Free consignment agreement template

How to fill it in

Most of this form is straightforward, but a few fields decide who absorbs the loss if something goes wrong. Fill it in before the goods leave your hands.

• Parties and goods: full names and addresses, then list every item with its description, condition, and agreed retail price, either in the clause or on an attached schedule.
• Term: set the start and end dates and decide whether the period renews automatically.
• Price and markdowns: set the agreed price for each item, say whether the consignee may discount, and cap the discount if so.
• Commission: set the percentage the consignee keeps and whether it is calculated on the original or the discounted price.
• Payment: choose per-sale payment within a set number of days, or a monthly settlement date.
• Risk and insurance: fill in the insured value and require a certificate before the goods ship.
• Returns: set who pays to send unsold goods back and how long the consignor has to collect them.
• Sign: both parties sign and date, and each keeps a copy with the goods schedule.

Who owns the goods, and why that gets complicated

Between the two parties, the answer is simple: the consignor owns the goods until they sell, and the consignee is a bailee holding them for sale. Against the consignee's creditors, the answer flips. Under section 9-319 of the Uniform Commercial Code, while consigned goods sit in the consignee's possession, the consignee is deemed to have the same rights and title to them that the consignor had, for the purpose of working out the rights of the consignee's creditors and buyers. In plain terms, if the shop goes under, its lenders and a bankruptcy trustee can treat your goods as the shop's own assets, and the trustee has the powers of a lien creditor under federal bankruptcy law regardless of what anyone knew. That is not a theoretical risk. When Sports Authority filed for Chapter 11 in 2016 it held millions of units of consigned goods and brought roughly 161 adversary actions against its consignment vendors, challenging their claims to their own merchandise. The fix is in the next section, and it is the reason a handshake consignment is a bad idea for anything valuable.

The UCC-1 filing most consignors skip

Article 9 of the Uniform Commercial Code applies to consignments, and it treats the consignor's interest as a purchase-money security interest in the consignee's inventory. Perfecting that interest, which is what puts you ahead of the consignee's other creditors, takes two steps. First, file a UCC-1 financing statement naming yourself as secured party and the consignee as debtor, in the state where the consignee is organized. Second, if the consignee already has a lender with a blanket lien on its inventory, send that lender an authenticated notice describing the goods before delivery. Timing is the part people get wrong. The interest has to be perfected by the time the consignee takes possession, so you file before you ship, not after. There is no general grace period for inventory consignments, and filing later does not reach back to cover goods already delivered. Run a UCC lien search on the consignee first so you know whether a prior inventory lender exists. This is the single biggest gap between a form-mill consignment template and one that actually protects you.

• Run a UCC search against the consignee's exact legal name in its state of organization.
• Sign the consignment agreement, which describes the goods and authorizes the filing.
• File the UCC-1 before you deliver the goods.
• Send written notice to any existing inventory secured party before delivery.
• Re-check when the consignee changes its name, entity type, or home state, which is why this template requires notice of those changes.

When Article 9 applies: the $1,000 line and the consumer-goods carve-out

Not every arrangement people call a consignment is a consignment under the Uniform Commercial Code. Section 9-102 defines it narrowly: goods delivered to a merchant for sale, where the merchant deals in goods of that kind under a name other than the consignor's, is not an auctioneer, and is not generally known by its creditors to be substantially engaged in selling other people's goods. On top of that, the aggregate value of the goods in each delivery must be $1,000 or more, the goods must not have been consumer goods immediately before delivery, and the arrangement must not really be a disguised security interest. Miss any element and the transaction falls outside the Article 9 definition and gets sorted out under other law instead, which is a genuinely murky place to be. Two practical takeaways. If you are consigning below the $1,000 per-delivery line, or consigning your own used household items to a resale shop, Article 9's consignment rules may not cover you, and some states add their own protection instead; California, for example, protects a consumer consignor's goods and the sale proceeds from the shop's creditors. And if the shop is obliged to pay you whether or not the item sells, that is not a consignment at all, it is a sale or a secured loan wearing a consignment label.

Special rules for artists consigning to galleries

If you are an artist, the law may already be on your side, and this is the part gallery contracts quietly rely on you not knowing. More than 30 states have artist-consignment statutes that protect artists who place work with a dealer. New York's is a good example: under the Arts and Cultural Affairs Law, delivering a work to an art merchant creates a consignor relationship by law, the artwork is trust property in the consignee's hands, and the proceeds of a sale are trust funds. Neither the work nor the money becomes the gallery's property or falls subject to the claims or liens of the gallery's creditors, and a waiver of those protections in a contract is void, with a narrow exception that cannot touch the first $2,500 of gross proceeds in any twelve-month period. California goes a similar route: delivering fine art to a dealer for exhibition or sale on commission is a consignment by statute, the dealer is the artist's agent, the work is trust property, the dealer is responsible for loss or damage to it, and any contract term waiving those protections is void. California even states that its art-consignment provisions prevail over conflicting provisions of its Commercial Code. Two caveats worth knowing. These statutes protect artists, not collectors or ordinary goods consignors, who still need to perfect by filing. And some states condition the protection on having a written agreement, which is one more reason to sign one.

Commission, payment, and markdown authority

Nothing in the Uniform Commercial Code sets the commission, the payment timing, or the accounting rights on an ordinary consignment. Those are pure negotiation, so write them down precisely. Splits vary widely by trade and by who brings the customer; fine-art galleries have traditionally worked near an even split, while resale and boutique shops sit across a broad range. Rather than accept a percentage as standard, settle four things in writing. What the commission percentage is. When you get paid, either within a set number of days of each sale or on a fixed monthly settlement date. What reporting you get, since a monthly statement listing each item sold, its price, the commission taken, and what is still on the floor is the only way to verify anything. And whether the shop can mark your goods down without asking, which is the term that surprises consignors most often. If discounting is allowed, cap it, and decide up front whether the commission comes off the discounted price or the original one, because those two produce very different cheques.

Risk of loss, insurance, and sales tax

Two practical questions come up on every consignment, and one of them has no default answer. Risk of loss is contractual. Article 9 does not decide who eats the cost if consigned goods are stolen or burn, so the agreement has to, and the sensible allocation is on the consignee, who has possession and control. As a bailee the consignee owes reasonable care over the goods, but ordinary care is a much weaker promise than a signed obligation to insure, so require insurance at an agreed value, ask to be named as loss payee, and get the certificate before you deliver. Fine art in California is an exception where the statute already puts responsibility for loss or damage on the dealer. Sales tax is different: there generally is a default, and it is the consignee. Because the consignee sells in its own name and can transfer title without further action from the owner, states usually treat it as the retailer and put the collection and remittance duty there. California and Indiana both do this by rule and statute. It is not uniform, though. Washington lets the owner take on the reporting in some cases where the owner is registered, so confirm the rule in the state where the sales happen rather than assuming.

Signing it

A consignment agreement does not need to be notarized. Both parties sign and date it, each keeps a copy, and the goods schedule or delivery receipt should be signed too, because that inventory list is what proves which items you handed over. An electronic signature is valid on it under the federal ESIGN Act and state electronic-signature law, so signing online is a practical way to get the agreement in place before the goods ship, which is when you want it. Get it in writing even for a small consignment. You cannot file a UCC-1 without an agreement describing the goods and authorizing the filing, some state artist-consignment statutes only give you their protection if there is a written agreement, and without a signed schedule the argument about what was delivered has no referee.

Common mistakes to avoid

Consignment disputes follow a familiar pattern.

• Skipping the UCC-1 filing, then losing the goods to the shop's lender or bankruptcy trustee even though you still own them.
• Filing after delivery instead of before, which does not protect goods already shipped.
• Delivering without a signed inventory schedule, so no one can prove what was handed over or in what condition.
• Leaving risk of loss and insurance out, which puts the loss on the owner by default of silence.
• Letting the shop discount without a cap, or not saying whether commission comes off the discounted price.
• Assuming an artist-consignment statute covers you when you are a collector or an ordinary goods consignor, not an artist.
• Treating an arrangement where the shop must pay whether or not the item sells as a consignment; that is a sale.