A consignment agreement is a contract between two parties – the consignor and the consignee. The consignor owns goods and gives them to the consignee to sell. If the goods do not sell, they return to the consignor.
Key Components of a Consignment Agreement
- The parties involved
- Goods to be sold
- Delivery terms
- Duration
- Payment terms
- Sales efforts
- Who has title to goods
- Return of unsold goods
Benefits
- Brands get more exposure in new markets without high investment
- Suppliers can sell goods without needing to invest in stores or shelf space
- More brand exposure without heavy marketing costs
Protecting Both Parties
A written agreement protects both parties and reduces liability. The consignee sells the goods for the consignor but does not own the goods. The consignee pays the consignor based on the sale of goods, often taking a fee or commission. The agreement lists the fees, commission, terms for sale, and other details.
Disadvantages
What is the disadvantage of a consignment agreement?
The consignee pays the consignor based on the sale of goods, often taking a fee or commission.