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A Consignment Agreement is a crucial legal document that allows you to sell goods through third parties while maintaining ownership until the final sale occurs. Under Australian law, this arrangement creates specific legal relationships and obligations that must be properly documented to protect all parties involved. Whether you're an artist placing works in galleries, a manufacturer distributing through retailers, or a business owner expanding your market reach, understanding the legal framework is essential for successful consignment relationships.

When do you need this document?

You need a Consignment Agreement whenever you want to place your goods with another party for sale without transferring ownership immediately. This is particularly common in art galleries where artists consign paintings or sculptures, retail stores selling luxury goods or specialty items, and manufacturing businesses distributing products through various outlets. The agreement is also essential when you're a consignee receiving goods from suppliers, as it clarifies your responsibilities for care, insurance, and sales reporting. Without proper documentation, disputes can arise over commission rates, liability for damaged goods, and ownership rights if the consignee faces financial difficulties.

Key legal considerations

Several critical legal issues must be addressed in your Consignment Agreement. First, you must clearly establish that the arrangement is a consignment rather than a sale, as this affects ownership rights and tax obligations. The agreement should specify commission structures, payment terms, and detailed procedures for handling unsold goods. Risk allocation is crucial - you need to determine who bears responsibility for theft, damage, or loss of consigned goods. Insurance requirements must be clearly defined, including minimum coverage amounts and who maintains the policies. The agreement should also address termination procedures, including how quickly goods must be returned and in what condition. Marketing and pricing restrictions help protect your brand while giving the consignee reasonable flexibility to sell effectively.

Legal requirements in Australia

Australian law imposes specific requirements that your Consignment Agreement must address. Under the Personal Property Securities Act 2009 (PPSA), consignment arrangements often create security interests that must be registered to protect the consignor's rights against third parties. Failure to register can result in loss of ownership rights if the consignee becomes insolvent. The Australian Consumer Law requires fair trading practices and may affect terms related to consumer sales, warranties, and refunds. State-based Goods Acts govern the sale of goods and impose certain statutory conditions that cannot be excluded. GST implications under A New Tax System (Goods and Services Tax) Act 1999 must be clearly addressed, including who is responsible for GST registration, collection, and remittance. The agreement should specify ABN requirements and ensure compliance with business registration obligations in the relevant state or territory.