A consignment is the process of consigning or the act of giving another person the custody to care or sell merchandise or products while still retaining legal ownership of the goods until they are sold. A consignment is usually done for the purpose of displaying goods in a store to be sold, moving merchandise out for auction, or having them shipped.
A Consignment Agreement is a legally binding and written document that is supplied in the event when a consignor provides goods to a consignee for the purposes of having them sell the merchandise or the products. You can download and use our Consignment Agreement Forms, which are easily accessible and help in alleviating the tedious process of having to whip one up from scratch.
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Why We Need a Consignment Agreement
Like all other General Agreement Forms, a Consignment Agreement is especially useful in providing tangible proof of evidence relating to the terms and conditions of the consignment. In a consignment arrangement, the consignee acts as the supplier for the consignor in order to provide goods to be sold to consumers. A Consignment Agreement helps to outline the fact that the goods remain to be the consignor’s legal property regardless of whether or not they are in the consignee’s possession. As soon as the merchandise is sold, the consumer then becomes the rightful owner of the product instead of the consignor.
Another important reason for having a Consignment Agreement is for both the consignor and the consignee to maintain peaceful relations while conducting business together. A Consignment Agreement generally draws up the terms and conditions that both parties need to abide by, such as the division of sales. Some consignees demand for a sixty-forty division of proceeds, other at fifty-fifty. The division of sale percentage will typically depend on the negotiations between the consignor and the consignee.
The Necessary Details in a Consignment Agreement
Issue a Time Frame
Providing a time frame in your Consignment Agreement will help benefit both the consignor and consignee. A time frame will allow the consignee to return the consigned items back to the consignor if they do not sell so as not to overburden the store with items that are stagnant, and so that the consignor can move the items to a different consignee who can market and sell the items quicker.
Set Up Terms for Unsold Merchandise
Most unsold merchandise are typically returned to the consignor while others are donated to charity. Be sure to properly outline the terms for any product that remains unsold after the specified time frame.
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Determine the Sale Price and the Division of Sales
The selling price of the item is usually determined by the consignee, although some items may be afforded value by an appraiser. Several factors such as the brand, the style, and the condition of a merchandise are usually considered in order for a consignee to name its value. Since consignees are the ones who usually have to bear the cost for rent and utilities, a bigger percentage of the sale is usually given to the consignee.
A Consignment Agreement is a written document that makes sure that your interests are protected. Steer clear of any legal disputes and miscommunication down the road. Be sure to have a written contract that properly outlines what you have agreed on. Download our sample agreement templates and Partnership Agreement Forms now.
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