Simple Consignment Agreement Template for the United States

A Simple Consignment Agreement is a crucial legal document that governs the relationship between a consignor (the party who owns goods) and a consignee (the party who sells those goods on behalf of the owner). Under this arrangement, you retain ownership of your products while allowing another party to display and sell them, typically in exchange for a commission on each sale.

When do you need this document?

You need a Simple Consignment Agreement when entering into any arrangement where goods are placed with a third party for sale while you maintain ownership. This commonly occurs in retail settings where artists place artwork in galleries, craftspeople display products in boutique stores, or manufacturers place inventory with retailers without requiring upfront payment. The agreement is essential when you want to expand your market reach without the consignee having to purchase inventory upfront, making it an attractive option for both new and established businesses looking to test new markets or products.

Key legal considerations

Several critical legal elements must be addressed in your consignment agreement to protect your interests. Title and ownership provisions are paramount, as you need to clearly establish that you retain ownership of the goods until they are sold to end consumers. Commission structure and payment terms must be explicitly defined, including when payments are due and how unsold inventory is handled. Risk allocation is another crucial consideration, determining who bears responsibility for damage, theft, or loss of consigned goods. You should also include provisions for insurance coverage, inventory tracking, and the consignee's obligations regarding proper care and storage of your products. Termination clauses are essential, outlining how the relationship can be ended and what happens to unsold inventory upon termination.

Legal requirements in United States

Under United States law, consignment agreements are primarily governed by the Uniform Commercial Code (UCC), particularly Articles 2 and 9, which address sales and secured transactions respectively. The UCC requires that consignment arrangements be clearly documented to establish the consignor's superior claim to the goods over the consignee's creditors. To ensure enforceability, your agreement must comply with state-specific variations of the UCC, as each state may have different implementation requirements. Federal Trade Commission regulations may apply if the arrangement involves consumer protection issues, while bankruptcy laws protect consignors' interests if the consignee becomes insolvent. Tax considerations are also significant, as the IRS and state tax authorities have specific rules regarding consignment income recognition and sales tax collection responsibilities. Your agreement should address these compliance requirements and specify which party is responsible for various tax obligations to avoid future disputes.