Are you entering into a consignment agreement with another party? Do you hesitate to sign a consignment agreement because you are unfamiliar with the legal terminologies? Are you bothered by the formation of the consignment agreement and the conditions associated with it?
Do not hold back! This is the time to understand the ins and outs of a consignment agreement and how it can be defined for a formal legal agreement between the two parties. This article will help you step up confidently by explaining all essentials of a consignment agreement.
What Is a Consignment Agreement?
The consignment agreement is rigorously used in numerous businesses. A consignment agreement is signed between two parties regarding the accession of one party to the goods of the other.
The consignment agreement basically is a pact between the two parties when one party provides its supply to the other for the purpose of business as agreed upon by mutual consent. It allows the consignee to utilize the given supply by storing, selling, reselling, or marketing it.
The consignor, forms a pact with the consignee and allows the consignee limited authority onto its good. The authority given to the consignee can include multiple features. The consignee has the choice of dealing with the acquired goods in many ways.
Mostly, the act of dealing with the goods is determined by the supplier or the consignor. The consignor determines how the goods will be managed by the consignee. The parties determine a basic agreement of the way to deal with the given supplies or inventory.
It is important to know that consignee is paid commission in percentage for providing services for the handling of goods.
How to Use a Consignment Agreement?
The consignment agreement can be used in various scenarios to meet your business needs. The way to use a consignment agreement can be divided into a number of factors, which may be described as follows:
The consignor takes the consignee into confidence about the goods in question and common ground is reached regarding their usage and management.
Extra details and precautions are highlighted to ensure that the agreement goes through without any misunderstandings and both parties gain the maximum advantage of the agreement.
The consignee then puts forth the commission or compensation he'll receive by the consignor, in case the deal is seen through as stated in the agreement.
A timeline is made, regarding the procurement of the goods from the consignor by the consignee. A time period is determined for the management of the goods, whether they are to be stored, sold, or resold.
The last step is the payments. It is decided if the payments are to be made in advance, what are the measures that need to be taken in order to make the situation viable and what are the contingency plans.
What Are the Benefits of Having a Consignment Agreement?
There are numerous benefits of using a consignment agreement. The businesses avidly use this agreement in order to manage their capital and inventories. Some major advantages of the consignment agreement are as follows:
- This agreement allows the consignor to have some relief regarding the management of his goods or inventory.
- Moreover, it is beneficial for the business in the sense that it reduces the cost of selling the goods in the market on its own.
- The involvement of a specialized Middle-man or agency, that is solely dealing in one's good, always brings a touch of more relief for the consignor.
- The consignment agreement allows the business to get their goods managed easily for a limited amount of investment.
- The consignor, if he makes a good choice in choosing his consignee, can even make a good brand image for his goods. Gaining goodwill of the customers is a big part of any business, and the consignment agreement can be a reliable way to achieve that.
- Consignment agreements also give exposure to your products. The middle man can be directed to spread the product to far off places. This increases the customer base of a product.
What Are Included in a Consignment Agreement?
A consignment agreement, like all the other legal documents, has well defined legal terms and conditions. It is very important for a business, who is looking to form the consignment agreement for his goods, to fully know the complexities of the agreement.
Here are a few key points to know about the consignment agreement:
- The consignor has many legal rights in the consignment agreement. It might be justified to say that the agreement leans more towards the consignors.
- The consignee will bear the expenses of transportation of the goods of the consignor, after the date of application of the agreement.
- The consignee will also ensure the whole package, as received by the consignor. This means that the consignor has the ease of heart, in case of natural calamities and disasters.
- The consignee can not change the agreement once it’s been agreed upon by both the parties, unless allowed by the consignor to be able to do so.
These were a few things that should be kept in mind while forming a consignment agreement between two parties. There is no need to feel overwhelmed by the details. Get your free copy of the updated consignment agreement template on CocoSign!
The consignment agreements are simple in nature, yet hold immense legal power and usefulness. It allows the authority of goods and inventory, to be shifted from onto the supplier to a middle man in a limited and legal manner.
The consignment agreement between a consignee and consignor has many intricacies that are explained in detail in this article. You can get your free consignment agreement sample at CocoSign to get started!
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