Consignment Agreement Template: How to Write a Consignment Contract

A consignment agreement lets one person sell goods through another's store, gallery, or platform without giving up ownership until the item actually sells. It is how boutiques stock local designers, how galleries hang an artist's work, and how thrift and resale shops fill their racks. It is also one of the easiest contracts to get wrong: a vague split, an unclear payment date, or a missing clause about who covers a stolen item can turn a friendly arrangement into a legal headache.

This guide explains what a consignment agreement is, how it differs from a normal sale, every clause it should contain, and the mistakes that most often cause disputes — plus a step-by-step you can follow to write your own.

What Is a Consignment Agreement?

A consignment agreement is a contract in which the owner of goods (the consignor) gives possession of those goods to a seller (the consignee) to sell on the owner's behalf. The consignee displays and sells the items, takes an agreed commission, and pays the rest to the consignor — but ownership of the goods stays with the consignor until the moment a customer buys them.

That single fact — that title never passes to the consignee — is what separates consignment from a wholesale purchase. In a wholesale deal, the store buys your inventory outright and owns it. In consignment, the store is selling your property and only earns money when a sale happens. The risk of unsold goods stays with you, the consignor; the store risks only its floor space and effort.

Consignment is common in:

• Retail and apparel — boutiques carrying local or independent brands
• Art and antiques — galleries and dealers selling on an artist's or collector's behalf
• Resale and thrift — secondhand clothing, furniture, and luxury goods
• Specialty goods — handmade crafts, books, musical instruments, and collectibles

Consignment vs. Other Sales Arrangements

It helps to see where consignment sits among the contracts a small business uses. If you are not sure consignment is the right structure, our overview of contract types for product or service sales compares the main options side by side.

Consignment vs. Wholesale

In wholesale, the buyer pays up front and owns the goods. They keep all the upside and absorb all the loss on unsold stock. In consignment, the consignor keeps ownership and the downside risk, but usually earns a larger share of each sale.

Consignment vs. Outright Sale

An outright sale transfers both possession and title immediately for a fixed price. Consignment transfers possession but delays the transfer of title until a third-party buyer purchases the item.

A Note on the UCC

Consignment of goods often falls under Article 9 of the Uniform Commercial Code, which can require the consignor to file a financing statement to protect their interest if the consignee has creditors. This is exactly why the ownership clause matters so much. Our guide to the UCC and product or service sales explains how the code treats goods transactions and why documentation protects you.

Key Clauses in a Consignment Agreement

1. Identification of the Parties and Goods

Name the consignor and consignee with full legal names and addresses. Then describe the goods precisely — by category, item list, SKU, or attached inventory schedule. Vague descriptions ("assorted clothing") make it impossible to prove what was delivered if items go missing.

2. Ownership and Title

State plainly that the consignor retains title to all goods until they are sold to an end customer, and that the consignee holds the goods only as a bailee. This clause is what keeps your inventory out of the consignee's bankruptcy estate and clarifies that the consignee cannot pledge your goods as collateral.

3. Commission and Pricing

Spell out:

• The commission split as exact percentages (e.g., 60% to consignor, 40% to consignee)
• Who sets the retail price, and whether the consignee may discount without approval
• Who absorbs payment-processing and credit-card fees
• Whether the split is calculated on the gross sale price or net of fees

4. Payment Terms

Tie payment to sales, and define the timing exactly. A common structure: the consignee reports sales monthly and pays the consignor's share within 15 or 30 days of month-end. Include the consignor's right to a written sales report and to inspect the consignee's records.

5. Term and Unsold Goods

Set a consignment period — often 60 to 90 days — and state what happens when it ends:

• Goods returned to the consignor at the consignor's or consignee's expense
• Automatic markdowns after a set time
• Donation of unsold items (only with the consignor's written consent)
• Renewal for an additional period

6. Risk of Loss, Damage, and Insurance

Decide who bears the risk while goods are in the consignee's possession, and say so explicitly. If the consignee is responsible, consider requiring insurance up to the agreed value of the goods. Record an agreed value for each item or lot so a damage claim is not a negotiation after the fact.

7. Returns and Customer Refunds

Retail customers return things. State whether returned items go back into consignment, whether the consignor's payment is reversed, and how long the return window runs.

8. Termination

Allow either party to end the arrangement with written notice (commonly 14–30 days), and require the consignee to return all unsold goods promptly on termination. Pair this with a clear accounting of any items sold but not yet paid out.

9. Confidentiality and Exclusivity

If the consignee will see your supplier list, cost structure, or designs, add a confidentiality clause — the same logic behind a standalone non-disclosure agreement. If you are granting one shop the exclusive right to sell your line in a region, define the territory and duration.

10. Governing Law and Dispute Resolution

Name the state whose law applies and where disputes are resolved. This avoids a fight over venue before anyone reaches the actual disagreement.

How to Write a Consignment Agreement: Step-by-Step

Step 1: Identify the parties. Use full legal names and addresses. For businesses, note the entity type and state of formation, and confirm the signer has authority to bind the company.

Step 2: Attach an inventory schedule. List every item or lot with a description, quantity, condition, and agreed value. This single attachment prevents most "that's not what I dropped off" disputes.

Step 3: Set the commission and pricing rules. Write the exact split, who controls price, and who eats the processing fees. Ambiguity here is the number-one cause of consignment conflict.

Step 4: Define payment timing and reporting. State when and how the consignor gets paid, what the sales report must contain, and the consignor's right to inspect records.

Step 5: Set the term and the fate of unsold goods. Pick a period and decide whether unsold items are returned, marked down, donated, or renewed.

Step 6: Allocate risk and require insurance if needed. Say who covers loss, theft, and damage, and record the agreed values that any claim will reference.

Step 7: Add termination, confidentiality, and governing law. Cover notice periods, return of goods, any confidentiality needs, and the controlling jurisdiction.

Step 8: Sign and date. Both parties sign. Keep the inventory schedule attached and give each side a copy.

Sample Commission Structures by Industry

There is no universal split, but a few patterns recur. Use these as starting points, not rules:

• Apparel and accessories boutiques — commonly 50/50, sometimes shifting to 60/40 in the consignor's favor for established brands that drive their own traffic.
• Resale and luxury consignment — often tiered: the consignor's share rises as the sale price climbs, so a designer handbag might net the consignor 70% while a $30 item nets 40%.
• Art galleries — frequently 50/50, though emerging artists may accept a lower share in exchange for exposure and the gallery's marketing.
• Antiques and collectibles — often favor the consignor at 60–80%, because the dealer's main cost is floor space rather than sourcing.
• Handmade crafts and makers' markets — typically 60–70% to the maker, reflecting the work that went into the goods.

Whatever you land on, anchor the number in the contract and state whether it applies to the gross sale price or the price net of processing fees. A "60% split" means very different things depending on that one word.

Protecting Both Sides

A good consignment agreement is not one-sided — it protects the consignor and the consignee for different reasons, and naming both sets of protections up front keeps the relationship healthy.

As a consignor, you are protecting: your ownership of the goods until sale, your right to be paid promptly and to see exactly what sold, your ability to reclaim unsold inventory, and your recourse if items are lost or damaged. The ownership clause and the agreed-value schedule do most of this work.

As a consignee, you are protecting: your floor space and effort, your right to a clear commission, your freedom from liability for normal wear or market conditions you did not cause, and a clean process for returning unsold goods so you are not stuck storing them. A defined term and a sensible risk-of-loss clause matter most here.

When both lists are written into the contract, neither party is relying on goodwill alone — and that is exactly what makes consignment relationships last across many seasons of inventory.

Common Mistakes to Avoid

Leaving the commission split vague. "Fair split to be determined" is not a term. Write the exact percentages and the base they apply to.

No agreed value on the goods. If an item is stolen or damaged and you never recorded its value, you are negotiating the loss from zero. Set values up front in the inventory schedule.

Silence on unsold inventory. Without a defined term and return process, goods sit indefinitely and neither party knows when the relationship ends. Always set a period and a default outcome.

Forgetting the ownership clause. If the contract does not state that title stays with the consignor, a creditor of the consignee could try to claim your goods. For higher-value inventory, ask whether a UCC filing is warranted.

No payment schedule. "Pay when sold" is not enough. Define the reporting cadence and the number of days within which the consignor is paid, or you will be chasing money.

Treating it as a casual handshake. Consignment between friends or local makers often starts informally — which is exactly when a missing clause hurts most. A short written agreement protects the relationship as much as the goods. The same lesson appears when cancelling a sales agreement: the terms you wrote down are the terms that govern.

When You Need a More Specialized Agreement

A standard consignment template covers most retail, apparel, and craft arrangements. But some categories need extra clauses:

• Art and antiques — authentication, provenance, and minimum sale prices. Dealers handling these often layer in the kind of terms covered in our guide to collectibles authentication and sales services.
• High-value luxury goods — appraisal, insurance, and stricter risk-of-loss terms.
• Perishable or seasonal goods — shorter terms and clear markdown schedules.

If your situation involves authentication, large dollar values, or exclusivity across a territory, build those specifics into the agreement rather than relying on a generic form.

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Generate Your Consignment Agreement with Contractable

A consignment agreement is straightforward once you know the structure — the hard part is getting the commission, ownership, payment, and risk clauses right for your goods and your shop. Contractable generates a customized consignment agreement in seconds, with the correct split, payment schedule, term, and risk allocation for your situation. No lawyers and no legal background required — just answer a few questions and download a contract both sides can sign.