventory is delivered.
Consignment Agreement Example
Below is a shortened consignment agreement example showing how terms are commonly written.
Description of Consigned Goods
Consignor agrees to deliver, and Consignee agrees to accept on consignment, the following goods (“Consigned Goods”): twelve (12) framed acrylic paintings in new condition, with an estimated total value of $18,000.
Consignment Relationship and Ownership
Consignor retains full title and ownership of all Consigned Goods until they are sold to an end purchaser. The Parties intend this arrangement to constitute a true consignment and bailment, not a sale of goods to Consignee. Consignee has no ownership interest in the Consigned Goods other than the limited authority to possess and sell them in the ordinary course of business.
Risk of Loss
Before any sale occurs, Consignor bears the risk of loss except where loss or damage results from Consignee’s negligence or failure to maintain required insurance. After a completed sale and delivery to a customer, risk of loss transfers to the customer under Consignee’s sale and delivery terms.
Commission and Payment
Consignee will receive a commission of forty percent (40%) of Net Sales Proceeds. Remaining proceeds must be remitted to Consignor within fifteen (15) days after the end of each reporting period, together with an itemized statement showing all sales, deductions, commissions, and net amounts payable.
Return of Unsold Goods
Upon termination or expiration of the agreement, any unsold Consigned Goods must be returned to Consignor. If Consignee fails to return the goods without justification, Consignee will be deemed to have purchased the goods at the agreed wholesale price or fair market value, whichever is greater.
Consignment Agreement Sample
To see the full document, view the complete consignment agreement sample. Then customize and download your template in Word or PDF.
