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Free Consignment Agreement Template
What Is a Consignment Agreement?
Copy section linkA consignment agreement is a contract under which the owner of goods gives another person or business possession of those goods for sale. The owner, called the consignor, usually retains title until an item is sold to a customer. The seller, called the consignee, displays or markets the goods and receives an agreed commission or consignment fee after a sale.
Unlike a direct purchase, consignment does not require the consignee to buy the inventory before offering it to customers. This arrangement is common among retailers, manufacturers, artists, galleries, antique dealers, and other businesses that want to test or expand product distribution.
A written consignment contract should explain how the goods may be priced and sold, when proceeds must be transferred, who bears the risk of loss, and how unsold inventory will be returned. It operates within contract and business law, while qualifying commercial consignments may also be subject to state versions of Uniform Commercial Code Article 9.
When to Use a Consignment Agreement
Copy section linkA consignment agreement form may be useful when:
An artist places artwork with a gallery for display and sale.
A clothing designer supplies products to a boutique without requiring an upfront purchase.
A manufacturer allows a retailer to test customer demand for new products.
An owner places antiques, collectibles, furniture, or equipment with a dealer.
A supplier delivers inventory that the consignee will pay for only after it sells.
An LLC or another business uses a retail store or online seller to reach more customers.
The parties need written rules for pricing, discounts, commission, insurance, sales reports, and unsold inventory.
When not to use this form
Use a Purchase Agreement Template or Sales Contract Template when a buyer purchases the goods and takes ownership directly.
Use a Commission Agreement Template when an agent helps generate sales but does not take possession of the inventory.
Use a Supplier Agreement Template when one business regularly purchases products from another for resale.
Use a Bill of Lading Template when the main purpose is to document the transportation and receipt of goods.
Parties to a Consignment Agreement
Copy section linkConsignor: The person or business that owns the goods and delivers them to the consignee for sale.
Consignee: The person or business that receives, stores, displays, and sells the goods under the agreed conditions.
Authorized representative: A person signing for a corporation, LLC, partnership, or another legal entity.
Witness or notary, if used: A person who observes or verifies a signature but does not become a party to the consignment contract.
Both parties should use their complete legal names and addresses. A representative signing for a company should also state their title and confirm that they have authority to enter into the agreement.
Key Components of a Consignment Agreement
Copy section linkThe critical elements of a consignment contract template include:
Effective date and party information: Identifies when the agreement begins and who is responsible for performing it.
Consigned items: Describes the goods by type, quantity, condition, serial number, model, or other identifying information.
Ownership and liens: Confirms that the consignor owns the goods and discloses any security interest, lien, judgment, or other claim affecting them.
Right to sell: States whether the consignee’s authority is exclusive or non-exclusive and where the goods may be marketed.
Pricing and minimum price: Explains who may set or change the retail price and the lowest price the consignee may accept.
Consignment fee: Sets the amount the consignee may retain and explains whether it is a percentage, fixed amount, or difference between the sale price and minimum price.
Sales proceeds: Defines the money received from customers and the deductions permitted before payment to the consignor.
Payment and reporting: Sets payment deadlines and requires reports showing sale dates, prices, fees, refunds, and amounts due.
Delivery and return conditions: Allocates freight costs and explains where, when, and in what condition goods must be delivered or returned.
Records and inspection: Requires accurate inventory and sales records and gives the consignor the right to review them.
Title retention: States that ownership remains with the consignor until the goods are sold, subject to applicable commercial law.
Risk of loss and insurance: Identifies who is responsible for theft, damage, destruction, or loss while the consignee controls the goods.
Product condition and defects: Covers quality standards, existing defects, customer complaints, replacement procedures, and supporting evidence.
Indemnification and liability: Allocates responsibility for third-party claims and may limit the types or amount of damages recoverable.
Tax and employment responsibilities: States who handles sales tax and confirms responsibility for the consignee’s employees, wages, insurance, and payroll obligations.
Default and remedies: Explains what constitutes a breach, how notice must be given, and how long the defaulting party has to correct it.
Term and termination: Sets the agreement’s duration and the notice required to end it early.
Governing law and disputes: Identifies the state law and courts that will govern the agreement.
Force majeure and standard clauses: Addresses events outside the parties’ control, severability, amendments, the entire agreement, and successors.
Signatures and payment details: Records the parties’ approval and the information needed to transfer sales proceeds.
Key Terms
Copy section linkConsignor: The person or business that owns and delivers the goods for consignment.
Consignee: The person or business that receives the goods and offers them for sale.
Title retention: The consignor’s continued ownership of the goods until a sale or another agreed event occurs.
Minimum price: The lowest amount for which the consignee may sell an item without further approval.
Consignment fee: The amount the consignee earns for displaying, marketing, and selling the goods.
Sales proceeds: The money collected from customers for sold consigned items.
Risk of loss: Responsibility for the financial consequences of goods being stolen, lost, damaged, or destroyed.
Default and cure period: A breach of the agreement and the time given to correct it after written notice.
Indemnification: A promise by one party to cover specified claims, losses, or liabilities incurred by the other.
UCC Article 9: State-enacted commercial law that may apply to certain consignments and affect the rights of consignors, consignees, creditors, and purchasers.
How to Fill Out a Consignment Agreement
Copy section link- Enter the effective date. State the date on which the agreement will begin.
- Identify both parties. Add the complete legal name and address of the consignor and consignee. Include the entity type and representative’s title when either party is a business.
- Describe the consigned items. List each item or product category and include quantities, condition, identifying numbers, and other details needed to distinguish the goods.
- Confirm ownership. Verify that the consignor has the right to consign the goods and disclose any liens or third-party claims.
- Define the right to sell. Review whether the consignee will have exclusive selling rights. Change the clause if the arrangement should be non-exclusive or limited to a particular store, platform, territory, or customer group.
- Set the pricing rules. Enter the minimum price and decide whether the consignee may set retail prices, offer discounts, or sell below the minimum with written approval.
- Add the fee formula. This consignment form calculates the consignee’s fee as the difference between the sale price and the minimum price. Revise the clause if the parties prefer a percentage or fixed fee.
- Set payment and reporting deadlines. Enter the number of days the consignee has to transfer proceeds and confirm how often sales reports must be provided.
- Allocate delivery and return costs. State who pays for shipping, packaging, storage, and the return of unsold or defective goods.
- Set recordkeeping requirements. Require the consignee to maintain accurate records of inventory, sales, fees, returns, and customer payments.
- Review the title provision. Confirm that ownership remains with the consignor until sale, while considering the potential application of UCC Article 9.
- Assign insurance and risk of loss. State who must insure the goods, the required coverage amount, and when responsibility begins and ends.
- Describe defect procedures. Explain how defects must be reported, documented, inspected, returned, and replaced.
- Review indemnity and liability limits. Decide which claims each party will cover and complete any blank period used to calculate the liability cap.
- Confirm tax responsibilities. Do not assume that the consignor always collects and remits sales tax. Check the rules of the state where sales occur and revise the clause when necessary.
- Enter the cure period. State how many days the consignee has to correct a default after receiving written notice.
- Set the term and termination notice. Add the end date or contract duration and the number of days’ notice required for early termination.
- Choose the governing state. Enter the state whose law will apply and the state where disputes will be heard.
- Review force majeure and standard terms. Confirm that the miscellaneous provisions reflect the parties’ expectations and that any amendment must be made in writing.
- Sign the agreement. Both parties should review and sign the consignment contract before the goods are delivered. Each party should retain a completed copy.
- Add payment information carefully. Enter only the banking details needed to transfer proceeds and store the signed document securely.
Consignment Agreement Example
A handbag designer delivers 50 bags to a boutique for 90 days. The agreement states that the designer retains ownership until each bag is sold, the minimum price is $80, and the boutique may keep 30% of the sale price. The boutique must provide weekly sales reports, transfer the designer’s share within 10 days of each sale, insure the inventory while it is in the store, and return all unsold bags when the agreement ends.
These terms allow the boutique to offer the products without buying the inventory upfront while giving the designer control over pricing, payment, and the return of unsold goods.
Benefits of Using a Consignment Agreement Template
Copy section linkA consignment agreement template helps the parties:
- Record which goods have been transferred and their condition.
- Separate physical possession from legal ownership.
- Establish minimum prices, discount authority, and commission terms.
- Set deadlines for reports and payments.
- Allocate storage, shipping, insurance, and risk of loss.
- Create procedures for defective and unsold inventory.
- Explain the consequences of nonpayment or another default.
- Maintain consistent records for customers, accounting, and tax reporting.
A consignment form template provides a practical starting structure, but the parties should still adapt its terms to their products, business model, and state law.
Legal Considerations Before Signing
Copy section linkUCC Article 9 and creditor rights
Not every consignment falls within Article 9. The UCC § 9-102 definition of consignment applies only when specific conditions are met, including conditions related to the consignee’s business, the value and type of goods, and the purpose of the delivery.
For a qualifying consignment, simply stating that the consignor retains title may not provide complete protection against the consignee’s creditors. Under UCC § 9-319, a consignee may be treated as having the consignor’s rights and title while the goods are in the consignee’s possession for certain creditor and purchaser claims. A consignor may therefore need advice about filing a financing statement or taking other steps to protect priority. Revised Article 9 has been adopted in every state, but enacted language and filing procedures may differ.
State-specific consignment laws
The template can be used as an all-states starting point, but state law should be checked before signing. State-specific issues commonly involve UCC filings, sales tax, secondhand-dealer rules, regulated merchandise, and fine-art consignments.
Several states impose special protections for artists who place work with galleries or dealers. For example, New York’s art consignment law, Florida’s Artist’s Consignment Act, and Washington’s fine-art consignment rules can treat artwork or sale proceeds as trust property and impose duties that cannot necessarily be waived by contract.
The parties should also check industry-specific requirements when consigning vehicles, alcohol, firearms, precious metals, secondhand goods, or other regulated property.
Sales tax and business income
Responsibility for sales-tax registration, collection, and remittance depends on state law and how the sale is conducted. California generally treats a consignee as the retailer when it controls the item and can transfer it without further action from the owner. Washington generally requires retail consignment sellers to collect sales tax, while Minnesota places responsibility on the person collecting payment. The agreement should reflect the rule that applies where the sale occurs rather than assigning tax responsibility automatically.
Income from consignment activity may also need to be reported for federal tax purposes. A sole proprietor generally uses IRS Schedule C to report income or loss from a regularly operated business. LLCs, partnerships, and corporations may have different filing requirements.
Consignment Contracts FAQ
Copy section linkWhat are the risks of a consignment agreement?
Common risks include damage or loss of inventory, unauthorized discounts, incomplete records, delayed payments, unpaid sales proceeds, customer returns, and disputes over unsold goods. The consignor may also face creditor-priority risks if the consignee becomes insolvent and the transaction falls under UCC Article 9.
The agreement should address insurance, reporting, payment deadlines, audit rights, default remedies, and inventory return procedures.
How do you write a simple consignment agreement?
Identify the consignor and consignee, describe the goods, and state that the consignor retains ownership until sale. Add the minimum price, the consignee’s fee, payment deadline, reporting schedule, insurance obligations, return terms, contract duration, and signatures.
Even a simple consignment agreement should explain who is responsible if goods are lost, damaged, sold below the approved price, or not returned.
When does title to consigned goods transfer?
The contract usually provides that title remains with the consignor until the consignee sells the item to a customer. The consignee receives possession and authority to sell but does not ordinarily purchase the goods itself.
However, UCC Article 9 can affect how creditors and purchasers are allowed to treat qualifying consigned goods while they remain in the consignee’s possession.
Who collects sales tax on consignment sales?
The answer depends on state law and the structure of the transaction. In many retail arrangements, the consignee or the person accepting the customer’s payment must collect and remit sales tax, but the agreement should be checked against the applicable state revenue authority’s rules.
Who should insure consigned inventory?
The agreement should identify the responsible party and required coverage. This template assigns responsibility to the consignee while the goods are under its control and requires insurance sufficient to cover their fair market value.
Both parties should confirm that the policy actually covers consigned property rather than assuming it is included under general business insurance.
What happens to inventory that does not sell?
Unsold inventory is normally returned according to the agreement. The contract should state when the consignment period ends, who arranges and pays for return shipping, what condition the goods must be in, and how quickly the consignee must return them.
Goods remaining unsold do not automatically mean that the consignee has defaulted unless the contract establishes a specific sales obligation or target.
Does a consignment agreement need to be notarized?
This template does not impose a universal notarization requirement. The parties may choose notarization to verify signatures, while state law, the type of property, or a regulated transaction may require additional formalities.
A witness or notary verifies signing but does not replace the need for complete and accurate contract terms.
Is a consignment agreement legally binding?
Consignment contracts can be legally binding when the parties have legal capacity, agree to clear terms, exchange valid consideration, and sign the document with the intention of being bound. The agreement must also have a lawful purpose and comply with applicable state and federal law.
This template is intended for general use across all 50 U.S. states+DC. Local procedures — such as notarization, witnessing, or filing requirements — may still apply, so check your state's specific rules before signing.
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