Consignment Agreement Template for the Philippines

A consignment agreement is a legally binding contract that allows you to place your goods with retailers or dealers while maintaining ownership until the final sale occurs. Under Philippine law, this arrangement is governed by the Civil Code and various commercial regulations, making it essential to have a properly drafted agreement that protects your interests and ensures compliance with local requirements.

When do you need this document?

You need a consignment agreement when you want to expand your distribution network without selling inventory outright to intermediaries. This is particularly valuable for luxury goods, artwork, jewelry, fashion items, or specialized products where retailers prefer to avoid upfront investment risks. The agreement is also essential when working with boutique stores, galleries, or specialty retailers who want to test market demand before committing to purchase. Additionally, you'll need this document when establishing relationships with warehouse operators or logistics providers who will handle your consigned goods, ensuring clear responsibility for storage, handling, and security.

Key legal considerations

Your consignment agreement must clearly define the commission structure and payment terms to avoid disputes. Under Philippine law, you retain ownership of consigned goods until they're sold, but you must specify procedures for handling unsold items, including return timelines and condition requirements. The agreement should address insurance responsibilities, as goods may be damaged or stolen while in the consignee's possession. You must also establish clear reporting requirements, including sales records and inventory updates, to maintain proper control over your assets. Risk allocation clauses are crucial, defining who bears responsibility for theft, damage, or market depreciation. The contract should specify the consignee's authority limitations, preventing unauthorized discounting or promotional activities that could damage your brand.

Legal requirements in Philippines

Under the Civil Code of the Philippines, consignment agreements must comply with general contract principles, including mutual consent, lawful object, and adequate consideration. The Consumer Act requires that any consumer-facing sales maintain proper disclosure and fair business practices. For tax purposes, the National Internal Revenue Code mandates proper documentation of consignment transactions, including VAT considerations and income tax implications for both parties. If goods are stored in warehouses, the Warehouse Receipts Law applies, requiring proper documentation and care standards. The agreement must specify jurisdiction for dispute resolution and ensure compliance with local business registration requirements. Additionally, you must consider data privacy obligations under the Data Privacy Act when handling customer information through consignment sales, and ensure that all promotional activities comply with advertising standards and consumer protection regulations.