Consignment and Sale
Consignment: In a consignment arrangement, an owner (consignor) gives possession of goods to another party (consignee) who attempts to sell them. The consignor retains ownership until the goods are sold. The consignee typically earns a commission on the sale but never owns the inventory. If items don’t sell, they’re returned to the consignor. The consignee acts as an agent for the consignor.
Sale: In a sale transaction, ownership transfers immediately from seller to buyer upon payment. The buyer takes full ownership and assumes all risks and benefits associated with the goods. The original seller no longer has any claim to the items once the sale is complete. The transaction is direct, with no third party involved.
Key Differences:
- Ownership: In consignment, ownership stays with the consignor until sold; in a sale, ownership transfers immediately.
- Risk: In consignment, the consignor bears most risk; in a sale, the buyer assumes all risk.
- Payment: In consignment, the consignee pays the consignor only after goods sell; in a sale, payment happens at the time of transaction.
- Return rights: Unsold consigned goods return to the consignor; sold goods generally don’t return to the seller.