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Consignment Agreement Template for United States

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Key Requirements PROMPT example:

Consignment Agreement

"I need a consignment agreement for a sales partnership where the consignee will sell 100 units per month, with a 30-day payment term, and a 10% commission on each sale."

What is a Consignment Agreement?

A Consignment Agreement lets a business owner (consignor) place their goods with another party (consignee) to sell them without transferring ownership. Under Philippine law, the consignee acts as an agent, selling items on behalf of the consignor while earning a commission on each sale.

These agreements are common in retail, where shop owners display products from suppliers without buying them outright. The contract specifies payment terms, commission rates, and handling of unsold items - all following Philippine Civil Code provisions on agency relationships. If items don't sell, they return to the original owner, making it a low-risk option for both parties.

When should you use a Consignment Agreement?

Consider using a Consignment Agreement when you want to sell products through another business without losing ownership of your inventory. This setup works perfectly for Filipino artisans, craftspeople, and small manufacturers who want to display their goods in established retail stores but can't afford wholesale arrangements.

The agreement makes sense when testing new markets or launching seasonal products in the Philippines. It protects both parties - sellers maintain control of their goods while stores minimize inventory risk. It's especially valuable for high-value items like jewelry, artwork, or designer clothing where outright purchase would be too costly for retailers.

What are the different types of Consignment Agreement?

Who should typically use a Consignment Agreement?

  • Consignors (Product Owners): Small business owners, artisans, manufacturers, or suppliers who want to sell their products through established retail channels without losing ownership
  • Consignees (Retailers): Shop owners, department stores, or boutiques that display and sell consigned items while earning commission
  • Legal Counsel: Lawyers who draft and review agreements to ensure compliance with Philippine commercial laws and protect both parties' interests
  • Store Managers: Oversee daily operations, maintain inventory records, and handle sales reporting for consigned items
  • Accountants: Track sales, commissions, and tax obligations for both consignor and consignee under BIR regulations

How do you write a Consignment Agreement?

  • Basic Details: Gather complete business information for both consignor and consignee, including tax identification numbers and business permits
  • Product Information: List items for consignment with detailed descriptions, quantities, and agreed selling prices
  • Commission Structure: Define commission rates, payment schedules, and handling of sales tax under Philippine regulations
  • Operational Terms: Specify delivery schedules, inventory reporting requirements, and handling of damaged goods
  • Duration and Terms: Decide contract length, renewal options, and termination conditions
  • Documentation: Prepare inventory forms, sales reports templates, and delivery receipts
  • Using Our Platform: Generate a legally-sound agreement that includes all required elements for Philippine compliance

What should be included in a Consignment Agreement?

  • Party Details: Complete legal names, addresses, and tax identification numbers of consignor and consignee
  • Product Description: Detailed inventory list with specific items, quantities, and agreed pricing
  • Commission Terms: Clear breakdown of commission rates and payment schedules under Philippine tax laws
  • Risk and Insurance: Allocation of liability for loss, damage, or theft of consigned goods
  • Reporting Requirements: Sales documentation, inventory tracking, and financial record-keeping obligations
  • Duration and Termination: Contract period, renewal terms, and conditions for early termination
  • Dispute Resolution: Jurisdiction choice and conflict resolution procedures under Philippine law

What's the difference between a Consignment Agreement and an Agency Agreement?

A Consignment Agreement differs significantly from an Agency Agreement in key ways, though both involve one party acting on behalf of another. While they may seem similar under Philippine commercial law, their purposes and structures serve distinct business needs.

  • Ownership Structure: In consignment, the consignor retains full ownership until items are sold, while agency agreements don't typically involve product ownership
  • Payment Terms: Consignment focuses on product sales and commission percentages, whereas agency agreements often involve fixed fees or variable compensation for services
  • Scope of Authority: Agency agreements grant broader powers to represent the principal in various transactions, while consignment strictly limits authority to selling specific goods
  • Risk Distribution: Consignment places inventory risk primarily with the consignor, but agency agreements typically share risks between principal and agent
  • Legal Obligations: Agency relationships create fiduciary duties under Philippine Civil Code, while consignment focuses mainly on sales and inventory management

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