Consignment Agreements are good contracts only if both parties agree to enforceable terms. Consignment contracts should specify obligations and rights equally.
Items that should be covered in agreements are:
- The items being consigned.
- Descriptions of items noting each item's condition (to avoid claims later). Pictures or videos are a good idea for high-ticket items.
- Set the duration of the term of consignment. When does it begin? How long does it last?
- Do agreements specify the item price? Do you set the retail price, get a set amount or get whatever price is available?
- How much is to be paid? It is common to pay the store a percentage of the sale proceeds. If the shop gets 30%, then a $200 in sale yields $140 to the seller.
- How will often will settlements be made? For most consignment shops this in monthly payable on the first or 15th.
- Who pays shipping, handling, packing, insurance, and other costs, if any?
- Will a buyer's fee apply (an amount to be deducted from sales proceeds prior to applying the store's percentage).
- Is the store or gallery responsible? Jurisdictions conform in various ways to the provisions of the Uniform Commercial Code (UCC) - laws that are intended to protect sellers. The store must pay for damages due to negligence but nor for damages caused by 'Acts of God'. States' provision and legal interpretations are different.
- Who pays for promotional expenses?
- What happens if the store fails?
- To protect sellers, the store should post a sign stating that goods are consigned. not available in all locations).
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- How will disputes be resolved? Shops handling large-ticket items should pre-appoint a private arbitrator.
- Who will pay attorneys? Will the loser pay the winner's fees?
Provisions
In bankruptcy, property may be seized by creditors. Some states (Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee, Texas, Washington, and Wisconsin) have consignment legislation preventing this but it still may be necessary to file a claim in bankruptcy court and produce a Consignment Agreement which clearly addresses this issue.
Rules are applied in different ways. Laws may apply to 'fine art' only while others might include 'crafts'.
To protect stores -
- The store should publicly post that goods are on consignment.
- Form UCC-1 should be filed in the county of the consignor who should stand ready to prove that creditors knew items were on consignment.
These and any other issues should be spelled out in written form in consignment agreements. Each party should have a copy signed by all participants.
Here's a sample form::
1. GENERAL: Sixty percent (60%) of the selling price of each item shall be paid to ___________________."
FURNITURE like cribs, chairs, changing tables, etc: Fifty percent (50%) of the selling price of each item shall be retained by ______________________________.
2. LIABILITY: ______________ assumes no liability for the loss or destruction of any item.
3. IMPERFECT items in need of repair or cleaning may, without notice, be donated. DONATION RECEIPTS AVAILABLE ON REQUEST ONLY.
4. A minimum of two (2) days notice must be given before pickup. OWNERS WILL BE RESPONSIBLE FOR PULLING ALL UNSOLD ITEMS.
5. All unsold items must be retrieved within three (3) months from the date of consignment or the agreement must be renewed for another 90 days. All unsold items not returned after the end of the contract period will, WITHOUT FURTHER NOTICE, automatically become property of ____________________.
6. DURATION and RENEWABILITY: Maximum consignment length is 180 days. This Consignment Agreement is renewable once.
7. PRICE REDUCTIONS: All items may be subject to a price reduction at the discretion of __________________.
8. CONSIGNMENT PAYMENT WILL BE VOIDED 180 DAYS AFTER AGREEMENT TERMINATION.
9. CONSIGNMENT CHECKS: Checks are issued monthly after the 15th for the prior whole month.
10. RECORD KEEPING AND FOLLOW UP CALLS: It is the responsibility of the seller to maintain all records of consignments and call not less than once a month after the 15th to confirm sales, pickups, and contract termination.
11. All transactions and resolutions to disputes will take place in (location).
ALL ITEMS MUST BE RETURNED BY TERMINATION DATE UNLESS CONSIGNMENT IS EXTENDED - NO EXCEPTIONS.
Other sources:
Consignment Contract Forms
Free Consignment Forms
