Definition of Consignment Agreement

A "consignment agreement" is a contract where the owner of goods turns them over to a seller (such as a store) who will attempt to sell the goods. If the seller sells the goods, the seller and the owner of the goods share in the sales price (net of taxes). For example, a maker of sweaters may "consign" goods to a local clothing store. If the clothing store sells a sweater, the seller could receive 35% (or whatever percentage agreed to) of the sales price and the owner would be entitled to the remaining proceeds. It allows the store owner to avoid inventory risk, as the store owner has not committed funds to purchasing the goods. The Consignment Agreement key provisions include:

• The specific description of the goods being consigned
• The percentage split between the seller and owner on sale of the goods
• The right of the seller or the owner to terminate the agreement
• Representations and warranties as ownership and unencumbered title to the goods