Consignment agreement template

Managing consignment agreements can be complex and time-consuming. Using a consignment agreement template simplifies this process, ensuring that all necessary terms are included and that the agreement is legally sound. This article explores consignment agreements in detail and provides insights into how you can streamline their management with Juro's contract management platform.

What is a consignment agreement?

A consignment agreement is a contract between two parties, wherein one party (the consignor) provides goods to the other party (the consignee) to sell on their behalf. The consignor retains ownership of the goods until they are sold, at which point the consignee takes a commission or fee from the sale proceeds.

This arrangement benefits both parties: the consignor can reach new markets without the risk of unsold inventory, and the consignee can offer a wider range of products without upfront costs.

When are consignment agreements used?

Consignment agreements are used in various scenarios, each serving distinct business needs. The following scenarios highlight how consignment agreements provide flexibility and reduce financial risk, making them a strategic tool for businesses looking to optimize their inventory management and expand their market reach:

• New product launches. Allows testing market response without significant financial investment. For example, a tech startup may consign its latest gadget to multiple electronics stores to gauge consumer interest before committing to large-scale production.
• Seasonal products. Helps manage inventory for products with fluctuating demand, ensuring availability during peak seasons without overstocking. For instance, a store might consign holiday decorations to ensure ample supply during the festive season, then return unsold items afterward.
• Unsold inventory. Moves unsold stock to different locations or markets, increasing the chances of sale and reducing storage costs. For example, a clothing manufacturer might consign surplus inventory to outlet stores in different regions to clear out last season’s styles.

Who manages consignment agreements?

Consignment agreements are typically managed by several key parties within a business or organization, each with specific roles and responsibilities. By involving these various roles, businesses ensure that consignment agreements are effectively managed, resulting in smooth operations and successful partnerships between consignors and consignees.

Consignor (goods owner)

The consignor – who owns the goods – initiates the consignment agreement. They manage the selection of items to be consigned, set pricing guidelines and oversee the delivery of goods to the consignee. The consignor also tracks inventory levels and coordinates the return or replenishment of unsold items.

Consignee (seller)

The consignee – who sells the goods – is responsible for displaying, marketing and selling the consigned items. They manage sales transactions, provide sales reports to the consignor and handle customer interactions. The consignee also ensures proper storage and maintenance of the consigned goods while they are in their possession.

Inventory managers

Inventory managers on both sides (the consignor’s and the consignee’s) play a critical role in tracking the movement of goods. They monitor stock levels, manage inventory records and ensure accurate reporting of sold and unsold items. Effective inventory management helps prevent stockouts and overstock situations.

Financial and accounting teams

Financial and accounting teams handle the financial aspects of consignment agreements. They manage invoicing, payment processing and commission calculations. They also ensure that all financial transactions are recorded accurately and comply with relevant accounting standards.

Legal teams

Legal teams draft and review consignment agreements to ensure they are legally sound and protect the interests of both parties. They handle any disputes or legal issues that may arise during the term of the agreement.

Sales and marketing teams

Sales and marketing teams on the consignee’s side are responsible for promoting the consigned goods to maximize sales. They develop marketing strategies, create promotional materials and execute sales campaigns to attract customers.

Customer service teams

Customer service teams handle inquiries and issues related to consigned goods. They provide support to customers, process returns or exchanges, and address any complaints or concerns.

What should a consignment agreement template include?

A comprehensive consignment agreement template should cover the following elements:

Parties involved. Identify the consignor (owner of the goods) and the consignee (seller of the goods), including their legal names and contact information.

Effective date. Specify the start date and, if applicable, the end date of the agreement.

Description of goods. Provide a detailed description of the goods being consigned, including quantities, specifications and any identifying information like serial numbers or stock-keeping unit (SKU) numbers.

Pricing and payment terms. Outline the pricing strategy for the goods, payment terms, commissions, fees, or any other deductions.

Consignment period. Define the duration for which the goods will be held on consignment and any conditions for extending or terminating the consignment period.

Delivery and acceptance. Detail the process for delivering the goods to the consignee, including shipping costs and inspection upon delivery.

Inventory management. Specify how inventory will be tracked and reported, including the frequency of inventory reports.

Sales and returns. Outline the consignee’s responsibilities for selling the goods and the return policy for unsold goods.

Risk and liability. Define the responsibilities regarding the risk of loss, damage or theft of the goods, and any insurance requirements.

Termination clause. Describe the conditions and notice periods for terminating the agreement by either party.

Dispute resolution. Outline the process for resolving disputes, such as mediation, arbitration or legal action.

Confidentiality. Address confidentiality requirements related to the agreement and handling of proprietary information.

Governing law. Specify the jurisdiction and governing law that will apply to the agreement.

Signatures. Provide space for the signatures of both parties, along with the date of signing, to formalize the agreement.

How are consignment agreements typically managed?

Managing consignment agreements manually involves a series of meticulous steps to ensure all contractual obligations are met and both parties remain satisfied. Here’s how it can be done:

1. Document creation and signing

• Draft agreement: Prepare the consignment agreement, detailing all terms, including pricing, payment terms, delivery schedules and responsibilities.
• Review and approve: Review the agreement with both parties to ensure mutual understanding and agreement on the terms.
• Sign and store: Secure signatures from both the consignor and consignee, then store the signed document securely, both physically and digitally.

2. Agreement implementation

• Delivery of goods: When goods are delivered, the consignee should verify the shipment against the contract's terms and the delivery note, recording details such as quantities and conditions of items received.
• Inventory records: Maintain a manual ledger (or digital equivalent) to track consigned inventory, documenting details like item descriptions, quantities, and receipt dates.

3. Sales management

• Sales documentation: Track each sale of consigned goods, noting the date of sale, item description, quantity sold, and sale price. This information should be recorded in a dedicated sales log.
• Reporting: Regularly (e.g., monthly) prepare sales reports summarizing all transactions, and share these with the consignor to provide transparency and track performance against the agreement.

4. Payment processing

• Invoicing: Based on the sales reports, generate invoices for the consignee to remit payments to the consignor. The invoices should detail sold items, their selling prices, commissions or fees deducted, and the net amount due.
• Payment tracking: Maintain records of all payments made to the consignor, updating the inventory and financial records accordingly.

5. Returns and unsold inventory

• Review inventory: Periodically assess the consigned inventory to identify items that have not sold within the agreed timeframe.
• Return process: Coordinate the return of unsold goods to the consignor, documenting the return dates, quantities and condition of the items as per the agreement’s terms.

6. Regular communication

• Updates: Schedule regular communications, such as monthly meetings or calls, to discuss sales performance, inventory levels and any issues arising from the consignment arrangement.
• Issue resolution: Promptly address any disputes or concerns, documenting the resolution process and any agreed modifications to the contract.

7. Compliance and record-keeping

• Document storage: Maintain organized files of all contract-related documents, including the original agreement, amendments, inventory logs, sales reports, invoices and communications.
• Audits: Conduct periodic audits of inventory and financial records to ensure compliance with the consignment agreement and to verify the accuracy of reported data.

By diligently following these steps, businesses can effectively manage consignment agreements manually, ensuring that all contractual terms are adhered to and that both the consignor and consignee are kept informed and satisfied with the arrangement.

Automate consignment agreements with Juro

Managing consignment agreements effectively is crucial for businesses that need to track inventory and maintain clear terms with consignors. Juro’s AI-native contract management platform offers several advantages for handling these agreements:

Streamlined contract creation and execution

Juro’s platform simplifies the creation and execution of consignment agreements. Using automated contract templates, legal and business teams can quickly draft agreements, ensuring all necessary terms and conditions are included. This accelerates the process, reducing the time spent on administrative tasks.

Collaborative workflows

Juro allows for real-time contract collaboration within a single, browser-native workspace. Teams can work together on the same document, making edits, adding comments and tracking changes seamlessly. This collaborative approach ensures that all stakeholders are aligned and any issues are resolved promptly, leading to faster agreement finalization.

Self-serve capabilities

Empower business teams to self-serve on consignment agreements. Sales or procurement teams can generate and manage agreements from the systems they already use, without needing constant legal oversight. This reduces bottlenecks and frees up legal teams to focus on more complex tasks.

Automated contract workflows

Automate the entire lifecycle of consignment agreements with Juro’s workflow tools. From initial drafting to approval and signature, each step can be automated, ensuring consistency and compliance. Automated reminders and notifications keep the process on track and help avoid delays.

Centralized contract repository

Store all consignment agreements in one secure, dynamic repository. This centralized storage provides easy access to contracts, enabling quick retrieval and review. With advanced search and filter capabilities, teams can find specific agreements or clauses effortlessly, so nothing gets overlooked.

Enhanced insight and reporting

Juro’s platform offers robust reporting tools that provide insights into contract performance and risks. Track key metrics such as inventory levels, sales performance, and compliance with consignment terms. These insights help businesses make informed decisions and optimize their consignment strategies.

Risk management and compliance

Maintain compliance and manage risks effectively with Juro’s AI-powered tools. Identify and mitigate potential risks in consignment agreements by setting up automated alerts for key dates, such as renewal or termination dates. This proactive approach minimizes the risk of non-compliance and financial loss.

Benefits of automating consignment agreements with Juro

Implementing Juro’s platform for managing consignment agreements provides several benefits:

• Increased efficiency – Automating repetitive tasks and reducing the need for manual intervention speeds up the contract management process.
• Improved accuracy – AI-powered drafting and review minimise the risk of errors and ensure compliance with legal standards.
• Enhanced collaboration – Real-time collaboration features enable stakeholders to work together more effectively, reducing delays and misunderstandings.
• Greater visibility – A centralised repository and real-time analytics offer complete visibility into contract statuses and performance, making it easier to manage deadlines and obligations.
• Scalability – Juro’s platform supports businesses as they grow, allowing them to handle increasing volumes of consignment agreements without compromising on efficiency or accuracy.

From AI-powered drafting to centralised storage and real-time analytics, Juro helps businesses streamline their consignment agreements, allowing them to focus on growth and innovation.

Juro's AI-native contract automation platform empowers all teams to create, agree, execute and manage contracts up to 10x faster than traditional tools. To find out more, hit the button below to book your personalized demo.