Legal Definitions - memorandum sale

A memorandum sale is a commercial transaction where goods are delivered by a seller to a buyer with the understanding that the buyer has the option to return any unsold items within a specified period. The sale is not considered final until the buyer either sells the goods to a third party or explicitly accepts them, thereby forfeiting the right to return them. This arrangement allows the buyer to take possession of goods without immediate financial commitment for all items, shifting some of the inventory risk back to the seller.

Here are some examples illustrating a memorandum sale:

• Example 1: Seasonal Clothing Retailer

  A small fashion boutique receives a shipment of new winter coats from a wholesaler under a memorandum sale agreement. The boutique displays the coats for the upcoming season. The agreement states that after three months, the boutique can return any unsold coats to the wholesaler and will only be invoiced for the coats that were actually sold to customers. This arrangement allows the boutique to stock a wide variety of coats without the risk of being stuck with unsold inventory at the end of the season.

  This illustrates a memorandum sale because the transfer of the coats to the boutique is conditional. The final sale from the wholesaler to the boutique only occurs for the items the boutique sells or chooses to keep, with the option to return unsold goods.

• Example 2: Independent Bookstore

  An independent bookstore orders 100 copies of a new, highly anticipated novel from a publisher. The publisher agrees to a memorandum sale, allowing the bookstore to return any unsold copies within six months. The bookstore promotes the book heavily, but after six months, 25 copies remain unsold. The bookstore returns these 25 copies to the publisher and only pays for the 75 copies that were sold to its customers.

  This demonstrates a memorandum sale as the bookstore takes possession of the books, but the obligation to pay for them is contingent upon their sale to end-consumers or the expiration of the return period. The bookstore has the right to return unsold inventory.

• Example 3: Electronics Distributor

  An electronics distributor sends a batch of new model smartphones to a regional retail chain on a memorandum sale basis. The retail chain intends to use these phones as display models and for initial sales. The agreement specifies that the chain has 90 days to evaluate sales performance and return any units that haven't been sold to customers or designated as permanent display models. After 90 days, the distributor invoices the chain only for the units kept or sold.

  This is a memorandum sale because the retail chain receives the smartphones with a clear option to return them if they don't meet sales expectations or are not permanently integrated into their inventory. The finality of the sale for each unit is conditional on the chain's actions or the passage of time.