Entering into a consignment agreement

Selling on consignment

You can always sell your products yourself. But you can also choose to sell products via other businesses. For example, in a bookshop, art gallery, or online shop (webshop)?. Do you own the products until they are sold? If so, you deliver the products to the seller ‘on consignment’. When the products are sold, you receive the amount for the sale from the seller, minus a specific amount of money. This is usually a percentage of the sale price, as payment to the seller for their service.

What is in a consignment agreement?

The consignment agreement contains the terms between the product owner and seller. For example:

• the percentage that the seller receives from the selling price (consignment percentage);
• the selling price of your product;
• insurance;
• how long will the products stay with the seller (consignment duration).

It can be good to ask for legal advice when drawing up the exact terms of a consignment agreement.

What are the financial risks?

Sometimes a seller cannot sell all of your products. Magazines in a newsagent are a good example. With a consignment agreement, the product owner/supplier carries the financial risk. The seller only pays you the money from a sale, minus the consignment percentage.

Who is liable?

In a consignment agreement, the seller is an intermediary. The purchase contract is between the product owner and the buyer. And so, the product owner is liable if there is a problem with the product. For example, if a new car is sold with a fault, the showroom that sells the car is not liable. The buyer always has to be informed who they are buying the product from.

Consignment and international business

It is also possible to deliver products on consignment to a company in another country. Make sure you check the rules, for instance for VAT and import requirements.