Consignment Agreement Template (2026): Commission, Title, Risk of Loss and Unsold Goods

Consignment means someone else displays and sells your goods, and you only get paid when they sell. That arrangement runs on trust until something goes wrong: the shop closes with your inventory still on its shelves, a piece is damaged in the window, or sales happen and nobody reports them. A consignment agreement is what turns that trust into terms you can enforce.

Quick Answer

• In consignment, the consignor (owner of the goods) keeps title until a sale happens, and the consignee (the shop, gallery or reseller) sells them for a commission.
• Most disputes turn on three clauses: who bears loss or damage (and whose insurance actually covers it), when sales are reported and paid, and what happens to unsold goods.
• If the consignee goes out of business or is sued, its creditors may go after the inventory on its shelves. Under US commercial law a consignor who hasn't taken protective steps can lose out, and more than 30 US states have artist-consignment statutes that treat consigned art as trust property.
• There is no legal standard commission. Galleries have traditionally split 50/50, and resale-shop splits vary widely, so treat any percentage as a negotiated number.

How Consignment Differs From Selling Wholesale

In a wholesale sale, the shop buys the goods, owns them, and carries the risk of not selling them. In consignment, the shop never buys anything. It holds your goods and passes along the sale price, minus its commission, when a customer buys. That difference is why the agreement has to answer questions a purchase order never raises: who owns the goods on the shelf, who pays if they're damaged, and who gets them back if the shop closes. If you're selling to a shop outright instead, a bill of sale or vendor agreement fits better.

Commission, Pricing and Markdowns

State the commission as a percentage of the sale price, and say what the percentage is applied to: the retail price before or after tax, before or after any discount. Then settle who controls price:

• Retail price. Who sets it, and can the consignee change it? Many consignors set a price floor and allow markdowns only with written approval.
• Discounts and promotions. If the shop runs a 20%-off sale, does that come out of your share, theirs, or both?
• Markdown schedule. Some resale shops mark down items automatically after a set number of days. If they do, put the schedule in the agreement.

Title, Risk of Loss and Insurance

Say plainly that title to the goods stays with the consignor until sold. Then decide who bears the risk if goods are lost, stolen or damaged while in the consignee's possession. Consignors usually want the consignee to be responsible, and in some artist-consignment statutes the consignee is responsible by law. Whichever way you decide, write down the value at which lost items are reimbursed (the agreed retail price, or the consignor's share of it).

Don't assume the consignee's insurance covers your goods. General liability policies commonly exclude property in the insured's "care, custody or control," and the coverage for other people's property typically comes from a separate bailee or inland marine policy. Ask the consignee whether it carries one. Also check your own coverage: homeowner's or business policies often have low sublimits for inventory kept away from the premises.

Protecting Your Inventory From the Shop's Creditors

This is the part most consignors miss. In the US, Article 9 of the Uniform Commercial Code treats many commercial consignments as a special kind of security interest. Very roughly, a consignment falls under Article 9 when:

• goods are delivered to a merchant who deals in that kind of goods under a name other than the consignor's,
• the merchant is not generally known by its creditors to be selling other people's goods,
• the goods are worth $1,000 or more per delivery, and
• the goods were not consumer goods immediately before delivery.

If an Article 9 consignment is not properly protected, the consignee's creditors can treat the goods as the consignee's property. The protective steps are technical: filing a UCC financing statement in the right state (for a corporation or LLC, generally the state where it was organized), and giving notice to any lender that already has a lien on the consignee's inventory. A filed financing statement is effective for five years unless continued. If the inventory is valuable, have a lawyer do the filing.

Separately, more than 30 states have laws protecting artists who consign work to galleries. New York's Arts and Cultural Affairs Law, for example, treats consigned art as trust property not subject to the consignee's creditors and limits a consignor's ability to waive this. California's Civil Code has a similar rule. These statutes apply to fine art and related works as defined by each state, so they may not cover ordinary crafts or manufactured goods. Check the definition before relying on it.

Sales Reporting, Payment and Records

• Reporting. Monthly is common: what sold, the price, the commission, and the amount owed.
• Payment. Within [15–30] days of the end of each period. Sale proceeds should be held for the consignor, not mixed into the shop's operating cash.
• Sales tax. Say who collects and remits it. State rules differ.
• Inspection and audit. Give the consignor the right to see sales records and count inventory on reasonable notice.

Term, Unsold Goods and Termination

Set a fixed term, such as 90 days, and a renewal method. Say how unsold goods come back: who pays return shipping, and by what date the consignor must collect them. If goods aren't collected by a deadline, some agreements treat them as abandoned. Use a firm number of days and note that state law on abandoned property varies. Either party should be able to end the arrangement on written notice, with a fixed period to settle up and return goods.

Consignment Agreement Template (Copy This)

CONSIGNMENT AGREEMENT

This Agreement is made on [DATE] between [CONSIGNOR NAME] ("Consignor")
and [CONSIGNEE NAME / SHOP] ("Consignee").

1. GOODS. Consignor delivers to Consignee the goods listed in Schedule A
   (the "Goods") to be offered for sale at [LOCATION / WEBSITE].

2. TITLE. Title to the Goods remains with Consignor until sold. Consignee
   holds the Goods as agent for Consignor and will not sell, pledge or grant
   any lien on unsold Goods.

3. PRICE. Retail prices are those in Schedule A. Consignee may not discount
   below [MINIMUM PRICE / X%] without Consignor's written approval.

4. COMMISSION. Consignee keeps [__]% of the sale price (excluding sales tax).
   Consignor receives [__]%.

5. REPORTING AND PAYMENT. Within [15] days after each month end Consignee
   will send a sales report and pay Consignor's share. Sale proceeds
   belonging to Consignor will be kept separate from Consignee's own funds.

6. RISK OF LOSS AND INSURANCE. Consignee bears the risk of loss, theft and
   damage while the Goods are in its possession and will reimburse Consignor
   at [the Schedule A retail price / Consignor's share of it]. Consignee will
   maintain insurance covering property of others in its care, and provide
   proof on request.

7. SALES TAX. [Consignee / Consignor] will collect and remit sales tax.

8. RECORDS. Consignor may inspect sales records and count inventory on
   [2] business days' notice.

9. TERM. [90] days from [START DATE], renewing for [90]-day periods unless
   either party gives [14] days' written notice.

10. UNSOLD GOODS. On expiry or termination Consignor will collect unsold
    Goods within [14] days. Return shipping is paid by [PARTY].

11. SECURITY INTEREST. Consignee authorizes Consignor to file any financing
    statement needed to protect Consignor's interest in the Goods.

12. GENERAL. Governed by the laws of [STATE]. Entire agreement. May be signed
    electronically.

SCHEDULE A — INVENTORY
| Item / SKU | Description | Qty | Retail price | Delivered on |
|------------|-------------|-----|--------------|--------------|
| [SKU-001]  | [DESCRIPTION] | [#] | $[PRICE]   | [DATE]       |
| [SKU-002]  | [DESCRIPTION] | [#] | $[PRICE]   | [DATE]       |

CONSIGNOR: ______________________   Date: __________
CONSIGNEE: ______________________   Date: __________

Common Mistakes

• A handshake deal with a gallery or boutique. With no writing, you can't prove who owns the goods if the shop's creditors show up.
• No inventory list. Without a signed schedule, you can't prove what was delivered or what's missing.
• Assuming the shop's insurance covers your goods. Ask for proof.
• No end date. Goods left indefinitely on a shelf are goods you can't sell elsewhere.
• Ignoring sales tax. Decide who collects it before the first sale.

Draft the Agreement and Document Every Drop-Off

AiDocX's AI contract generator drafts a consignment agreement from a plain-language description of your goods, split and terms, and e-signature gets it signed with an audit trail. For each delivery, the AI delivery note generator creates a matching record of what was dropped off, so your inventory schedule and what actually arrived line up. Free to start at app.aidocx.ai.

Related documents: artist commission contract, vendor agreement, return merchandise authorization form, packing slip and delivery note.

FAQ

Who owns consigned goods?

The consignor, until the goods are sold. The consignee holds them to sell for the consignor. Say this in the agreement, and if the goods are valuable, protect that ownership with the filings described above.

What commission should a consignment shop charge?

There is no legal standard. Galleries have traditionally split sales 50/50 between artist and gallery, and resale and boutique shops vary widely with the type of goods and services provided. Negotiate the split and put it in writing.

What happens if the shop goes out of business?

That is when the agreement matters most. If you've protected your interest (a UCC filing where required, or an artist-consignment statute that covers you), your position is much stronger. If not, your goods may get caught up with the shop's other assets.

Do I need a lawyer for a consignment agreement?

For low-value goods, a clear written template is a big improvement over a handshake. For high-value inventory or art, have a lawyer check the UCC filing and any state statute that applies.

This guide is general information, not legal advice. Consignment, UCC filing and artist-consignment rules vary by state and country. Consult a licensed attorney for high-value inventory.