Creating a Consignment Agreement Form

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Creating a legally binding consignment agreement form is an essential part of any sale transaction, providing both parties – the consignor (the seller) and the consignee (the buyer) – with protection from potential legal and financial liability.

The terms of a consignment agreement form should be properly established, so that both parties know exactly who is responsible for what, how payment will be made, what condition the goods are in and any other relevant information. This safeguards sellers from being left out of pocket if a transaction does not go as planned and buyers from not receiving the goods in an acceptable condition or being taken advantage of.

Furthermore, having relevant information clearly outlined in a written document helps to streamline the process by reducing potential confusion; allowing the focus to be on making a sale rather than dealing with unforeseen issues. Additionally, it can be used as evidence should any disputes arise during or after completion of the transaction.

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Definitions (feel free to skip)

Consignor: The party agreeing to transfer ownership of goods.
Consignee: The party agreeing to sell the goods on behalf of the consignor.
Consignment Percentage: The percentage of the selling price that the consignor will receive as payment.
Payment Terms: The conditions that dictate when and how the consignor will be paid.
Inventory Control: Measures that are in place to ensure that the consignee is not overstocked with goods.
Responsibility: Outlines the roles and responsibilities of each party involved in the agreement.

Contents

• Explain the purpose of a consignment agreement form
• Explain the key terms and definitions of a consignment agreement
• Outline the different types of consignment agreement forms
• Manufacturer/retailer
• Manufacturer/distributor
• Retailer/distributor
• Provide guidance on how to structure the agreement
• Specify payment terms
• Establish inventory control
• Define responsibilities
• Explain how to determine the consignment percentage
• Calculate the consignor’s cost of goods
• Determine the selling price
• Estimate the expected sales volume
• Explain what types of payment should be included in the agreement
• Cash payments
• Consignor payments
• Commission payments
• Describe the process for setting up a consignment agreement
• Identify the parties involved
• Draft the agreement
• Negotiate the terms
• Sign the agreement
• Provide tips for negotiating a consignment agreement
• Clarify the responsibilities of each party
• Set clear pricing guidelines
• Define payment terms
• Specify inventory control measures
• Explain the legal considerations for a consignment agreement
• Ensure compliance with state and federal laws
• Specify any applicable taxes
• Provide a sample consignment agreement form
• Outline the terms
• Establish payment terms
• Include all necessary legal clauses

Get started

Explain the purpose of a consignment agreement form

• Understand the purpose of a consignment agreement form and why it is important for both parties.
• A consignment agreement form is a legal document that outlines the terms and conditions of an agreement between two parties – the consignor (the supplier) and the consignee (the retailer).
• It sets out the responsibilities of each party, as well as the terms and conditions of the agreement, such as the commission rate and payment terms.
• The consignment agreement form also protects both parties in case of any disputes.

Once you have a clear understanding of the purpose of a consignment agreement form, you can check this off your list and move on to the next step.

Explain the key terms and definitions of a consignment agreement

• Research the key terms and definitions of a consignment agreement, such as:
• Consignor: the seller
• Consignee: the buyer
• Goods: the items that are being consigned
• Consignment Fee: the fee that the consignor pays to the consignee
• Sales Commission: the commission that the consignee takes from the sale
• Write down each of the key terms and definitions in the consignment agreement form, along with any other relevant terms and definitions.
• Check that the key terms and definitions are all clearly defined in the form.
• When you are satisfied that all of the key terms and definitions of the consignment agreement have been adequately explained, you can move on to the next step.

Outline the different types of consignment agreement forms

• Manufacturer/Retailer Consignment Agreement Form: This form is used when a manufacturer is selling their goods to a retailer to stock in their store. It will include clauses that outline the responsibilities of the manufacturer and the retailer, payment terms, and any other relevant language.
• Wholesaler/Retailer Consignment Agreement Form: This form is used when a wholesaler is selling their goods to a retailer to stock in their store. It will include clauses that outline the responsibilities of the wholesaler and the retailer, payment terms, and any other relevant language.
• Service Provider/Retailer Consignment Agreement Form: This form is used when a service provider is providing services to a retailer for a fee. It will include clauses that outline the responsibilities of the service provider and the retailer, payment terms, and any other relevant language.
• Manufacturer/Distributor Consignment Agreement Form: This form is used when a manufacturer is selling their goods to a distributor to sell to other retailers or businesses. It will include clauses that outline the responsibilities of the manufacturer and the distributor, payment terms, and any other relevant language.

You will know when you can check this off your list and move on to the next step when you have written out all the details of the different types of consignment agreement forms and what clauses they will include.

Manufacturer/retailer

• Create fields for the agreement that both parties must agree to, such as the date of the agreement, a description of the products to be sold on consignment, the duration of the agreement, and the terms of payment.
• Fill out the fields with the appropriate information from both parties.
• Identify the roles and responsibilities of both the manufacturer/retailer and the consignee.
• Include a signature line for both parties to sign the agreement.
• Once all of the above is complete, you can move on to the next step.

Manufacturer/distributor

• Create a document that outlines the agreement between manufacturer/distributor.
• Include the details of the products being sold, the payment terms and conditions, and the responsibilities of both parties.
• Make sure that both parties agree to the terms and conditions and sign the document.
• You will know when you have completed this step when both parties have signed the document.

Retailer/distributor

• Gather information about the retailer/distributor, such as contact information and payment terms
• Draft a consignment agreement form that outlines the terms of the agreement and includes all relevant information
• Include details such as a description of the products to be sold on consignment, the payment terms and the responsibilities of both parties
• Discuss the agreement with the retailer/distributor and make any necessary revisions
• Once both parties have signed the agreement, it is considered legally binding and can be used in a court of law
• Check off this step and move on to the next step of providing guidance on how to structure the agreement.

Provide guidance on how to structure the agreement

• Start by introducing the parties involved in the agreement.
• Outline the terms of the agreement, including the duration of the agreement and the roles of each party.
• Describe the merchandise that is subject to the agreement and the terms of sale for the merchandise.
• Include any restrictions or obligations applicable to either party.
• Specify how disputes will be handled.
• Include a clause for confidentiality, if applicable.
• Clearly define the rights of each party in the agreement.
• Include a section for signatures and dates.

You’ll know that you have completed this step when you have included all of the above points in the written agreement form.

Specify payment terms

• Outline the payment terms in the form, such as when payment will be due, what forms of payment will be accepted, and any late fees that may be charged.
• Make sure to specify whether the payment will be made to the consignor or the consignment shop.
• Include a signature line to indicate that the payment terms have been agreed upon and accepted.

You can check this off your list and move on to the next step when the payment terms have been outlined and agreed upon.

Establish inventory control

• Create a record of all items to be included in the consignment agreement and their associated values
• Develop a system to track sell-through rates for each item
• Establish a system to monitor and report inventory levels on a regular basis
• Determine and document the procedure for replenishing inventory
• Once these steps are complete, the inventory control system is established and ready for use.

Define responsibilities

• Determine who will be responsible for keeping track of the items that are part of the consignment agreement
• Establish who will be responsible for restocking the inventory
• Establish who will be responsible for collecting payment for items sold
• Establish who will be responsible for maintaining the inventory in an orderly fashion
• Once all the responsibilities have been determined and agreed upon, the next step is to explain how to determine the consignment percentage.

Explain how to determine the consignment percentage

• Determine what percentage of the sale price you will receive as the consignor: This will depend on the agreement between yourself and the consignee. Generally, the consignor will receive 40-50% of the sale price.
• Decide who will pay the costs of labor associated with preparing and selling the items: The consignor and the consignee may agree to split any associated costs.
• Specify in the agreement who will pay shipping and other associated costs: The consignor and consignee may decide to split the costs or the consignee may agree to pay all associated costs.
• Once you and the consignee have agreed upon the consignment percentage and who will pay for associated costs, you can check this off your list and move on to the next step – calculating the consignor’s cost of goods.

Calculate the consignor’s cost of goods

• Calculate the cost of goods to the consignor, which is the cost to purchase the items plus any additional costs associated with preparing the items for sale
• This will be the basis for determining what percentage of the sale price the consignor will receive
• Verify the cost of goods by obtaining invoices, receipts, or other proof of purchase
• Once the cost of goods is determined and verified, you can move on to the next step of determining the selling price

Determine the selling price

• Research the market value of similar items to determine the appropriate price for the item being consigned
• Consider the consignor’s cost of goods and the markup that should be applied to the item
• Negotiate a fair and reasonable selling price with the consignee
• Record the agreed-upon selling price in the consignment agreement form
• Once the selling price has been determined and recorded, move on to the next step of estimating the expected sales volume

Estimate the expected sales volume

• Gather past sales data or research current market trends
• Estimate the expected sales volume based on this data
• Use the estimated sales volume to determine the number of consignment agreements needed
• When you have the estimated sales volume and the number of agreements needed, you can move on to the next step of explaining what types of payment should be included in the agreement.

Explain what types of payment should be included in the agreement

• Determine what payment types you will accept in the consignment agreement form.
• Make sure to include cash payments, credit card/debit card payments, and any other payment methods you will accept.
• Be sure to state any applicable payment processing fees that may be added to the total cost of the sale.
• When you have listed all of the payment types that you will accept in the consignment agreement form, you can move on to the next step.

Cash payments

• Identify the type of cash payments that will be accepted
• Specify if payment must be made in full or in installments
• State when and where payment should be made
• Include the amount of cash payments
• List any applicable taxes and fees
• Outline any potential penalties for late payments
• Note any applicable interest rates

When you have all the information listed above, you can check this step off your list and move on to the next step, which is ### Consignor payments.

Consignor payments

• Gather information from the consignor, such as their name, address, and contact information.
• Create a section in the consignment agreement form that specifies the payment terms of the consignment agreement.
• Make sure to include the percentage or amount of the commission that will be paid to the consignor.
• Add a clause that specifies when the consignor will be paid (e.g., when the consigned item is sold).
• Include a signature line for the consignor to indicate that they agree to the terms of the consignment agreement.

When you have gathered all the information and included it in the consignment agreement form, you can check this off your list and move on to the next step of the guide, which is ### Commission payments.

Commission payments

• Determine the percentage of commission owed to the consignee
• Decide when the consignee will be paid
• Specify how the consignee will receive their commission payments
• Include any other terms or conditions related to commission payments
• Draft these terms and conditions into the consignment agreement form
• Have all parties involved sign the consignment agreement form
• When all parties have signed the form, the commission payment section is complete and you can move on to the next step of describing the process for setting up the consignment agreement.

Describe the process for setting up a consignment agreement

• Create an outline of the items to be included in the consignment agreement, such as the items being consigned, the length of the agreement, the payment terms, and any other important details.
• Research local and state laws to ensure the agreement meets all applicable regulations.
• Draft the consignment agreement and review it with the other party to ensure all details are accurate and agreed upon.
• Sign and date the agreement.
• Make copies of the agreement for each party and keep a copy for your records.

Once these steps are completed, you can move on to the next step: Identify the parties involved.

Identify the parties involved

• Create a list of the parties involved in the consignment agreement, such as the consignor, consignee, and any other third parties
• Ensure the list is complete, including all relevant contact information
• Check that the list is up-to-date and accurate
• Once the list is complete, check this off the list and move on to the next step: drafting the agreement

Draft the agreement

• Outline the terms of the agreement in a concise and clear manner, including any legal terms or jargon that is necessary
• Identify when the agreement takes effect and when it ends
• Determine who is responsible for any taxes or fees associated with the consignment
• Specify how payment will be made, including when payment is due and how any disputes will be handled
• Outline the responsibilities of both parties and any penalties for noncompliance
• Include any other specific terms that are relevant to the agreement
• Have the parties sign and date the agreement

You’ll know you’ve completed this step when you have a complete agreement form with all of the relevant terms outlined and have had the parties sign and date it.

Negotiate the terms

• Clarify the terms of the agreement with both parties involved
• Discuss the terms of payment, delivery, and return policies
• Make sure both parties understand the terms and any other relevant details
• Reach an agreement that both parties are happy with
• When both parties have agreed on the terms, you can move on to the next step of signing the agreement.

Sign the agreement

• Have both parties sign the consignment agreement form
• Make sure to keep a copy of the signed agreement for your records
• Check off this step when both parties have signed the agreement form and you have a copy of the signed form.

Provide tips for negotiating a consignment agreement

• Make sure to clearly define the length of the agreement and the terms of the agreement.
• Establish a payment structure that is fair for both parties.
• Discuss the terms of the agreement such as who is responsible for taxes, shipping, and other expenses.
• Determine how the consignor will be paid and when payments will be made.
• Decide what happens with the unsold merchandise and how any returns or refunds will be handled.
• Specify how the consignee will promote and market the consigned items.

You will know that you can check this off your list when you and the other party agree to the terms and sign the agreement.

Clarify the responsibilities of each party

• Clearly define the roles of the consignee and consignor in the agreement
• Outline the responsibilities of each party, such as who is responsible for the storage, transportation, and sale of the merchandise
• Specify who will be responsible for any losses or damages that may occur
• Make sure that the responsibilities of both parties are stated in the agreement in writing
• Once you have clarified the responsibilities of each party, you can check this step off your list and move on to the next step.

Set clear pricing guidelines

• Determine the cost of goods, services, and other costs associated with the agreement.
• Include any applicable taxes, shipping costs, and handling fees.
• Agree on a fair price that is acceptable to both parties.
• Specify how the payment will be made (e.g., cash, check, credit card, etc.).
• Decide on a payment schedule (e.g., upfront, installments, etc.)
• Include any additional fees or discounts that may apply.
• Once the pricing guidelines are set, document them in the agreement.

How you’ll know when you can check this off your list and move on to the next step:

• Once you have determined the cost of goods, services, and other costs associated with the agreement, settled on a fair price, and specified the payment terms, you have completed this step.

Define payment terms

• Agree upon payment method and schedule
• Outline payment amounts and due dates
• Specify payment penalties in case of late payment
• Decide on payment acceptance methods (e.g. cash, check, online)
• Include any additional charges to the customer
• Once all payment terms have been determined and agreed upon, check this step off your list and move on to the next step.

Specify inventory control measures

• Outline the system used for tracking consigned items
• Note the responsibilities of the consignor and consignee for monitoring the inventory levels
• Establish the process for tracking sales and returns of consigned items
• Define the process for ordering and replenishing inventory
• Determine the method for tracking consignment inventory and sales
• Specify the procedure for returning unsold items
• When applicable, agree on the process for splitting the proceeds of any consigned items that are sold

Once all the inventory control measures are specified, you can check this off your list and move on to the next step.

Explain the legal considerations for a consignment agreement

• Understand the differences between your state’s laws and regulations when creating a consignment agreement.
• Consider the legal implications of the agreement, such as who is responsible for the products and how they should be handled.
• Research the applicable laws and regulations in your area to ensure your agreement is legally compliant.
• Consult a lawyer if you need help understanding the legal implications of the agreement.
• When you feel confident that you understand the legal considerations of the consignment agreement, you can move on to the next step.

Ensure compliance with state and federal laws

• Research the applicable state and federal laws that govern the consignment agreement.
• Ensure the consignment agreement is compliant with all of the relevant laws.
• Identify and address any areas of non-compliance to ensure the agreement is valid.
• Once you have completed this step, you can be confident that the agreement is compliant with state and federal laws.

Specify any applicable taxes

• Identify the applicable state and federal taxes
• Determine whether any of the taxes are applicable to the consignment agreement form
• Consult a tax specialist or attorney to make sure your consignment agreement form complies with the applicable taxes
• Include a section in the agreement form that explains the applicable taxes
• Update the agreement form as necessary if any applicable taxes change

When you have identified the applicable taxes, conducted research to determine which are applicable to the consignment agreement form, consulted with a specialist or attorney, and included a section in the agreement form explaining the applicable taxes, you can check off this step and move on to the next step.

Provide a sample consignment agreement form

• Obtain a sample consignment agreement form from a reliable source such as an online template or a local legal professional
• Make adjustments to the form to make sure that it meets the specific needs of your consignment business
• Include relevant details such as the names of the parties involved, the items being consigned, the price of each item, and how the consignment fee will be split
• Specify any applicable taxes, delivery terms, payment terms, and any other relevant information
• Make sure that the form is legally binding and that both parties agree to its terms
• You will know that you have completed this step when you have a customized consignment agreement form that is ready to be signed by both parties.

Outline the terms

• Decide on the terms of the agreement such as the length of the agreement, the amount of time the consignor has to pick up unsold items, and the consignee’s liability for damages or losses
• Decide on the commission rate the consignee will receive for selling items
• Specify any restrictions the consignee has, such as not selling items below a certain price or using certain advertising techniques
• Specify any restrictions the consignor has, such as no refunds or exchanges, or requiring a minimum sale price
• Specify the responsibilities of the consignee and consignor, such as the consignee must provide a secure location for the items and the consignor must deliver items in a timely manner
• Specify the payment terms, such as when the consignee will receive payment and how much they will receive
• Specify any other terms and conditions you would like to include

Once you have outlined all the terms of the agreement, you can move on to the next step which is Establishing Payment Terms.

Establish payment terms

• List out the payment terms and conditions, such as when payment is due, the payment method, and any applicable late fees.
• Establish a payment plan if the consignment agreement is for a large purchase.
• Include whether or not the buyer needs to provide a deposit before the item is shipped.
• Specify the acceptable payment methods, such as cash, check, or credit card.
• When you have all the payment terms established and listed, you can mark this step as complete and move on to the next step.

Include all necessary legal clauses

• Research the applicable laws and regulations for consignment agreements in your jurisdiction to ensure your form is compliant
• Make sure the form includes language that releases you from responsibility for any damages incurred to the consigned property
• Include language clearly stating who owns the consigned property, their rights and responsibilities, and the length of time the agreement is in effect
• Include a clause that states the consignor must provide insurance for the property while it is in their possession
• Include a clause that states the consignor must provide written notice if they need to terminate the agreement
• Once you have included all of the necessary legal clauses, review the form to make sure it is accurate and compliant with your jurisdiction’s laws and regulations.

Once you have included all of the necessary legal clauses and reviewed the form to make sure it is accurate and compliant, you can check this step off your list and move on to the next step.

FAQ:

Q: What is a consignment agreement?

Asked by Emma on 11th January 2022.
A: A consignment agreement is a legal document that establishes a business relationship between two parties - the consignor, who owns the goods and the consignee, who will sell the goods for a commission. It sets out the terms of the agreement such as the commission rate, the payment terms, and the type of goods being sold. It also outlines any additional responsibilities of either party, such as storage, insurance, and delivery.

Q: What are the legal requirements for a consignment agreement?

Asked by William on 19th June 2022.
A: The legal requirements for a consignment agreement vary depending on your jurisdiction and industry. Generally speaking, a consignment agreement should be written in clear and unambiguous language that outlines the rights and obligations of both parties. It should also include all relevant information about the goods being consigned, such as description, quantity, condition, price, and any applicable warranties or guarantees. Finally, it should be signed by both parties.

Q: What types of disputes can arise from a consignment agreement?

Asked by John on 2nd April 2022.
A: Disputes can arise in many forms when it comes to a consignment agreement. Generally speaking, disputes can arise due to disagreements over payment terms, delivery times, quality issues with the goods being sold, or breach of contract claims. If a dispute arises, it is important to address it quickly and professionally in order to avoid any further issues.

Q: Can I create a consignment agreement form online?

Asked by Olivia on 18th August 2022.
A: Yes! There are many online resources available that can help you create a customised consignment agreement form quickly and easily. You can find templates and guidance on how to fill in the form correctly for your individual needs. There are also services that offer assistance with creating tailored documents for specific jurisdictions or industries if needed.

Q: Is there a difference between UK and US laws regarding consignment agreements?

Asked by Noah on 8th November 2022.
A: Yes there are some differences between UK and US laws when it comes to consignment agreements. In the UK there are specific requirements around disclosure of information about goods being sold which must be included in any written agreement between parties. The US requires certain provisions such as indemnity clauses to be included in all contracts related to goods being sold by one party to another.

Q: What happens if I breach my consignment agreement?

Asked by Emma on 30th March 2022.
A: A breach of contract will depend on how serious it is and whether any damage has been caused to either party as a result of that breach. Generally speaking, if either party fails to fulfil their obligations under the terms of the contract then they may face legal action from the other party or be required to reimburse them for any losses incurred as a result of the breach.

Example dispute

Suing a Business for Breach of Consignment Agreement

• The plaintiff must prove that the agreement was in effect and that the defendant did not live up to their obligations as stated in the agreement.
• The plaintiff must provide copies of the consignment agreement form as evidence of the contract and the defendant’s breach of its terms.
• The plaintiff must prove that the defendant’s breach of the contract caused the plaintiff to suffer damages.
• The plaintiff may be entitled to the return of any goods or payments that were consigned, as well as any profits that the defendant may have earned from the consigned goods.
• The plaintiff may also be able to recover any damages that they suffered as a result of the breach, such as lost sales or profits, or any costs related to the breach.
• The plaintiff may also be able to seek punitive damages, depending on the specific facts of the case.
• If the parties cannot reach an agreement, the plaintiff may need to take the matter to court and ask the court to award them the damages owed.

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