Consignment Agreement Template for Canada

A Consignment Agreement is a specialized commercial contract that allows you to place your goods with a retailer or seller without transferring ownership until the items are actually sold to end customers. Under Canadian law, this arrangement provides significant advantages for inventory management and market expansion while maintaining your ownership rights and reducing financial risk for the consignee.

When do you need this document?

You need a Consignment Agreement when you want to expand your market reach without selling goods outright to retailers. This is particularly valuable for artists selling through galleries, manufacturers placing products in retail stores, or wholesalers testing new markets. The agreement is essential when you want to maintain ownership of goods while allowing another party to display and sell them, or when you're entering into arrangements where payment only occurs after the final sale to consumers. It's also crucial when working with boutique retailers who prefer not to purchase inventory upfront, or when launching new products where market demand is uncertain.

Key legal considerations

Several critical legal elements must be addressed in your Consignment Agreement to ensure enforceability and protection under Canadian law. The agreement must clearly establish that title remains with you as the consignor until final sale, protecting your ownership rights if the consignee becomes insolvent. Commission structures and payment terms need precise definition, including when payments are due and how unsold goods are handled. Risk allocation clauses should specify who bears responsibility for loss, damage, or theft of goods while in the consignee's possession. The agreement must also address insurance requirements, proper record-keeping obligations, and termination procedures including the return of unsold inventory.

Legal requirements in Canada

Canadian consignment agreements must comply with multiple layers of federal and provincial legislation. Under the Personal Property Security Act (PPSA), you may need to register your security interest in the consigned goods to protect against the consignee's creditors. The Sale of Goods Act governs the fundamental aspects of the transaction and the parties' rights and obligations. For tax purposes, the Excise Tax Act requires proper GST/HST handling, with specific rules about who collects and remits these taxes in consignment sales. The Income Tax Act also has implications for how consignment income is reported and when it's recognized. If goods are sold to consumers, provincial Consumer Protection Acts may apply, requiring specific disclosures and consumer rights protections. Additionally, if warehousing is involved, the Warehouse Receipts Act may govern storage arrangements and the rights of parties holding goods.