Consignment agreement is a very common legal and business contract that is written and signed between the manufacturer and owner of a specific product and the consignee who is responsible of displaying the product, attract customers and to make sale of the product in the market. With the consignment agreement, both parties decide the terms and conditions on which the joint venture will take place and the compensation or percentage share of the consignee in the profit that the manufacturer will make with the sales of the product. It also resolves the possible conflicts that either party can have in future related to increase in profit, addition of new franchises and products, legal rights and ownership of the products and distribution boundaries for the consignee.
Brief Description of Consignment Agreement:
In business and modern organizations, it is very common that the manufacturer or producer of a product hires a third party to distribute and consign the product under his possession including storage, sales, maintenance and services offered with the product. This can be explained as a shoe maker who only makes shoes and hires a shopkeeper as the consignee and in this manner, the consignor will manufacture the shoes and the consignee will make the sales either by showcasing the shoes in a shop or by meeting with potential clients in person. There are many key elements that are very important to address and cover in this matter. For example, the amount or units of product that the manufacturer will provide on weekly or monthly basis, the compensation that the consignee and consignor will get with the sale of the product, the legal rights and ownership of the product, responsibilities of each party and the legal jurisdictions on the sale, production and distribution of the product by the consignee.
It is possible that the manufacturer doesn’t want the consignee to sale the product to some specific people or just distribute the product in a particular market. If there are no legal documents entered in this process, it is possible that one might cross the limits and violate the guidelines cleared by the other party. In order to secure the rights and clear the responsibilities of each partner, they sign this consignment agreement that includes the key elements and keeps the partners to violate any clause or condition mentioned in the agreement.
Here is preview of a Free Printable Consignment Agreement Template created using MS Word,
Key Elements to add in the Consignment Agreement:
- Name, address and contact information of the consignor and his company
- Name, address and contact information of the consignee and his business
- Details of the consignment that is being discussed currently
- Specifications of the consignment
- Number of units of consignment under possession of the consignee
- Rates, payments and schedules for consignee and consignor
- Legal rights, responsibilities and obligations of both parties
- Percentage or profit or lump sum compensation to be paid to the consignee for his services
- Terms and conditions of the agreement
- Mutually agreed clauses of the agreement
- Termination of the agreement
- Results of violation of the agreement
- Validation and limitations of the agreement
- Signature by consignee and consignor with witnesses/legal advisers