Consignment Contract Template for Indonesia

A Consignment Contract is a specialized commercial agreement that allows you to place your products with retailers or dealers while maintaining ownership until the goods are sold to end customers. Under Indonesian law, this arrangement provides significant advantages for businesses seeking to expand distribution channels without immediate payment requirements or ownership transfer risks.

When do you need this document?

You need a Consignment Contract when establishing retail partnerships where you want to maintain control over your inventory and pricing. This is particularly common in luxury goods retail, where manufacturers place expensive items like jewelry, watches, or designer clothing in retail stores. The arrangement is also popular in automotive dealerships, where manufacturers consign vehicles to dealers, and in art galleries where artists or collectors place artworks for sale. Additionally, many businesses use consignment arrangements for seasonal products, new product launches, or when entering new geographic markets where they want to test demand before committing to wholesale transactions.

Key legal considerations

Your Consignment Contract must clearly define the relationship between parties to avoid disputes and ensure legal compliance. The agreement should specify commission rates, payment terms for sales proceeds, and detailed inventory management procedures. Risk allocation clauses are critical, determining who bears responsibility for theft, damage, or loss of consigned goods. You must include provisions for regular reporting of sales activity and inventory levels. The contract should address termination procedures, including how unsold goods will be returned and any associated costs. Insurance requirements and liability limitations must be clearly stated to protect both parties' interests.

Legal requirements in Indonesia

Under Indonesian Civil Code (KUHPerdata), your Consignment Contract must meet fundamental contract formation requirements including clear offer and acceptance, consideration, and lawful purpose. The Indonesian Commercial Code (KUHD) governs the commercial aspects of your consignment arrangement, particularly regarding trade practices and business relationship obligations. Law No. 7 of 2014 on Trade regulates distribution activities and may impose specific requirements on your consignment arrangement. If your consignment involves electronic systems or e-commerce platforms, Government Regulation No. 80 of 2019 may apply additional compliance requirements. Consumer protection provisions under Law No. 8 of 1999 must be considered, especially when consigned goods are sold to end consumers, ensuring proper disclosure and warranty protections are maintained throughout the distribution chain.