How to Make a Consignment Contract

A consignment contract should specify what goods are being turned over and how the profits will be distributed.

Consignment occurs when inventory is in the possession of the customer, but is still owned by the supplier. The supplier delivers the inventory to the customer, who agrees to pay for the inventory when it is sold. The consignment system benefits customers because they do not have to make the initial investment to get inventory. Consignment contracts are necessary to protect both the customer and the supplier. The contract needs to include a description of the inventory as well as details about how earned profits from the sale of the inventory will be distributed.

Things You'll Need

• Pictures of inventory
• Consignment contract

Instructions

How to Make a Consignment Contract

1. Take a picture of each item that you will be placing for consignment. In the event there is ever a question about the quality or condition of the item, you will have proof.

2. Outline the terms that will be included in the consignment contract and put in a clause that will release you from liability in the event of a fire, theft or damage at the location where inventory is stored or displayed.

3. Detail the percentage of commission your company will receive from the sale of the inventory. Be sure to include the name and description of each item as well as the price for which the cosigner will sell the product.

4. 

   Owners of shops may be open to consignment agreements because there's minimal risk for them.

   Specify the dates of when the items will be transferred to the possession of the customer. Also include the date when the inventory will be returned to the supplier if not sold. Include detailed information about how the transfer of unsold items will take place. It is standard for the supplier to pick up unsold merchandise within 90 days. Provide details on the payment terms. Be specific about the form of payment and date payment will be required.

5. Make three copies of the completed agreement. After signed, one copy is to be given to the customer and the supplier keeps the other two.

6. Take the completed consignment contract to an attorney. The attorney will review the contract for language and clarity. In the event the contract is not adhered to, you want to present a concise document to the court to support your case.

7. Obtain signatures. The completed contract should be signed by the customer and supplier. It also should be dated and include the contact information for both the customer and supplier.

References

• E Personal Finance: Consignment Agreement
• Smart Frogs: What Should Be In A Consignment Contract
• Harriete Estel Berman: Professional Guidelines-Consignment Contract

Resources

• Read this Article in Spanish
• Capitol Consignment: Consignment Contract
• Inventory Ops: Consignment Inventory