The Consignment Agreement

Contractually speaking, the consignor and consignee can agree in writing to a variety of mutually advantageous or disadvantageous measures. For example, you might agree that the merchandise will be placed in the wholesale or retail business where it is exposed to an estimated 50 percent of foot traffic that enters the store.

Also, you should agree as to the exact commission to be awarded upon sale. The length of time (days, weeks, etc.) after which payments will be made for goods sold should be considered.

Agreement concerning delivery and pick-up might be included, as well as conditions of storage that is not on display, particularly perishables. Your contractual agreement might specify that you will be paid for "inventory sold". Yet, the formula for payment noted above assumes that all items will be either sold or claimed by the consignor and completely rules out the possibility of disappearance of items from the sales floor. Since shopper damage and shop lifting are sobering realities of doing business, it is wise to consider them and to plan for their occurrence beforehand.

The consignments legally belongs to the consignor in a consignment sale and liability for any loss is still the consignor's problem. Some consignees may be willing to share the responsibility involved due to shop lifting if the issue is handled tactfully.

In some cases, the store will assume responsibility for damaged goods. When this is the case, you, the manufacturer, will not suffer. However, such cases are rare. At best, you can expect a sharing with the consignee.

When you assume part or all of the loss, ask for and keep the damaged goods for your records. It could be claimed that some of your merchandise was damaged when in fact it was sold it and the money was pocketed.

Also, consider damage caused by sun rays that fade colors and make some things unfit for sale.