Consignment Agreement Template: Everything You Need to Know

Whether you’re an artist placing work in a gallery or a retailer accepting inventory on consignment, a poorly written consignment agreement costs money. According to the World Commerce & Contracting, approximately 9% of contracts experience a significant claim or dispute.

Misunderstandings about commission rates, unsold inventory, and payment terms create disputes that damage business relationships. Modern contract management platforms help businesses track all their agreements in one centralized location. This guide covers what to include in a consignment contract, common pitfalls to avoid, and provides a free downloadable template.

What is a consignment agreement?

A consignment agreement is a contract between a consignor (the owner of the goods) and a consignee (the party selling the goods) that outlines the terms under which the goods will be sold. The consignor retains ownership until sale, while the consignee displays and sells goods for a commission.

Example: An artist consigns 20 paintings to a gallery for 6 months, with a 40% commission. Unsold paintings return to the artist after the consignment period ends.

What should a consignment agreement include?

Every consignment agreement form needs these essential components to protect both parties. Well-drafted contract clauses prevent ambiguity between parties.

1. Parties and contact information

Full legal names, business addresses, and contact details for both consignor and consignee. Include tax ID numbers for significant transactions to ensure proper reporting and compliance.

2. Description of consigned goods

Create a detailed consignment inventory form, including:

Any unique identifying characteristics

• Specific item descriptions and quantities
• Retail values and current condition notes
• Photos or serial numbers for high-value items
• Any unique identifying characteristics

3. Consignment period

Specify exact start and end dates for the arrangement. Address whether the agreement automatically renews or requires mutual consent for extension. Include 30-60 day notice requirements for termination so both parties have adequate preparation time.

4. Pricing and commission structure

State exact commission percentages, for example, “Consignee receives 40% commission calculated on final sale price, excluding sales tax.” Define who controls pricing decisions and under what conditions markdowns are allowed. Specify whether consignor approval is required for price reductions.

5. Payment terms

Establish a clear payment schedule (monthly, quarterly, or per sale), payment method, and due dates after sales occur. Include sales reporting requirements so consignors can verify which items sold and track payment accuracy.

6. Title and ownership

Clearly state that the consignor retains full ownership of the goods until sale. This protects consignors if consignees face bankruptcy or creditor claims. Specify that the consignee cannot claim ownership, use goods as collateral, or transfer rights to third parties.

7. Risk of loss or damage

Define who bears responsibility for loss, theft, or damage while the goods are with the consignee. Specify minimum insurance requirements, coverage amounts, and claim filing procedures. Address how insurance proceeds will be distributed if goods are damaged.

8. Return of unsold goods

Establish conditions for returning unsold items at the consignment period end. Specify that goods must be returned in original condition, reasonable wear excepted. Include the return timeline (typically 30 days) and specify who pays the return shipping costs.

9. Termination conditions

Outline how either party can terminate the agreement before the consignment period ends. Specify required notice periods and procedures for handling inventory upon early termination. Address whether the consignee must return goods immediately or has a grace period.

Types of consignment agreements

Different industries use consignment sales agreements tailored to their specific needs. Like other vendor agreements, consignment contracts establish clear terms between suppliers and retailers.

1. Retail consignment agreement

Retail stores use these agreements when accepting goods from individual sellers. According to the National Association of Resale Professionals (NARTS), there are currently more than 25,000 resale, consignment, and nonprofit resale shops in the United States, with the U.S. secondhand apparel market expected to reach $73 billion by 2028. Clothing boutiques, antique stores, and gift shops commonly operate on consignment. These agreements typically run 30-60 days with commission rates ranging from 40-60% for the consignee.

The retail consignment agreement template should address display space allocation, pricing authority, and whether goods can be moved between multiple store locations. Consignment store contracts often include minimum display requirements and seasonal rotation provisions.

2. Art consignment agreement

Galleries and art dealers use art consignment agreement templates for displaying and selling artwork. These arrangements run longer than retail consignments, typically 6 to 12 months, because art sales require more time to find the right buyers.

Gallery commissions usually range from 30% to 50% of the sale price. The agreement must address provenance documentation, insurance for high-value pieces, exhibition schedules, and whether the gallery receives exclusive or non-exclusive representation rights. Many art consignment agreements include promotional obligations, under which galleries commit to actively marketing consigned works.

3. Vehicle consignment agreement

Automotive dealerships use vehicle consignment agreement templates when selling cars, trucks, or specialty vehicles on behalf of owners. These agreements often have shorter timeframes, typically 60 to 90 days, due to inventory turnover needs and holding costs.

Many dealerships use flat fee structures rather than percentage commissions for vehicles. The contract must include detailed vehicle condition documentation with photos, specify who handles test drives and insurance during consignment, and address maintenance responsibilities if the consignment period extends.

How to write a consignment agreement

Creating an effective consignment agreement requires careful planning and clear documentation. How to make a consignment agreement starts with understanding all terms before drafting begins. Effective contract creation starts with clearly defining all terms up front.

Step 1: Document the inventory

Create detailed descriptions of each consigned item before goods change hands. Take photos from multiple angles showing the current condition. Note any existing damage, wear, or imperfections with specific descriptions. Assign retail values to each item based on market research and comparable sales. Develop a tracking system to monitor which items sell and which remain with the consignee.

Step 2: Negotiate key terms

Discuss and agree on essential terms before drafting the agreement. Commission rates or flat fee structures should reflect industry standards and product margins. Determine consignment period length based on product type and typical sales cycles. Decide who has the authority to set prices and approve markdowns to prevent future pricing conflicts. Establish a payment schedule that works for both parties while maintaining cash flow.

Step 3: Define responsibilities

Clarify operational details to prevent misunderstandings down the line. Specify who will cover shipping costs for delivery and returns of unsold goods. Determine insurance coverage requirements and value amounts that protect both parties. Outline marketing and promotion responsibilities so expectations are clear. Address dispute resolution procedures, whether through mediation, arbitration, or litigation.

Step 4: Address contingencies

Plan for potential problems before they occur. Establish procedures for handling damaged or stolen goods, including insurance claim processes. Define conditions that allow early termination by either party to provide exit strategies. Specify what happens to goods if the consignee closes business or files for bankruptcy. Include amendment procedures for modifying terms as business needs change.

Step 5: Get it in writing

Use a written, simple consignment agreement that documents all negotiated terms. Both parties should review the document thoroughly before signing to ensure mutual understanding. A basic consignment agreement doesn’t need excessive complexity, but it must clearly cover all essential terms. Sign and date the agreement, and have witnesses if required by state law. Provide copies to both parties and store with other essential business contracts in an accessible location.

Common mistakes in consignment agreements (and how to prevent them)

Many consignment disputes arise from poorly drafted agreements that leave critical consignment terms undefined. Understanding these common pitfalls helps you create stronger contracts from the start.

1. Vague commission structures

What to avoid: Generic language like “fair commission” or “standard rates” leaves room for vastly different interpretations of what constitutes fair compensation.

Prevention strategy: Specify exact percentages in writing: “Consignee receives 40% commission calculated on the final sale price of each item, excluding sales tax.” If commission rates vary by product type or price tier, include a detailed commission schedule table. Address whether commissions apply to discounted sales or only full-price transactions. Clarify how refunds or returns affect commission calculations.

2. No precise consignment period end date

What to avoid: Open-ended agreements stating “until goods are sold” or “for the foreseeable future” create indefinite obligations that neither party can easily exit.

Prevention strategy: Establish specific timeframes from the beginning: “Consignment period begins January 1, 2025, and ends June 30, 2025, renewable by mutual written agreement.” Include automatic return provisions specifying that unsold goods must be returned within 30 days of the period end. This gives consignors certainty about when they’ll either receive payment or get their goods back. Contract tracking systems help monitor important dates across all agreements.

3. Missing insurance and liability terms

What to avoid: Signing agreements with no mention of who bears responsibility for loss, theft, fire, or damage while goods are in the consignee’s possession.

Prevention strategy: Include specific insurance requirements before goods change hands: “Consignee shall maintain commercial general liability insurance with minimum coverage of $1,000,000 and name Consignor as additional insured.” Specify whether the consignee’s existing business insurance covers consigned goods or if separate coverage is required. Address deductibles and the distribution of insurance proceeds if goods are damaged or destroyed.

4. Unclear pricing authority

What to avoid: Assuming either party controls pricing decisions without explicit written confirmation in the consignment terms.

Prevention strategy: Document explicitly who sets retail prices and markdown authorization: “Consignor retains exclusive authority to set initial retail prices. Consignee may not reduce prices by more than 20% without prior written consent from Consignor.” Address seasonal sales, clearance events, and how bulk discounts will be handled. Include notification requirements if prices need to be adjusted to move inventory.

5. No system for managing multiple consignments

What to avoid: Tracking multiple consignment agreements across scattered spreadsheets, email threads, and paper files makes it impossible to monitor commission rates, expiration dates, and performance.

Prevention strategy: Establish centralized systems for managing all consignment arrangements before signing multiple agreements. Businesses managing multiple agreements need strategies for organizing contracts effectively. Set up calendar reminders for consignment period end dates, payment due dates, and inventory return deadlines. Create a dashboard view of all active consignments with key terms readily accessible.

Download a free consignment agreement template

This free consignment agreement template provides a foundation for your consignment contract. The consignment form template includes all essential clauses, ready to customize with your specific terms.

DOWNLOAD TEMPLATE

Template includes:

•     Complete the consignment agreement form with essential clauses
•     Customizable commission and payment sections
•     Inventory tracking table
•     Standard termination and dispute provisions
•     Word format (.docx) for easy editing

This Word document template covers retail consignment agreements and commercial arrangements.

Manage consignment agreements with HyperStart

Managing multiple consignment relationships means tracking different commission rates, periods, and inventory across agreements. Missed end dates mean goods sit unsold longer than planned. Lost agreements lead to disputes over terms.

HyperStart, AI-powered contract management software, eliminates the chaos of consignment agreements. Automated reminders alert you 30, 60, and 90 days before each period ends. A centralized contract repository provides instant access to commission rates and terms across all relationships. Contract analytics reveal which arrangements are most profitable.

HyperStart’s AI-powered search finds specific consignment terms in seconds rather than hours of manual document review. HyperStart’s obligation tracking ensures you never miss payment deadlines or inventory return requirements that could damage business relationships. Stop managing consignment contracts in scattered systems where critical dates and terms disappear into email threads.