Almost every consignment dispute that sours a relationship or eats an afternoon is something a one-page agreement would have settled before it started. Who set the price. When the payout was due. What happens to the coat that did not sell. Whether you owe the consignor for the necklace that went missing. None of these are exotic problems. They are the predictable friction points of holding other people's property and selling it for them, and the fix is not more goodwill. It is a written agreement, signed at intake, that answers the questions before anyone has a reason to argue about them.

This is the operator's checklist of what that agreement needs to cover. It is not legal drafting, and it is not a substitute for having an attorney review your final document, which you should do. Think of it as the decisions you have to make and write down, in plain language, so that every consignor signs the same clear terms and you never run your program on memory and hope.

The clauses your agreement needs

A good consignment agreement is short, but it is complete. These are the points it should settle, each in a sentence or two of plain English:

  1. Who owns the goods, and until when. State plainly that the consignor keeps title to the item until it sells, that you are holding it for sale on their behalf, and that ownership passes to the buyer at sale (or to the store under the unsold-item terms below). This one line is the backbone of the whole arrangement.
  2. The split. Say exactly what each side keeps, for example a 60/40 or 50/50 division, and whether it varies by category or price. If the commission is tiered, put the tiers in writing so there is never a question at payout.
  3. The consignment period. Define the fixed window an item stays on the floor, commonly 60 to 90 days, and state what triggers when it ends. A defined period is what keeps unsold goods from becoming a permanent problem.
  4. Pricing authority and markdowns. Say who sets the initial price (usually the store, using its judgment) and spell out any automatic markdown schedule during the period, for instance a reduction at set intervals. When the markdown schedule is disclosed and agreed up front, a price cut is never a fight.
  5. What happens to unsold items. Name the default: returned to the consignor within a set pickup window, donated on their behalf, converted to store ownership and cleared, or bought out. State that unclaimed items become store property after a defined notice period. This is the end-of-term question that causes the most back-room clutter when it is left blank.
  6. Payout terms. State when the consignor gets paid, monthly or on request or after a threshold, how they get paid, cash or store credit, and any minimum before a payout is issued. Predictable payouts are what earn you good consignors.
  7. Acceptance standards and the right to refuse. Reserve the right to decline items, to determine condition and category, and to remove anything that does not meet your standard. This protects your floor and your brand from becoming a dumping ground.
  8. Liability for loss, damage, and theft. Address head-on what happens if a consigned item is stolen, damaged, or lost while in your care. Most retail consignment agreements limit the store's liability with clear language, and some address insurance. This is the clause owners most often skip, and the one most likely to cost them, so it deserves its own attention below.
  9. Term and termination. Say how either party can end the arrangement, how much notice is required, and what happens to items still on the floor when it does. A clean exit clause prevents a messy breakup.

The clause owners skip and regret: liability for loss

Everything above is important, but the liability clause is the one that turns a minor incident into a real fight. You are holding merchandise you do not own, on a floor open to the public, for weeks at a time. Some of it will be shoplifted. Some will be damaged. Occasionally something will simply go missing and no one will know how. When that happens, the only thing standing between you and an angry consignor demanding full retail value is what your agreement says.

You are holding goods you do not own, in a public space, for weeks. Decide who bears that risk before it happens.

Most retail consignment agreements set expectations clearly: they describe the store's degree of responsibility, often limit it, and make plain that consignment carries some inherent risk the consignor accepts by participating. Whether you can limit liability, and how, depends on your state and your insurance, which is exactly why this clause should be reviewed by an attorney rather than copied from a template you found online. The mistake is not choosing the wrong words. The mistake is having no words at all, and discovering the gap the first time a consignor's item disappears.

Keep it to one page and plain language

A consignment agreement does not need to read like a mortgage. In fact, the more approachable it is, the better it works, because consignors actually read it, understand what they agreed to, and stop being surprised later. Write each clause in a sentence or two of everyday language, fit the whole thing on a page, and have every consignor sign it at intake before a single item goes on the floor. Consistency is the point: the same terms for everyone means no special deals to remember, no favorites to manage, and no argument that starts with "but you told me something different."

One more practical note. Consignment sits near two areas that carry their own rules: some jurisdictions require a secondhand dealer license or record-keeping for stores that take in used goods from the public, and the tax treatment of consignment sales has its own wrinkles. Those are worth confirming with your attorney and CPA as you set the program up, so the agreement fits inside a compliant operation rather than sitting on top of an open question.

The operator's take

The consignment agreement is the cheapest, highest-return document in a resale operation. It costs you an hour to think through and an attorney's review to finalize, and it saves you every dispute it quietly prevents for years afterward. Decide the split, the period, the pricing and markdowns, the fate of unsold goods, the payout, your right to refuse, the liability for loss, and the exit. Write each in plain language, keep it to a page, sign it at intake, and use the same one with everyone. Do that and consignment becomes what it should be: a low-cash way to stock a great floor, run on clear terms instead of goodwill and guesswork.

Frequently asked questions

What should a consignment agreement include?

At minimum: who owns the goods and until when, the split, the consignment period, pricing and markdown authority, what happens to unsold items, payout terms, your right to refuse items, liability for loss or damage, and how either party ends the arrangement. Keep it to one page in plain language and have an attorney review it.

Who is responsible if a consigned item is stolen or damaged?

That depends entirely on what your agreement says and on your state's rules and your insurance. Most retail consignment agreements address this directly and often limit the store's liability. Because the specifics vary, have an attorney draft or review this clause rather than relying on a generic template.

Do I need a lawyer to write a consignment agreement?

You can decide the business terms yourself using a checklist like this one, but you should have an attorney review the final agreement, especially the liability and unclaimed-property language, because those depend on your state's law.

Should every consignor sign the same agreement?

Yes. Using one consistent agreement for everyone means no special terms to remember, no favoritism, and far fewer disputes. Have each consignor sign it at intake before any item goes on the floor.

Funkhouser Strategy helps independent and mid-market retailers make the calls that move the P&L, resale included, with senior operator judgment and no vendor agenda. This article is general information, not legal advice; have your consignment agreement drafted or reviewed by an attorney licensed in your state.