Selling on Consignment in the United States

Introduction

Many small business people, especially those who produce art, crafts, and specialty clothing
items, sell on consignment. In a consignment agreement, the owner of goods (the consignor)
puts the goods in the hands of another person or business—usually a retailer (the
consignee)—who then attempts to sell them.

If the goods are sold, the consignee receives a fee, which is usually a percentage of the purchase price, and the rest of the money is sent to the consignor. For example, a sculptor (the
consignor) might place a work for sale at an art gallery (the consignee) with the understanding
that if the artwork sells, the gallery keeps 50% of the sale price. Or a homeowner might leave
old furniture with a resale shop that will keep one-third of the proceeds if the item sells.

Typically, the consignor remains the owner of the goods until the consignee sells them.

Insurance Policy

As part of any consignment of valuable items, the consignor (owner) wants to be
protected if the goods are lost or stolen while in the consignee’s possession. The key here
is to make sure that the consignee has an insurance policy that will cover any loss. When
extremely valuable items are being consigned, it’s often appropriate for the consignor to be
named as a coinsured who can receive a share of the insurance proceeds if a loss occurs.

Loss of “personal property of others”

The consignee should check his/her insurance coverage. Before he/she accepts the risk of loss
or theft, it is important that he/she makes sure his/her business insurance policy covers him/her for loss of “personal property of others” left in his/her possession—and that the amount of coverage is adequate.

Endorsement

Getting full reimbursement for the selling price of consigned goods may require an
added supplement (called an endorsement) to his/her insurance policy. Check with an
insurance agent or broker.

Main Source: “Selling Goods and Services on Consignment”, Nolo ’s Encyclopedia of everyday law