Consignment Agreement Template for India

A consignment agreement is a commercial contract where goods are delivered to a consignee for sale while the consignor retains legal ownership until the goods are sold to end customers. Under Indian law, this arrangement creates a principal-agent relationship governed by specific statutory provisions and requires careful documentation to protect both parties' interests.

When do you need this document?

You need a consignment agreement when establishing retail partnerships where manufacturers place products in stores without immediate payment, when setting up distribution networks for new market penetration, or when suppliers want to maintain inventory control while expanding reach. This document is essential for fashion retailers receiving seasonal collections, electronics manufacturers placing products with dealers, or pharmaceutical companies distributing through medical stores. The agreement becomes particularly important when dealing with high-value goods, perishable items, or products requiring specialized handling and storage conditions.

Key legal considerations

The agreement must clearly establish that title remains with the consignor until sale occurs, preventing premature transfer of ownership and associated liabilities. Commission structure and payment terms require precise definition to avoid disputes, including timing of payments and calculation methods for consignee compensation. Risk allocation clauses must specify responsibility for damage, theft, or deterioration during the consignment period, typically placing such risks with the consignee upon receipt. Return provisions should address unsold inventory, including conditions for return, transportation costs, and time limits. The contract should include detailed reporting requirements, specifying frequency and format of sales reports, inventory updates, and financial reconciliations to maintain transparency and control.

Legal requirements in India

Under the Indian Contract Act 1872, consignment agreements must satisfy fundamental contract requirements including offer, acceptance, consideration, and lawful object to ensure enforceability. The Sale of Goods Act 1930 governs aspects related to delivery, acceptance, and transfer of property in goods, requiring compliance with provisions regarding bailment and agency relationships. GST regulations under the Central Goods and Services Tax Act 2017 significantly impact consignment transactions, particularly regarding input tax credit, place of supply determination, and tax liability allocation between consignor and consignee. The agreement must address GST registration requirements, invoice responsibilities, and compliance with tax filing obligations. Indian Partnership Act 1932 principles apply to the principal-agent relationship created, defining fiduciary duties and liability limits for both parties in the commercial arrangement.