Consignment involves sending goods from a manufacturer or producer (consignor) to an agent (consignee) in another location to sell the goods. The consignee acts on behalf of the consignor and does not take ownership of the goods. Any losses are borne by the consignor, while the consignee earns a commission from successful sales and deducts expenses before remitting the balance to the consignor. The relationship between the consignor and consignee is one of principal and agent.

1. Consignment

2. ConsignmentConsignment
Consignment can be defined as the act of
sending a quantity of goods by
manufacturers and producers of one
country or place to their agents in another
country or place at the risk of the principal
for the purpose of sale.
Good so sent are called consignment. The
sender of the goods is called consignor.
Generally the manufacturer and procedures
are called consignors. The person to whom
goods are sent for the purpose of sale is
known as the consignee.

3. Cont..Cont..
Good sent on consignment do not become
property of the consignee. He has not
bought them. The ownership remains with
the sender or the consignor.
If the goods are destroyed, the
receiver(consignee) is not at all responsible.
The loss will fall on the consignor.
The consignee tries to sell the goods
according to the instruction of the
consignor.

4. Cont..Cont..
When the goods have been sold, consignee
will deduct his expenses, commission etc,
from the sale proceeds and the balance is
remitted to the consignor.
The relationship between consignor and
consignee is that of principal and agent.
Consignor is principal and consignee is
agent.
The consignee act entirely on behalf of
consignor.

5. Distinction between consignmentDistinction between consignment
and saleand sale
1. In case of sale, the legal ownership of
goods sold is transferred to the
purchaser of goods, whereas in case of
a consignment of goods, the legal
ownership of the goods is not
transferred to the consignee but
ownership of the goods remains with
the consignor till the goods consigned
are sold by the consignee.

6. Cont..Cont..
2. In case of sale of goods, the relationship
between the seller and purchaser of the
goods is that of creditor and debtor,
whereas in case of consignment the
relationship between the consignor and
consignee is that of principal and agent.
3. In consignment, expenses incurred by the
consignee in connection with the goods
consigned to him are usually borne by the
consignor., whereas in case of a sale,
expenses incurred after sale of goods are
borne by the purchaser.

7. Cont..Cont..
4. In case of consignment , risk attached to the
goods consigned lies with the consignor till
the goods consigned are sold by the
consignee. But in case of a sale, risk attached
to the goods sold is transferred to the
purchaser of the goods.
5. In case of consignment, return of goods is
possible if the goods are not sold by the
consignee. But in case of sale, return of
goods is not possible as goods once sold are
not returnable.

8. Cont..Cont..
6. In case of consignment, account sale is
required to be submitted periodically by
the consignee to the consignor. But in
case of sale no account sale is required to
be submitted by the purchaser to the
seller.

9. Important TermsImportant Terms
1. Commission:
Commission is the remuneration of the
consignee for selling the goods of the consignor.
This commission is generally calculated at a rate
percentage on the gross proceeds of sale.
2. Del credere commission:
It is an extra commission paid to consignee for
his guarantee of realization of debts in full, in
connection with the credit sale of goods on
consignment.

10. Cont..Cont..
Good may be sold by consignee either
for cash or on credit, When the goods
are sold on credit the consignee may
guarantee that consignor will be paid fully
and consignor will be liable to indemnify
the consignor for all the bad debts.
In such case the consignor pays the
consignee an extra commission for his
guarantee, this extra commission is called
Del Credere commission.

11. Cont..Cont..
3. Advance against consignment
Usually consignee is asked to accept a bill of
exchange to cover the part of the value of the
goods consigned. This is a guarantee that
when the sales are effected , he will make the
payment.
Instead of bill of exchange, the agent may
remit a sum of money to the principal as an
advance. This advance or the amount of the
bill of exchange is adjusted when the goods
are sold.

12. Cont..Cont..
4. Pro forma Invoice
When the consignor sends the goods to
consignee, he forward a statement showing the
particulars such as quantity, quality, price of goods
etc. This statement is called pro forma invoice.
5. Account sale:
An account sale is a statement prepared and
sent by consignee to consignor at periodical
intervals, specifying the goods sold, price realized,
expenses incurred, commission payable and the
net amount due from the consignor.