Consignment Sales Agreement Template for Saudi Arabia

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Consignment Sales Agreement

"I need a Consignment Sales Agreement for my luxury handbag business where I'll be appointing a major department store in Riyadh as my consignee, with a 25% commission structure and minimum sales targets to be achieved by March 2025."

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What is a Consignment Sales Agreement?

The Consignment Sales Agreement is essential for businesses operating in Saudi Arabia who wish to establish a consignment sales arrangement where one party (Consignor) provides goods to another party (Consignee) for sale without transferring ownership until the final sale occurs. This document is particularly relevant in retail, luxury goods, and various commercial sectors where inventory management and flexible sales arrangements are crucial. The agreement must comply with Saudi Arabian commercial law and Sharia principles, making it distinct from conventional consignment agreements in other jurisdictions. It typically includes detailed provisions for inventory management, commission structures, reporting requirements, and risk allocation, while ensuring all financial arrangements are Sharia-compliant. This agreement type is commonly used when businesses want to expand their market presence without establishing their own retail operations or when testing new markets with minimal risk.

What sections should be included in a Consignment Sales Agreement?

1. Parties: Identification of the Consignor (owner of goods) and Consignee (seller)

2. Background: Context of the agreement and brief description of the business relationship

3. Definitions: Key terms used throughout the agreement, including specific industry terminology

4. Appointment and Scope: Terms of appointment of the Consignee and scope of authority

5. Ownership of Goods: Clear statement that ownership remains with Consignor until sale

6. Delivery and Storage: Terms for delivery, storage requirements, and handling of consigned goods

7. Pricing and Commission: Price setting mechanisms and commission structure

8. Payment Terms: Terms for remittance of sales proceeds and commission payments

9. Inventory Management: Requirements for stock keeping, reporting, and inventory controls

10. Responsibilities of Parties: Detailed obligations of both Consignor and Consignee

11. Risk and Insurance: Allocation of risk and insurance requirements

12. Term and Termination: Duration of agreement and termination provisions

13. Confidentiality: Protection of confidential information

14. Governing Law: Specification of Saudi law as governing law

15. Dispute Resolution: Procedures for dispute resolution under Saudi jurisdiction

What sections are optional to include in a Consignment Sales Agreement?

1. Marketing and Promotion: Used when Consignee has responsibilities for marketing the goods

2. Territory Restrictions: Include when sales are limited to specific geographic areas

3. Minimum Performance Requirements: Used when setting specific sales targets or KPIs

4. Returns and Defective Goods: Include for products that may require return handling

5. Intellectual Property: Include when branded products or licensed materials are involved

6. Non-Competition: Used when restricting Consignee from selling competing products

7. Data Protection: Include when personal data processing is involved in sales operations

8. Force Majeure: Optional but recommended for addressing unforeseen circumstances

9. Compliance with Sharia: Detailed section on Sharia compliance if required by parties

What schedules should be included in a Consignment Sales Agreement?

1. Schedule 1 - Products: List and specifications of consigned products

2. Schedule 2 - Commission Structure: Detailed breakdown of commission rates and calculations

3. Schedule 3 - Operating Procedures: Detailed procedures for ordering, storage, and sales

4. Schedule 4 - Reporting Templates: Required formats for inventory and sales reporting

5. Schedule 5 - Territory Map: If applicable, maps or descriptions of authorized sales territory

6. Schedule 6 - KPIs: If applicable, detailed performance metrics and targets

7. Appendix A - Insurance Requirements: Specific insurance coverage requirements

8. Appendix B - Handling Instructions: Special instructions for product handling and storage

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Relevant legal definitions
Relevant Industries

Retail

Fashion and Apparel

Electronics

Luxury Goods

Automotive Parts

Industrial Equipment

Art and Antiques

Jewelry

Sporting Goods

Home Furnishings

Agricultural Products

Construction Materials

Relevant Teams

Legal

Commercial

Sales

Operations

Supply Chain

Finance

Compliance

Business Development

Retail Operations

Distribution

Risk Management

Contract Administration

Relevant Roles

Commercial Director

Sales Manager

Legal Counsel

Business Development Manager

Operations Manager

Supply Chain Manager

Retail Operations Director

Inventory Manager

Finance Manager

Compliance Officer

Contract Administrator

Regional Sales Director

Chief Commercial Officer

Distribution Manager

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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