How to Write a Consignment Contract Properly

by Contributor; Updated September 26, 2017

A consignment contract spells out the relationship between a store owner and a consignor. It's a map of sorts for consignors about what to bring in and when, how much to bring in, what the split is, what happens to items at the end of the consignment cycle and how and when payment is given. If you are interested in a consignment business, or you currently have one and want to revise your contract, follow some easy tips to let clients know what you expect in your shop.

Step 1

Determine the length of time for each consignment. Most stores have a 60- or 90-day cycle. Also figure out what the consignment split will be. Some shops operate at a 50/50 split, but many operate at a 60/40 split (the shop keeping 60 percent of the sale, the consignor getting 40 percent). Come up with different splits for different circumstances, if necessary. For example, if someone consigns her hand-beaded jewelry, you might give her 70 percent and keep 30 percent, since she is paying for all of the supplies and doing the work. Some furniture items or more expensive items may deserve a different split as well. You can make your own rules, but always make it fair and worthwhile to the consignor, since that is how you get your inventory.

Step 2

Note what you take in for consignment (ladies, children's, home decor, etc.), how you want items presented (washed or dry-cleaned and free of all stains, holes, broken buttons or zippers, too much wear or major flaws), and how many items can be brought in at a time (this will keep your shop tidy and not overloaded). Also note the days you accept consignments. Some shops only allow drop-offs at certain hours on certain days; some require an appointment.

Step 3

Let the consignor know what happens to her items if they go unsold. You might have a local charity pick up items once or twice a month for donation. You can also give consignors the option of picking up what didn't sell. If you allow the consignor to pick up unsold items, make sure to include the process in the contract. Some shops allow consignors to pick out their unsold items by going through shop inventory lists. You could also pull the items for a small fee.

Step 4

Address payment options. Explain how you pay for sold items and when the consignor can collect payment. For example, the consignor could pick up a check at the end of the consignment period, or she could use the money in her account for store credit to purchase something.

Step 5

Reserve an area at the bottom of the contract for the consignor to sign her name. You should also sign it and date it. This will help make it a legally binding contract.

Tips

  • Stop into other consignment shops and ask to see their contracts for more ideas. You should never have set prices, so don't include them in the contract. Prices should be based on brand name, retail costs and condition of each item.

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