Consignors

A consignor is the owner of goods that are delivered to another party, the consignee, for sale on the consignor’s behalf. In a typical consignment arrangement, the consignor retains legal title and most risks of ownership while the goods are held by the consignee; title transfers to a customer only when the sale occurs.

The consignee acts as an agent or retailer, responsible for storing, displaying, marketing, and selling the goods. The consignee usually collects the sale proceeds and then remits the agreed portion to the consignor, keeping a commission or fee for services rendered. Unsold items may be returned to the consignor or handled according to the contract, which may include extensions, price adjustments, or other arrangements.

Financial and accounting considerations: Usually the consignor keeps ownership and records the inventory on hand until sale; revenue from a sale is recognized by the consignor when the sale to the end customer occurs, while the consignee earns a commission and remits the remaining funds to the consignor. The consignee generally does not own the inventory for accounting purposes and may record a liability for cash collected until it is remitted. The contract may specify markdowns, reserve prices, or return rights for unsold items.

Legal and contract terms: Consignment agreements define duration, exclusivity, pricing, responsibilities for insurance and damage, and procedures for returns or disposal of unsold goods. They address risk of loss in transit, liability for damaged or counterfeit items, and dispute resolution over payments.

Applications: Consignments are common in retail, art galleries, bookstores, and online marketplaces, especially when sellers wish to test demand or minimize upfront inventory costs.