Consignment Agreement Template: What to Include and Free Template

Most consignment arrangements start informally. An artist places work in a gallery. A brand places inventory in a boutique. A manufacturer delivers goods to a regional distributor. Everything runs smoothly until a payment is late, goods go missing, or the consignee closes without returning unsold stock.

A consignment agreement converts an informal arrangement into an enforceable contract. It establishes who owns the goods at every stage, what happens when a sale occurs, how commissions are calculated, and who is liable when something goes wrong. Without it, the consignor has no documented claim on payment, returned inventory, or insurance proceeds.

This guide covers what a consignment agreement must include, how to write one from scratch, a free sample template you can adapt, and how to manage active agreements through the full contract lifecycle management process.

What is a consignment agreement?

Use a consignment agreement any time one party sells goods on behalf of another without taking ownership. This applies to artists, independent brands, manufacturers, and distributors who want market access without operating their own retail channel.

Common situations where a consignment agreement is required:

• Placing handmade goods, artwork, or clothing in a boutique, gallery, or resale shop while keeping ownership
• Agreeing to sell another party’s products in your store on a commission basis
• Moving surplus or end-of-season inventory through a third-party seller
• Distributing goods through a regional agent who earns commission per sale rather than buying stock upfront
• Testing a product in a new market without committing to wholesale pricing

The agreement must be signed before any goods change hands. Delivering inventory without a signed contract leaves both parties with no enforceable obligations and no documented proof of ownership, value, or commission terms.

When should you use a consignment agreement?

Use a consignment agreement any time one party sells goods on behalf of another without taking ownership. This applies to artists, independent brands, manufacturers, and distributors who want market access without operating their own retail channel.

Common situations where a consignment agreement is required:

• Placing handmade goods, artwork, or clothing in a boutique, gallery, or resale shop while keeping ownership
• Agreeing to sell another party’s products in your store on a commission basis
• Moving surplus or end-of-season inventory through a third-party seller
• Distributing goods through a regional agent who earns commission per sale rather than buying stock upfront
• Testing a product in a new market without committing to wholesale pricing

The agreement must be signed before any goods change hands. Delivering inventory without a signed contract leaves both parties with no enforceable obligations and no documented proof of ownership, value, or commission terms.

What are the key elements of a consignment agreement?

A consignment agreement must cover 10 core elements — each addressing a foundational element of a contract — to be complete and enforceable. Each clause addresses a specific risk that arises when goods are in someone else’s possession.

1. Title and ownership

State explicitly that the consignor retains title to all goods until they are sold to an end buyer. This clause is the legal foundation of the arrangement. Without it, the consignee’s creditors may claim consigned goods in an insolvency event.

2. Description of goods

List the specific goods being consigned with quantities, condition, identifying details, and estimated value. Vague descriptions create disputes. If consigning 15 framed prints at $600 each, document that specifically, including any reference numbers or distinguishing features.

3. Pricing and commission

Define who sets the sale price, whether the consignee can offer discounts, and the commission percentage the consignee retains from each sale. Industry commission rates typically range from 25% to 60% depending on the goods and selling environment.

4. Payment terms

State when the consignor is paid after each sale and how remittance is made. Most agreements require payment within 15 to 30 days after each reporting period, with an itemized sales statement accompanying each remittance.

5. Risk of loss

Define who bears the risk of loss at each stage. The standard allocation: the consignor bears risk during shipping to the consignee; the consignee bears risk from the moment of delivery until goods are sold or returned to the consignor.

6. Insurance

Require the consignee to maintain insurance on the goods while in their possession at a value not less than the replacement cost. Name the consignor as an additional insured on the policy and require proof of coverage on request.

7. Records and reporting

Require the consignee to maintain accurate sales records and provide periodic sales reports. The consignor should have the right to audit records on reasonable written notice.

8. Returns and unsold goods

Specify how unsold goods are returned when the agreement ends and the time period for return after termination. Goods not returned within the agreed window may be treated as purchased by the consignee at agreed wholesale price or fair market value.

9. Termination

Define how either party may terminate the agreement, the required notice period, and what triggers immediate termination without notice, such as insolvency, non-payment, or material breach.

10. Governing law and dispute resolution

State the jurisdiction and applicable contract law. Include a dispute resolution clause specifying whether disputes are resolved through arbitration or court proceedings.

How do you write a consignment agreement step by step?

Write a consignment agreement by working through each clause in sequence, using defined terms for both parties and clear language for each obligation. The most commonly disputed provisions are pricing control, payment timing, and liability for lost or damaged goods — these require precise language, not vague references.

1. Name the parties. Use full legal names and addresses for both the consignor and consignee. Define both terms in the opening clause and use them consistently throughout the document.
2. Describe the goods. Attach a goods schedule if the inventory list is extensive. Include quantity, condition, estimated value per item, and any identifying details like SKU numbers or serial numbers.
3. Set the price and commission. State who controls pricing and whether the consignee may discount without approval. Express commission as a percentage of net sales proceeds, not gross price.
4. Define payment timing. Specify the payment cycle, remittance method, and consequences for late payment. Monthly payment cycles are the most common for retail consignment.
5. Assign risk of loss. State exactly when risk transfers from consignor to consignee and back. Tie the risk clause directly to the insurance requirement.
6. Require insurance. Name the required coverage amount, policy type, and require the consignor to be named as additional insured. State that proof of insurance must be provided on request.
7. Define reporting obligations. Specify how often sales reports are due, what they must include, and the consignor’s right to audit records on reasonable written notice.
8. Address unsold goods. State the return deadline after termination and what happens if goods are not returned within that window.
9. Add standard provisions. Include governing law, amendments in writing only, non-assignment without consent, and severability.

Using contract drafting software with an approved consignment template ensures clause language stays consistent across all arrangements and reduces the risk of omitting a required provision. Templates also make it faster to onboard new consignees without building each agreement from scratch.

What does a free consignment agreement template look like?

A consignment agreement template organizes the core commercial terms into numbered clauses with defined terms. Below is a working sample you can adapt for most B2B and retail consignment arrangements — including consignment contracts for clothing, art, furniture, and manufactured goods.

CONSIGNMENT AGREEMENT

This Consignment Agreement is entered into as of [Date] between:

Consignor: [Full Legal Name], [Address] ("Consignor")
Consignee: [Full Legal Name], [Address] ("Consignee")

1. CONSIGNED GOODS
Consignor agrees to deliver, and Consignee agrees to accept on
consignment, the following goods ("Consigned Goods"):
[Description | Quantity | Condition | Estimated Value per Unit]

2. TITLE AND OWNERSHIP
Title to all Consigned Goods remains with Consignor until sold
to an end purchaser. Consignee acquires no ownership interest
other than the limited right to possess and sell the Consigned
Goods in the ordinary course of business. This Agreement
constitutes a true consignment and not a sale of goods to Consignee.

3. PRICING AND COMMISSION
Consignor sets the sale price of each item. Consignee shall
receive a commission of [X]% of net sales proceeds. Consignee
may not discount below the listed price without Consignor's
prior written approval.

4. PAYMENT TERMS
Consignee shall remit net proceeds to Consignor within [15 or 30]
days after the end of each calendar month, accompanied by an
itemized statement showing all sales, commissions, deductions,
and net amounts due to Consignor.

5. RISK OF LOSS AND INSURANCE
Consignee bears all risk of loss to Consigned Goods from the
time of delivery until sale to an end buyer or return to Consignor.
Consignee shall maintain property insurance on the Consigned Goods
naming Consignor as additional insured, in an amount not less than
the full replacement value of the Consigned Goods.

6. RECORDS
Consignee shall maintain accurate records of all sales and make
such records available to Consignor upon reasonable written request.
Consignor may audit Consignee's records with five (5) business
days written notice.

7. RETURN OF UNSOLD GOODS
Upon termination of this Agreement, all unsold Consigned Goods
shall be returned to Consignor within [10] business days. Goods
not returned within this period shall be deemed purchased by
Consignee at the agreed wholesale price or fair market value,
whichever is greater.

8. TERMINATION
Either party may terminate this Agreement with [30] days written
notice. Consignor may terminate immediately upon Consignee's
insolvency, material breach, or failure to remit payment when due.
Outstanding payments due at the time of termination remain
enforceable.

9. RELATIONSHIP OF THE PARTIES
Nothing in this Agreement creates a partnership, joint venture,
employment, or agency relationship between the Parties.
Consignee is an independent contractor.

10. GOVERNING LAW AND DISPUTE RESOLUTION
This Agreement is governed by the laws of [State/Jurisdiction].
Disputes shall be resolved by binding arbitration under the
Commercial Arbitration Rules of the American Arbitration
Association.

CONSIGNOR: _______________________  Date: ____________
CONSIGNEE: _______________________  Date: ____________

This sample consignment agreement covers all 10 required clauses. Customize the commission rate, payment period, return window, and jurisdiction for your specific arrangement. For high-value or complex consignments, have the agreement reviewed by legal counsel before execution.

What is the difference between exclusive and non-exclusive consignment?

An exclusive consignment agreement gives one consignee the sole right to sell the consignor’s goods in a defined territory or channel. A non-exclusive arrangement allows the consignor to place the same goods with multiple sellers simultaneously.

Exclusive consignment is more common for branded, premium, or limited-edition goods where the consignor wants controlled presentation. Non-exclusive consignment is better suited to surplus inventory or wide-distribution scenarios where sales volume matters more than channel control.

What is a retail consignment agreement and how does it work?

A retail consignment agreement is a consignment contract between a goods owner (consignor) and a physical or online retailer (consignee). The retailer displays and sells the goods, retains a commission on each sale, and remits the balance to the goods owner on a regular payment cycle.

Retail consignment is common in these contexts:

• Boutiques selling handmade or independent brand goods on a commission basis
• Art galleries selling works on behalf of artists
• Second-hand and resale stores selling goods placed by individual consignors
• Specialty retailers testing new product lines without buying wholesale upfront

In a retail consignment agreement, the consignee typically controls pricing within a range set by the consignor, handles customer interactions and returns, and provides monthly sales reports. The agreement must specify how customer returns are processed: whether returned goods go back to the consignor or remain with the consignee to re-sell.

Retail consignment arrangements benefit from a structured contract management workflow because the payment cycle is recurring, inventory changes continuously, and many retail stores run multiple consignor relationships simultaneously.

Who are the consignor and consignee in a consignment agreement?

The consignor is the party that owns the goods and places them for sale. The consignee is the party that receives, stores, and sells those goods on the consignor’s behalf. Both parties have distinct documented obligations under the agreement.

Consignor obligations:

• Deliver goods in the condition and quantity described in the agreement
• Set the sale price and communicate any approved pricing changes in writing
• File a UCC-1 financing statement if required to protect ownership rights
• Disclose any known defects or limitations in the goods

Consignee obligations:

• Accept and store goods with reasonable care and appropriate security
• Sell goods at or above the listed price unless authorized in writing to discount
• Maintain required insurance and provide proof of coverage on request
• Provide accurate sales records and timely payment with itemized statements
• Return unsold goods promptly upon termination within the agreed timeframe

The consignment relationship is not an employment relationship, a partnership, or an agency arrangement. The consignee operates as an independent party with specific contractual obligations — not as an employee or representative of the consignor.

Who bears the risk of loss in a consignment agreement?

The risk of loss in a consignment agreement is divided by stage. The consignor bears risk during shipping to the consignee. The consignee bears risk from the moment of delivery until goods are sold to an end buyer or returned to the consignor.

Standard risk allocation by stage:

• Before delivery: Consignor bears all risk during transit to the consignee’s premises
• After delivery and before sale: Consignee bears risk of loss, damage, or theft while goods are in their possession
• After sale: Risk transfers to the buyer once delivery to the end customer is complete

The consignee’s liability for loss does not disappear if they are unable to pay. This is why the insurance clause is non-negotiable: if goods are damaged or stolen and the consignee carries no insurance, the consignor may have no practical means of recovery. Contract compliance monitoring should include regular verification that the consignee’s insurance policy is active and meets the agreed coverage amount.

How does a consignment agreement work under the UCC?

Under Article 9 of the Uniform Commercial Code (UCC), a consignment arrangement where the consignee is a merchant who deals in goods of the same kind is treated as a secured transaction. This means the consignor must file a UCC-1 financing statement to perfect their ownership interest, or consigned goods may be treated as the consignee’s property by creditors in an insolvency event.

UCC protection steps for consignors:

1. Confirm UCC Article 9 applies. It applies when the consignee is a merchant who routinely deals in goods of the same kind being consigned. A clothing retailer selling consigned clothing is the standard example.
2. File a UCC-1 financing statement in the appropriate state jurisdiction before delivering any goods. Filing after delivery does not retroactively protect goods already in the consignee’s possession.
3. Send authenticated notice to any existing secured creditors of the consignee before delivery, putting them on notice that the incoming goods are consigned and not the consignee’s property.
4. Label consigned goods clearly as the consignor’s property in the consignee’s facility to maintain the legal distinction from the consignee’s own inventory.

Without a UCC-1 filing, a bankruptcy trustee may distribute consigned goods to the consignee’s creditors as if those goods belonged to the consignee. Sound contract risk management includes a UCC filing checklist as a required step in every consignment onboarding workflow for high-value arrangements.

How does HyperStart help manage consignment agreements?

HyperStart CLM manages consignment agreements across the full lifecycle: drafting, execution, payment tracking, obligation monitoring, and termination. It replaces the manual process of tracking remittance cycles, insurance renewals, and return deadlines across multiple active agreements.

For procurement teams managing multiple vendor consignment relationships, HyperStart centralizes all active agreements in one searchable repository with automated reminders for payment, reporting, and insurance obligations. Use contract reminder software built into HyperStart to automate the remittance cycle instead of relying on spreadsheet-based date tracking that breaks when team members change.

HyperStart deploys in 4 weeks and integrates with SharePoint, Salesforce, DocuSign, and the tools legal, procurement, and operations teams already use. You do not need to change how your teams work to get full visibility into your consignment portfolio.