Legal Definitions - commission merchant

A commission merchant is an individual or company that takes possession of goods belonging to another person (the "principal") and sells those goods on the principal's behalf. The commission merchant sells the goods in their own name, not the principal's, and receives a percentage of the sale price (a "commission") as compensation for their services. They do not own the goods themselves; they are acting as an agent for the owner.

Here are some examples to illustrate this concept:

• Imagine a small-scale artisan who creates unique, handcrafted furniture. Instead of selling each piece directly to customers, which would be time-consuming, the artisan contracts with a high-end furniture gallery. The gallery takes physical possession of the artisan's finished tables and chairs, displays them in their showroom, and sells them to customers under the gallery's own name. Once a piece is sold, the gallery deducts an agreed-upon commission from the sale price and remits the remainder to the artisan. In this scenario, the furniture gallery acts as a commission merchant for the artisan.

• Consider a vineyard owner who produces a limited quantity of premium wine. To reach a broader market beyond their local area, the owner partners with a specialized wine distributor. The distributor takes delivery of the bottled wine, stores it in their climate-controlled warehouse, and then sells it to restaurants and retailers across the region, using the distributor's own sales channels and invoicing. For each case of wine sold, the distributor earns a percentage of the sale price. Here, the wine distributor functions as a commission merchant for the vineyard owner.

• An inventor develops a new, highly specialized industrial component but lacks the sales force or distribution network to market it effectively to manufacturing plants. The inventor engages a firm that specializes in selling industrial equipment. This firm takes samples and a supply of the components, showcases them to potential buyers at trade shows, and negotiates sales contracts in the firm's name. After a sale, the firm takes its agreed commission and passes the rest of the payment to the inventor. This firm is operating as a commission merchant, facilitating the sale of the inventor's product.