What Is A Consignment Agreement?
A consignment agreement is a legal contract between two parties, a supplier and a retailer, that establishes a mutually beneficial relationship. In this type of agreement, the supplier retains ownership of the goods shipped to the retailer. The retailer then has the right to sell the goods at its leisure. Consignment agreements are frequently used in the manufacturing and selling of apparel, jewelry, furniture, and high-end electronics.
The most common type of consignment agreements are those involving retailers and wholesalers. In these agreements, the supplier, known as the consignor, holds legal ownership of the inventory until it is sold. The consignees, who are the retailers, pay the suppliers a predetermined commission or fee on the item upon selling the goods . When the desired goods are not sold, they are returned to the supplier and are considered inventory. The terms of these agreements vary among suppliers, but generally include provisions for how transportation fees are to be handled, the duration of the relationship, and termination dates of the agreement.
In order to avoid misusing or mishandling goods, a consignment agreement should specifically state the manner in which the goods being supplied can be used and handled. There may be restrictions in place as to who may handle the goods or how the goods may be sold. For example, the retailer may not sell the supplies via the internet, or it may not use a third-party to sell the goods. This is an important provision to include in the agreement, particularly if the goods are not as easy to sell as had been first expected.
Components Of A Consignment Agreement
A well-crafted consignment agreement is essential to protecting your interest in the property involved. This is especially true where the consigned property includes high value items, such as antiques or collectibles. For example, a consignment agreement would be in the best interest of a jeweler who is displaying a bracelet from a private owner. The consignment agreement may be the only way for the jeweler to assert rights to the bracelet, should the private owner be unable to pay for it and default on his obligations.
Parties.
In your consignment agreement, you will first want to identify the parties. The parties can include both buyer and seller. For many, this can be two individuals, and their respective addresses may be enough. If your business involves brick and mortar stores, you may also want to identify the location of your business.
Pricing.
Second, you will want to indentify the price of the property being sold, and whether the price can be negotiated. You may even want to identify the price of the property, if the "as is" price is acceptable. This protects you in the event of a dispute. Without pricing terms, the parties could easily argue over something that was never agreed-upon to begin with – the price of the object. When negotiating the price, it is important to consider things like sales tax and the market conditions when forming an agreement.
Duration.
Third, the consignment agreement should identify the duration of the consignment. In order to avoid a breach of contract, you will want to make sure your agreement includes the date of the agreement and the time frame in which the property must be picked up. Remember, duration is not only a good business practice, but it is also a valuable asset if you ever have to go to court for the dispute over the consignment. Your agreement can be the difference between winning and losing your case, depending on whether it is effectively drafted and your rights are protected.
Advantages Of A Consignment Agreement PDF
The option to create consignment agreements as PDFs has become almost universal. PDF files are relatively easy to keep safe from tampering (or "cryptojacking"), and they’re also much easier to share.
A consignment agreement template PDF is also much easier to standardize. Employees or company representatives that are responsible for creating or finalizing PDFs don’t have to click around looking for buttons, just like with any other type of template. They can browse for the PDF template, enter the relevant information in the correct boxes, and print or send it with ease.
It’s also possible to have a customized consignment agreement PDF that automatically generates the final document only when all other requirements are met. This such as passing through a "legal approval" process by having default approvers of a consignment agreement template approve it. The format of a consignment agreement also ensures that no important elements are accidentally omitted due to formatting.
How To Make A Consignment Agreement PDF
To create a consignment agreement PDF, the first step is to draft the agreement in a word processor like Word or Google Docs. Once the agreement is complete and thoroughly proofread, you would proceed to convert the document into a PDF format.
Most word processing software includes an option within the ‘File’ menu that allows you to save or export the document as a PDF. On Word, for example, you can go to ‘File’, then ‘Save As’, and select PDF from the list of available formats. Alternatively, Google Docs users can publish their document as a PDF by going to the ‘File’ menu, selecting ‘Download’, and then choosing ‘PDF Document’.
There are also several online services and tools, such as SmallPDF, PDF Converter, or SodaPDF, that provide quick conversion from Microsoft Word or Google Docs to PDF. These services typically involve simply uploading the document and downloading the converted file.
When it comes to templates, there are numerous free and paid templates online developed by legal document providers. These templates are pre-populated and designed to help with drafting a consignment agreement. A few reputable websites that provide these templates include Rocket Lawyer, LegalZoom, and Law Depot.
Once a consignment agreement template has been downloaded or accessed, it should be opened and modified as needed. After all required fields have been filled out and the terms of the agreement finalized, the document can be converted to a PDF as previously described.
Legal Factors Related To Consignment Agreements
When two or more parties enter into an agreement whereby goods are delivered on a consignment basis, the law of agency will be applicable. The party supplying the goods to the agent will be the principal and the party taking delivery (or possession of the goods) will be the purchaser. A written consignment agreement containing clauses dealing with the return of goods is vital for both the parties.
Two important legal considerations in this regard are: The right of the principal to recover the goods and the return of undelivered goods to the principal after expiry or cancellation of the consignment agreement.
The general rule is that a purchaser/taker cannot set off any amount it claims against a consignor/consigner from any amount outstanding by it to the consigner on the basis of a tacit hypophèque , i.e. it is entitled to set such amount off only against the specific debt arising from the non-payment of the price of such goods.
The consignment sale has all to do with the fact that ownership in goods is transferred by way of the contract of sale when the price is paid. In this regard, according to section 47(1)(e) of the National Credit Act 2007, "goods sold on consignment" means a credit agreement that: It is important to note that under a consignment agreement no ownership is transferred in respect of the goods and that the onus of proving that ownership in the goods has been transferred resides with the party alleged to have purchased them.
When a party invokes its rights in terms of a consignment agreement, it is important to comply with all the requirements of the Act relating to hypothec, mortgage or pledge in order for that party to avoid the consequences of not having done so in the first place.
Common Errors To Avoid
Common mistakes can cause significant problems down the line, so here are some to watch out for and, most importantly, to avoid.
Forgot the Date
It sounds simple, but it happens more often than you realize. Do you need to know when the agreement was signed, often referred to as the "macro" or "hard" date for events? The date on the actual Consignment Agreement really doesn’t matter. When the parties signed the contract is important, but in a separate addendum (not required to be a pdf file) that is also uploaded and referred to in the pdf, the date of signing is included. This allows you to track the important dates and still comply with the requirement to upload "all" related documents.
No Signature Line for Seller’s Rep
It is equally important that the party that signs on behalf of a seller (whether it is a corporation, LLC, etc.) is clearly identified. This is the "who" not the "what" of the document. Upon revision, not only must the "Party" side of the Contract be revised, but the "Seller" signature line must also be revised to correctly identify that person as an officer of the Seller.
Wrong Property in This Agreement
While it may seem obvious that the property was the correct one, it is important to confirm that any description of such property is correct. Have the best person available review the description of the property, both in the text of the PDF and the photos. Describe the consigned property in detail and cross-check all aspects, which eliminates mismatches and leads to a more efficient closing.
Inconsistent Dates Make for Confusing Language
Everywhere a date is referenced, you should copy it verbatim without mistakes. Also, changes of dates should be done in pen with cross-out lines to indicate corrections. There should not be a type-written change to a critical date. These discrepancies can delay the later sale if one party thinks the date is the original and the other thinks it’s been amended.
Missed the Comment Box for Notes
It is important for you to take advantage of the comments section of the pdf file to provide notes of changes you made to the agreement. It is important to communicate to your Broker any details that you did or did not include in the agreement, or why you did not attach or upload certain documents.
How To Locate Consignment Agreement PDF Templates
Most online services will throw in a consignment agreement template as a standard feature of their services. These services may tailor the consignment agreement to your specifications, using simple multiple-choice questions to ensure the end product best reflects your business. However, free consignment agreement templates are available on the major legal service sites, including Rocket Lawyer, Lawdepot, FindLegalForms, Nolo, and Justia, among others. Many similar services also offer basic templates for free, but charge a fee for more robust or customizable features . Also, you can find free downloadable templates from sites like PDFSimpli and MyLegalTemplates.org. These templates typically incorporate the most common sections and provisions found in a consignment agreement, such as: The executed consignment agreement is a legal document evidencing the sale of goods. It describes the procedures and terms that the consignee is required to follow in selling the goods.
While each consignment agreement is unique, the basic framework of a consignment agreement is its definition and purpose, consignee duties, and what happens if the goods aren’t sold within a certain time period.
