Consignment Agreement

A consignment agreement lets an owner place identified goods with a merchant for sale while defining retained ownership, sales authority, pricing, commission, custody, accounting, returns, creditor protection, and exit procedures.

A useful document turns the parties' actual arrangement into measurable duties, approvals, timing, remedies, and a reliable execution record. Its terms should be reconciled to the transaction rather than copied from an unrelated form.

• An artist, designer, collector, manufacturer, or other owner places specifically identified goods with a gallery, boutique, resale shop, or other merchant that will sell in its own channel without buying the inventory at intake
• A retailer receives rotating or seasonal inventory and pays the owner only after an authorized customer sale, while retaining a stated commission and reporting each transaction
• A consignor uses several retail locations or online channels and needs item-level custody, pricing, sales, proceeds, and return records for each consignee
• Existing parties are renewing or correcting an informal arrangement and need to reconcile the physical inventory, unsold goods, customer returns, proceeds, insurance, and any UCC financing statements

The document name alone does not determine the right structure. Consider a different instrument or qualified legal review when any of these conditions applies:

• Do not use a consignment label when the merchant is actually obligated to buy the goods, bears the ordinary resale-price risk, or receives goods as collateral for an obligation; a sale-or-return, wholesale sale, distribution arrangement, secured transaction, pawn, or other structure may apply regardless of the document's title.
• Do not assume that retained title or a no-lien clause by itself protects the goods from the consignee's secured lenders, judgment creditors, bankruptcy estate, or purchasers; Article 9 classification, filing, notice, priority, debtor-name, location, and proceeds rules are jurisdiction- and fact-specific.
• Do not use a generic form for vehicles, firearms, alcohol, food, medical products, precious metals, regulated wildlife, securities, titled goods, auctions, pawnbroking, or other goods or sales requiring special licensing, title documents, custody controls, disclosures, or transfer procedures.
• Do not use it for real estate, services, intellectual-property licenses, purely digital assets, or a sales representative who never takes custody of inventory; those relationships need a different agreement.
• Do not deliver goods while ownership, authenticity, condition, liens, authority to consign, insurance, an existing lender's rights, or the consignee's financial condition is materially unresolved.

Record exact facts before clauses are written. Names, authority, dates, amounts, defined terms, dependencies, and incorporated materials should be verifiable and consistent.

• Consignor and consignee legal names, entity type, formation jurisdiction, addresses, tax and permit information, authorized signers, notice contacts, selling locations and channels, and any affiliates, marketplaces, processors, warehouses, or subcontractors that will possess goods or collect proceeds
• For every item or lot, a unique inventory number, detailed description, quantity, maker or brand, model and serial number, dimensions, materials, photographs, condition and defects, provenance or authenticity records, stated owner, lien status, intake date, approved location, and agreed return deadline
• The intended transaction structure, whether the delivery meets the governing jurisdiction's UCC definition of consignment, whether any exclusion or other law applies, the consignee's exact authority to display, advertise, discount, sell, ship, accept payment, issue warranties, and process returns, and who contracts with the retail customer
• List price, minimum or net-to-consignor amount, discount and markdown authority, approval thresholds, bundled-sale and trade-in treatment, consignee commission or fee formula, payment-processor and marketplace fees, shipping and storage charges, taxes, refunds, credits, chargebacks, bad debt, foreign-currency conversion, and worked settlement examples
• The consignee's existing and proposed secured lenders, blanket inventory filings, lien searches, exact registered name and organizational information, filing jurisdiction, financing-statement collateral description, continuation dates, purchase-money or consignment notices, acknowledgments, subordinations, and payoff or termination records
• Delivery, custody, display, storage, security, environmental controls, inspection, movement between sites, commingling restrictions, stock counts, shrinkage, damage, alteration, repair, customer trials, shipping, unsold-return standards, and risk-of-loss allocation
• Required property, inland marine, bailee, transit, commercial general liability, cyber or crime coverage as appropriate; policy limits, deductibles, valuation basis, additional-insured or loss-payee treatment where available, cancellation notice, certificates and endorsements, exclusions, claim control, and responsibility for uninsured loss
• Sales and inventory reports, point-of-sale data, customer receipts, separate ledger or account treatment, settlement frequency, payment deadline, reserves, reconciliations, inspection and audit rights, record retention, data access, tax forms, sales-tax and marketplace-facilitator responsibilities, and unclaimed-property handling
• Customer-facing warranties, disclaimers, returns, refunds, repairs, product-safety duties, recalls, authenticity or condition claims, privacy obligations, complaint handling, and the allocation of related costs and liabilities
• Initial term, renewal, termination events, sell-through or immediate stop-sale rules, pickup and shipping logistics, final inventory count, unsold and returned goods, open customer orders, reserves, final statement and payment, UCC amendments or terminations, survival, and post-termination cooperation

These decisions shape the allocation of responsibility and should not be left for boilerplate to decide:

• Whether the arrangement is a true consignment, a transaction excluded from the applicable Article 9 consignment definition, a sale or return, or a security interest securing an obligation, and which state's enacted commercial code and filing rules govern each issue
• What title the consignor retains between the parties and what filings, notices, lender consents, priority agreements, proceeds controls, searches, continuations, and monitoring are needed before and during possession to address the consignee's creditor risk
• Which party may set or change the retail price, the lowest authorized price, when a sale and commission become final, which taxes and third-party fees are excluded from the commission base, and how refunds, exchanges, partial payments, chargebacks, bad debt, discounts, bundles, and post-term sales affect settlement
• How every item is identified and segregated in physical and electronic records, where it may be located, who may handle or ship it, how often counts and reconciliations occur, and what evidence controls if the parties' records differ
• Who bears each category of loss before and after retail sale, which insurance responds at each location and in transit, how property is valued, who pays deductibles, what exclusions remain, and who controls and receives claim proceeds
• Which party is the retailer or seller for customer receipts, permits, sales and use tax, warranties, returns, product claims, privacy, recalls, and marketplace rules, recognizing that tax and regulatory treatment depends on jurisdiction and facts rather than the agreement label
• Whether proceeds are remitted transaction-by-transaction or periodically, how they are traced and reconciled, what reserve is permitted, what records and audit access are available, and how promptly discrepancies and overdue balances must be resolved
• At termination, whether sales stop immediately or a controlled sell-through applies, how open orders and customer returns are handled, when and how goods are returned, when the final account is due, and who completes any UCC amendment or termination after the inventory and proceeds are fully resolved

• Appointment, defined sales channels and territory, nonexclusive or exclusive status, relationship of the parties, limited sales and collection authority, prohibition on unauthorized commitments, and a statement that the consignee does not purchase the goods merely by taking possession
• Itemized consigned-goods schedule, retained ownership between the parties until an authorized sale, title and lien representations, authenticity and lawful-transfer records, acceptance or rejection at intake, additions and withdrawals only by dated record, and no unauthorized pledge, transfer, relocation, use, alteration, or commingling
• Article 9 cooperation covering classification without controlling it, consignor authorization to file and amend financing statements, accurate debtor information, pre-delivery searches, perfection timing, notice to conflicting inventory secured parties where applicable, renewals, proceeds tracing, lender acknowledgments or subordination when needed, and termination filings only after all covered goods and proceeds are resolved
• Merchandising and sales standards, approved descriptions and claims, list and minimum prices, discount and markdown approval, customer contracting party, payment methods, shipment, delivery, warranties, refunds, exchanges, chargebacks, fraud, consumer-law compliance, product safety, and recall administration
• Commission and settlement mechanics defining the earning event, calculation base, excluded taxes and fees, authorized deductions, sale and return cutoffs, reserves, worked examples, statement contents, invoice or self-billing process, payment timing, disputed entries, corrections, interest or other late remedies if lawful, and treatment of sales completed after termination
• Custody and standard of care, location controls, physical security, stock counts, inspection access, loss and incident notice, maintenance and prohibited use, shipping and customer trials, risk of loss for theft, casualty, mysterious disappearance, damage and transit, insurance requirements, deductible allocation, valuation of lost goods, claims cooperation, and subrogation treatment
• Books and records separating owned inventory from consigned inventory, item-level perpetual inventory, sales and proceeds ledger, receipt and return evidence, bank or processor reconciliation, access to point-of-sale records, periodic reporting, audit and discrepancy procedure, confidentiality and customer-data limits, retention, and cooperation with financial and tax reporting
• Federal, state and local tax allocation without guaranteeing characterization, including sales and use tax registration, collection, reporting and remittance; marketplace-facilitator documentation; resale or exemption certificates; income and commission reporting; inventory records; and prompt exchange of returns, permits, notices and information needed for each party's filings
• Customer and unsold-goods returns, including approval and shipping method, return window, condition standard, restocking or restoration costs, risk in transit, rejected delivery, recalled or noncompliant goods, unclaimed goods, and a signed inventory and condition reconciliation on every return
• Term, renewal, suspension, ordinary and cause termination, immediate stop-sale triggers, insolvency and creditor-event notice to the extent enforceable, controlled sell-through only if authorized, customer-order completion, final accounting and reserves, retrieval or insured shipment of goods, payment of proceeds, access and brand removal, records handoff, survival, and separate UCC amendment or termination obligations

Every provision should use the same parties, dates, standards, defined terms, and document hierarchy. A clause that is reasonable by itself can still create a conflict when it is not reconciled with payment, default, termination, or another exhibit.

1. 01Describe the intended result and the relationship in plain language.
2. 02Confirm parties, authority, governing jurisdiction, dates, money, property, services, and approvals.
3. 03Resolve the key decisions and identify every schedule, exhibit, disclosure, consent, or filing.
4. 04Draft the provisions as one consistent system, then review the complete execution set before signature.

The central risk is treating retained ownership as complete third-party protection. Under enacted Article 9 rules modeled on the UCC, many commercial consignments are treated as purchase-money security interests in the consignee's inventory for perfection and priority, and an unprotected consignor can lose priority to the consignee's inventory lender, lien creditor, bankruptcy estate, or certain purchasers even though the agreement says title remains with the consignor. Definition exclusions and state variations matter, and filing alone may not obtain inventory priority when an earlier filer requires timely notice. Operationally, vague item schedules, unauthorized markdowns, commingled stock, missing sales data, delayed remittance, uncontrolled customer returns, inadequate insurance, and unclear casualty valuation can convert a simple retail channel into an ownership, proceeds, tax, or loss dispute. The contract also cannot by itself decide which party is the retailer for sales tax, consumer obligations, marketplace rules, or federal accounting, and it cannot create insurance coverage that the policy excludes.

The main agreement may establish the framework while schedules, exhibits, disclosures, consents, or operational records supply transaction-specific details.

• Signed item or lot schedule with unique identifiers, photographs, ownership and lien evidence, provenance or authenticity materials, appraisal or agreed valuation, intake condition report, delivery receipt, movement log, stock counts, and return condition report
• Current price and commission schedule with minimum prices, discount authority, fee and tax treatment, settlement examples, approved sales channels, customer terms, return policy, warranty or disclaimer language, and product claims
• Consignee organizational records and exact-name evidence, UCC and lien-search results, filed financing statements and amendments, filing acknowledgments, inventory-lender notices and delivery evidence, lender acknowledgments or subordinations, continuation calendar, and termination records
• Insurance certificates and relevant endorsements, limits and deductible schedule, loss-payee or additional-insured evidence where applicable, security and storage standards, incident reports, police or carrier records, claim correspondence, and valuation support
• Periodic inventory and sales reports, point-of-sale exports, customer receipts, payment-processor statements, proceeds and commission ledger, bank reconciliations, settlement statements, invoices, tax and marketplace records, dispute notices, and audit workpapers
• Termination notice, stop-sale instruction, open-order and customer-return list, final physical inventory and condition report, return shipping or pickup receipt, final statement and payment evidence, access revocation record, and agreed UCC amendment or termination authorization

Each incorporated document should be identified precisely, use the same names and effective date, and follow a stated order of precedence if terms conflict.

Before delivery, verify each party and item, reconcile the written structure to the actual economics, search the consignee's exact legal name and existing inventory liens, complete any jurisdiction-specific filing and priority notices, confirm permits and customer-sale responsibilities, attach price and commission examples, and obtain current insurance evidence. At intake, sign an itemized condition record and load matching identifiers into both parties' systems. During the term, reconcile physical counts, point-of-sale activity, proceeds, returns, taxes, filings, notice renewals, and insurance on a fixed calendar; investigate variances promptly. At exit, issue a written stop-sale or sell-through instruction, secure the goods, close open sales and returns, complete a joint count, return inventory through a traceable method, pay the final account, and address filings only after all covered goods and proceeds are resolved. NOMOS provides general U.S. drafting information, not legal, tax, accounting, insurance, bankruptcy, secured-transactions, licensing, or regulatory advice, and does not determine ownership, classification, perfection, priority, coverage, tax liability, or enforceability for a particular transaction.

• Confirm legal names, roles, capacity, addresses, and signing authority
• Reconcile dates, amounts, definitions, cross-references, schedules, and exhibits
• Confirm that duties, deadlines, approvals, acceptance standards, and payment triggers are measurable
• Check that default, termination, remedies, and surviving obligations work together
• Complete jurisdiction-specific forms, notices, witnesses, notarization, filings, or professional review when applicable
• Deliver and preserve the complete signed package with its incorporated documents

These sources provide federal, state-resource, regulatory, or institutional context. They do not replace checking the law and required forms applicable to the parties, transaction, and governing jurisdiction.

1. Source 1

   D.C. Code § 28:9-102 — Consignment-related definitions

   Council of the District of Columbia, D.C. Law Library. Current official enacted commercial-code text defining consignee, consignment, and consignor. The definition illustrates the UCC conditions and exclusions that make classification depend on the merchant, value, type of goods, purpose of delivery, and whether the transaction secures an obligation rather than on the parties' chosen label.

2. Source 2

   D.C. Code § 28:9-103 — Purchase-money security interests and consignments

   Council of the District of Columbia, D.C. Law Library. Current official enacted commercial-code text providing that the interest of a consignor in goods subject to an Article 9 consignment is a purchase-money security interest in inventory. Its official comments connect consignments to the priority rules for lien creditors, competing secured parties, and buyers while preserving the ownership relationship between consignor and consignee for other purposes.

3. Source 3

   D.C. Code § 28:9-319 — Rights and title of consignee with respect to creditors and purchasers

   Council of the District of Columbia, D.C. Law Library. Current official enacted commercial-code text deeming a consignee in possession to have the consignor's rights and title for specified creditor and purchaser questions, subject to the perfected-interest rule. The official examples show why an agreement's retained-title clause does not alone defeat a consignee's inventory lender or lien creditor.

4. Source 4

   D.C. Code § 28:9-324 — Priority of purchase-money security interests

   Council of the District of Columbia, D.C. Law Library. Current official enacted commercial-code text setting the conditions for purchase-money inventory priority, including perfection when the debtor receives possession and, when the statutory conditions apply, signed advance notification to an earlier filer covering the same type of inventory. The official comments expressly apply these inventory-priority rules to consignments.

5. Source 5

   Publication 538 — Accounting Periods and Methods

   Internal Revenue Service. Official federal tax guidance stating that merchandise inventory includes goods sent out on consignment and excludes goods consigned to the taxpayer, while also describing inventory identification, valuation, accounting-method consistency, and loss treatment. Particular taxpayers and small-business exceptions require fact-specific accounting and tax analysis.

6. Source 6

   Publication 114 — Consignment Sales

   California Department of Tax and Fee Administration. Current official California guidance, revised July 2024, explaining that a consignee with possession or control and authority to transfer the item without further owner action is generally treated as the retailer responsible for a seller's permit and tax on the retail selling price. It is a jurisdiction-specific example demonstrating why the agreement must allocate sales-tax administration without assuming one nationwide result.