Consignment Inventory Agreement Template for Indonesia

A Consignment Inventory Agreement is a specialized commercial contract under Indonesian law that allows you to establish a business relationship where goods are placed with another party for sale while you retain ownership until the final sale occurs. This arrangement provides significant flexibility for businesses looking to expand their distribution network or retail presence without the financial burden of outright inventory purchases.

When do you need this document?

You need this agreement when establishing consignment relationships in Indonesia's commercial marketplace. Manufacturers commonly use these agreements when placing products with retailers or distributors, allowing broader market penetration without requiring immediate payment. Wholesalers benefit when working with smaller retailers who cannot afford large inventory investments upfront. The agreement is also essential for trading companies seeking to expand their product lines through consignment arrangements, and for retail chains wanting to offer new products without purchase risk. E-commerce businesses increasingly use consignment models to diversify their offerings while maintaining lean inventory structures.

Key legal considerations

Your consignment agreement must clearly define ownership rights, as the consignor retains legal title to goods until sale completion. Commission structures and payment terms require precise definition to avoid disputes, including when payments become due and how unsold inventory is handled. Risk allocation clauses are crucial, determining liability for damaged, lost, or stolen goods during the consignment period. You must address insurance requirements, storage conditions, and handling procedures to protect both parties' interests. The agreement should specify termination procedures, including return of unsold inventory and final accounting settlements. Record-keeping obligations must be clearly outlined, ensuring proper tracking of inventory movements and sales reporting.

Legal requirements in Indonesia

Under Indonesian Civil Code (KUHPerdata), your consignment agreement must meet standard contract formation requirements including clear offer, acceptance, and consideration. Law No. 7 of 2014 on Trade governs commercial relationships and may impose specific obligations on trading activities within your consignment arrangement. If your consignment involves electronic sales platforms, Government Regulation No. 80 of 2019 may apply additional compliance requirements. Consumer protection obligations under Law No. 8 of 1999 become relevant when consigned goods reach end consumers, requiring attention to product quality and safety standards. Tax implications under Law No. 36 of 2008 on Income Tax must be considered, as consignment sales may create specific tax obligations for both parties. The agreement should address these regulatory requirements while ensuring enforceability under Indonesian courts and commercial dispute resolution mechanisms.