Legal Definitions - consignment

Consignment is a business arrangement where one party (the consignor) delivers goods to another party (the consignee) for the purpose of sale or safekeeping. A key characteristic of consignment is that the consignor retains ownership of the goods until they are sold to a third party or returned by the consignee. The consignee typically sells the goods on behalf of the consignor and then pays the consignor an agreed-upon portion of the sale price, often keeping a commission for their services. This arrangement allows the consignor to place goods in a retail setting without immediately transferring ownership or risking unsold inventory, while the consignee can offer a wider range of products without upfront purchasing costs.

• Example 1: Independent Bookstore and Local Authors

  A local author writes a novel and wants to sell copies without managing inventory or sales directly. They approach an independent bookstore that agrees to display and sell the author's books. The author (the consignor) delivers a box of books to the bookstore (the consignee). When a book sells, the bookstore keeps a percentage of the sale price as commission and remits the rest to the author. If the books don't sell after a certain period, the author can pick them up.

  This is a consignment arrangement because the author retains ownership of the books until a customer purchases them from the bookstore. The bookstore acts as a sales agent, not an owner, until the point of sale.

• Example 2: Vintage Furniture Shop

  Someone inherited several antique chairs and wants to sell them but lacks the time and expertise to market them effectively. They contact a vintage furniture shop. The shop owner agrees to take the chairs, so the individual (the consignor) delivers the chairs to the shop (the consignee). The shop cleans, stages, and displays the chairs. When a chair sells, the shop deducts an agreed-upon commission and pays the remainder to the original owner. If the chairs don't sell within a specified timeframe, the owner can retrieve them.

  This illustrates consignment because the original owner maintains legal ownership of the antique chairs while they are in the shop's possession. The shop only gains the right to sell them and earn a commission upon a successful sale, without ever owning the chairs themselves.