Consignment: what is this form of selling goods?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Consignment agreement is a document that is concluded for the purchase / sale in foreign trade. It is not directly provided for by the legislation of the Civil Code of the Russian Federation. By legal essence, this agreement is mixed (clause 3 of article 421 of the Civil Code of the Russian Federation). The parties, in accordance with this document, agree on the rules, the elements of which are contained in a mixed contract. Basically, the consignment agreement defines the relationship between the supplier (seller) and the distributor (buyer). For this reason, the provisions of the Civil Code of the Russian Federation on the supply contract can be applied to it.

This document also contains elements of a commission agreement. Usually it contains signs of a storage agreement, in the event that the goods will be stored in a warehouse with third parties. In some cases, the consignee acts as the responsible custodian. The contract for the consignment of goods may also contain some elements of the agreement for the provision of services -market monitoring, marketing, shipping, forwarding and so on.

The term "consignment"

This term has many meanings. This word can be called a document, a special procedure for the delivery and payment of goods, an intermediary agreement, an agency contract, and much more. Due to the extensive interpretation of the term "consignment" - what it is, in fact, can be difficult to determine. Sometimes this leads to litigation. This can be explained by business practices. If consignment is defined in the subject of the contract, then all interested parties will clearly understand what their obligations are, but if the specific terms of cooperation are not specified, then it becomes unclear how the concluded agreement differs, for example, from a commission or a delivery.

Consignment as a form of selling goods

Consignment should be considered as a form of sale of goods, in which the owner of the goods transfers it for further sale to the buyer. At the same time, the supplier remains the owner of the products delivered to the consignee throughout the entire period the goods are with the latter. The consignment agreement for the sale of goods must clearly define this point. That is, this definition or any other similar one should definitely be reflected in the text of the agreement itself.

What is the advantage of a consignment agreement

An agreement to sell a product, in which ownership of the product remains with the supplier, is called a consignment. What is itnot an ordinary delivery, of course. That is, the buyer does not become the owner of the delivered products at the time of its transfer to him. It turns out that the exporter will always be able to withdraw from the consignee the unsold goods from the warehouse, if the latter turns out to be an insolvent counterparty. This is the advantage of choosing such an agreement.

Features of payment for goods when they are transferred under a consignment agreement

Payment for delivered products is made on receivables, that is, in installments. In some cases, price collusion, unilateral refusal of fulfilled obligations, punitive agreements and other measures are chosen as a way to secure obligations.

Terms of Agreement

The consignment agreement may contain conditions not only for the sale, storage, but also for the promotion of goods in a certain territory. In this case, sales representatives are in direct contact with points of sale on the sale of goods. Employees of either the supplier or the buyer act as sales representatives. It is allowed to involve intermediaries with whom a contract for the provision of services and a document on liability are concluded.

Often, the consignment, which is already known in commercial practice, includes conditions that provide for the procedure for advertising the goods. The following can be attributed here: the implementation of drawings, tastings, test drives and other promotional activities with the participation of interested consumers. The agreement also reflectsconditions on the time and place of the advertising campaign, on controlling the availability of goods at the outlet, its display, and so on.

Agreement Forms

There is a simple, partially returnable and irrevocable consignment. What are these forms and how do they affect the organization of the sale of goods? Partially returnable consignment implies the obligation of the buyer to buy back from the supplier an agreed quantity of unsold goods. The irrevocable form does not give the consignee the right to return the unsold goods, they must be redeemed by them in full.

However, the problem of guaranteed sales will not be solved with the help of the consignment form. It is clear that if the consignee fails to successfully sell the goods, then the partners will analyze the current situation to determine the cause of the failure. As a rule, the main factor of low demand is the non-competitiveness of products - insufficient technical level of the product, high prices, and much more.