The email arrives on a Tuesday. The gift shop that has carried your candles for eighteen months is closing at the end of the week. "Anything not picked up by Saturday will be included in the liquidation." You count from memory. Somewhere between 30 and 40 candles, a dozen tins, and the matching gift sets you never quite wrote down. They also owe you for two months of sales they never reported.
You have a handshake, a friendly owner, and a box of receipts. You do not have a piece of paper that says those candles are yours.
A consignment agreement is that piece of paper: a written contract between a maker and a shop that fixes what was delivered, the retail price, the commission and what it is calculated on, when you get paid, who owns the stock, who pays for theft, who collects sales tax, and how unsold pieces come back. Below is a complete template you can copy, written for makers placing finished goods in shops, cafés, galleries and boutiques. Each clause comes with two notes: what it protects, and the record that makes it enforceable. That second note matters more than the wording, because an agreement that says "the shop pays for stolen items" is worthless if you cannot prove what was on the shelf.
Before you start: this post covers the agreement itself. If you are still deciding whether to accept consignment at all, the wholesale pricing guide explains how consignment differs from wholesale and when the split is worth it. If you have signed and need to track the stock, the multi-location inventory guide walks through the setup.
How to use this template
The wording to copy for each clause is in the quoted block under its heading. Copy the ten clause blocks in order, Clause 1 through Clause 10 with its signature lines: that is the agreement. Schedule A, under Clause 2, is a separate page with its own header, table, total and signatures. Copy it once for every delivery and attach it.
Replace everything in square brackets. A bracketed number is a suggested default you can change, a bracket with a slash ([6 / 12]) means pick one, and a bracket holding a word such as [date] is something you fill in. Delete any option you do not use, and keep a signed copy each.
Three rules make it work:
- Fill in numbers, not adjectives. "Payment promptly after sale" invites an argument. "Payment by the 15th of the following month" does not.
- Attach the inventory schedule every time. Clause 2 does most of the work in this agreement, and it only works if every drop-off gets its own signed list.
- Read it with the shop owner, not at them. Most shop owners who take consignment want a clear agreement too. Unclear terms cause their disputes as well as yours.
The consignment agreement is one of ten documents in the free Legal Documents Every Maker Should Have checklist, if you want to see where it fits alongside your shop policies and custom-order contract.
Clause 1: Parties and term
CONSIGNMENT AGREEMENT
1. Parties and term. This agreement is between [Your business name] ("Consignor") and [Shop legal name], doing business as [Shop trading name] at [Shop address] ("Consignee"). It begins on [start date] and runs for [6 / 12] months. It renews automatically for the same period unless either party gives written notice at least [30] days before the end of the term.
What it protects. Two easy-to-miss details. Use the shop's legal name as well as the name on the sign, because the trading name is often not the entity you would have to chase for money. And give the agreement an end date. An open-ended arrangement tends to drift: pieces sit for two years, prices go stale, and nobody can remember what was agreed.
The record behind it. The signed agreement itself, stored somewhere you can find it in two years. Note the renewal date in your calendar so the agreement doesn't renew without you deciding.
Clause 2: The inventory schedule
2. Items. The Consignor will deliver the items listed on a signed Inventory Schedule (Schedule A). Each delivery gets its own Schedule A listing, for every item: description, SKU or item code, quantity, and the retail price. Both parties sign and date each Schedule A at drop-off. The Consignee will count items on receipt and note any damage on the schedule before signing. Items not listed on a signed Schedule A are not covered by this agreement.
What it protects. Everything else. Theft claims, payment disputes, the shop-closure scramble from the opening: each one comes down to the question what did you leave there? A signed, itemized list answers it. "Assorted candles" does not. Twelve 8 oz Cedar & Smoke candles at $28 does.
The last sentence protects the shop as much as you. It stops a later "I also dropped off some tins" argument in either direction.
The record behind it. Two records, and they must agree:
- The paper (or photographed) Schedule A with both signatures.
- Your own inventory showing those exact units moved from your workshop to that shop on that date. Consigned stock is still yours, so it should never disappear from your books at drop-off. It changes location.
That second record is the easy one to get wrong, because a spreadsheet tends to treat "left the workshop" as "sold". In Ardent Seller each shop is its own location and every drop-off is a transfer, so the stock still counts as yours, on that shop's shelf, until a sale is recorded there. The free plan includes two locations, enough for your workshop and your first consignment shop.
Schedule A: copy one for every delivery
SCHEDULE A: INVENTORY SCHEDULE
Delivery no. [delivery number]. Date: [date]. Consignor: [Your business name]. Consignee: [Shop legal name].
| Description | SKU | Quantity | Retail price each | Line total | Condition on receipt |
|---|---|---|---|---|---|
| Example: 8 oz candle, Cedar & Smoke | CND-8-CS | 12 | $28.00 | $336.00 | Good |
| [next product] | [SKU] | [quantity] | [price] | [line total] | [condition] |
Delete the Example row before you print, and add one row per product in the delivery.
Total retail value of this delivery: [total]
Consignor signature: [signature]. Name: [printed name]. Date: [date].
Consignee signature: [signature]. Name and title: [printed name, title]. Date: [date].
The total line earns its place twice: it is what you claim if the delivery goes missing, and it tells you whether the delivery crossed the $1,000 line discussed under Clause 6.
Clause 3: Retail price and discounts
3. Pricing. Items will be sold at the retail price on Schedule A. The Consignee may not sell any item below that price, or include it in a sale, promotion, or bundle discount, without the Consignor's written approval (email is enough). The Consignor may change a retail price with [14] days' written notice.
What it protects. Your price, and with it your relationship with every other place you sell. A shop that quietly marks your candles down 30% for a holiday weekend is now undercutting your own website and any wholesale account you have nearby.
Allowing approval by email matters in practice. Shops sometimes have a good reason to discount (a slow-moving scent, a sidewalk sale), and you want a yes or no in writing within the hour, not a formal amendment.
The record behind it. The approval emails, filed with the agreement. When a monthly report shows a sale below list price, you can check it against the approvals.
Clause 4: Commission, and what it is calculated on
4. Commission. For each item sold, the Consignee keeps a commission of [40]% of the price actually paid by the customer, excluding sales tax, and the Consignor receives the rest ([60]%). If an item is sold below its Schedule A price without the Consignor's written approval, the Consignor's share is calculated on the Schedule A price instead. Card processing fees: [Option A: the Consignee absorbs them. / Option B: fees of up to [3]% of the sale price may be deducted from the Consignor's share.] No other fees, display charges, or deductions apply unless added to this agreement in writing.
If you change the commission percentage, change the Consignor's percentage to match.
What it protects. The split percentage gets most of the attention when you negotiate, but the base it is calculated on matters just as much. Work through it with an illustrative $28 candle and a 60/40 split:
| What the shop charges | Commission base | Your share |
|---|---|---|
| $28.00 full price | Price actually paid | $16.80 |
| $22.40 after an approved 20% sale | Price actually paid | $13.44 |
| $22.40 after an unapproved 20% sale | Your Schedule A price (Clause 4's second sentence) | $16.80 |
| $28.00 + $2.31 sales tax collected | Price including tax (wrong base) | $18.19, of which $1.39 is sales tax that belongs to the state, not you |
The last row is the one that causes trouble later. Sales tax isn't revenue for either of you. It belongs to the state. Calculating a split on a tax-inclusive total muddles who owes what to the revenue department, which is why the template excludes it explicitly.
The final sentence closes a door shops sometimes open later: a monthly "display fee" or "shelf rent" added to a pure-commission arrangement. Some shops do charge shelf rent openly, and that is a legitimate model. It just has to be in the agreement from the start.
The record behind it. Your listed price per SKU (Schedule A), and the shop's monthly report showing the price actually paid. Clause 5 makes the shop produce that report.
Clause 5: Sales reports and payment
5. Reporting and payment. By the [15th] day of each month, the Consignee will send the Consignor a written sales report for the previous month listing, for each item sold: description, SKU or item code, date sold, and price paid. Payment of the Consignor's share is due with the report, by [bank transfer / check / other]. If nothing sold, the Consignee still sends a report stating that. Payment more than [15] days late is a breach of this agreement under Clause 10.
What it protects. Your cash flow, and your ability to spot a problem early. The "still send a report if nothing sold" line looks fussy. It's the most useful sentence in the clause, because a shop that goes quiet usually has a reason, and you want to hear about it in month two, not month six.
The record behind it. Every report, reconciled against your own count for that shop. The check: units delivered, minus units reported sold, minus units you collected or the shop returned (Clause 8), minus units the shop paid out as lost, should equal what is on the shelf. When you visit, count the shelf. A gap means a sale that wasn't reported, a theft, or a miscount, and Clauses 5 and 7 tell you whose problem each one is.
Recording each reported sale against that shop's location keeps the reconciliation running as you go, rather than a once-a-year archaeology project. It also tells you something about the shop: a location where a dozen candles have sat unsold for 90 days is a placement worth renegotiating or ending.
Clause 6: Ownership and the money from sales
6. Ownership. The Consignor owns all consigned items until each item is sold to a customer. The Consignee may not sell, pledge, lend, or use any item as security for a loan, and holds the Consignor's share of each sale for the Consignor until paid. If the Consignee closes, sells the business, enters bankruptcy, or stops trading, the Consignee will notify the Consignor within [2] business days, and the collection and payment deadlines in Clause 10 apply as if the agreement had been terminated on the day the event occurs.
What it protects. This is the clause that matters in the opening scene, and it is also the one where the agreement can do the least on its own. You need to know that before you rely on it.
In plain terms: hand $1,200 of candles to a general gift shop that mostly sells its own bought-in stock, and if that shop's lender or bankruptcy trustee comes for its inventory, your candles may be swept up with it unless you have perfected your interest. That usually means filing a UCC-1 financing statement with the state before delivery.
The legal basis, under the model Uniform Commercial Code that each state adapts:
- The definition. UCC § 9-102(a)(20) (opens in new tab) treats a delivery as an Article 9 "consignment" when, among other conditions, the goods are worth $1,000 or more in that delivery and the shop is not generally known by its creditors to be substantially engaged in selling the goods of others.
- The effect on creditors. For that kind of consignment, § 9-319 (opens in new tab) says that, as far as the shop's creditors are concerned, the shop is treated as having the same rights to the goods you had.
- Your interest. § 9-103(d) (opens in new tab) treats your interest as a purchase-money security interest in the shop's inventory. If a lender has already filed a financing statement covering that kind of inventory, § 9-324(b) and (c) (opens in new tab) give your filed interest priority over that lender only if you also send it an authenticated notice, stating that you have or expect to acquire a purchase-money security interest and describing the goods, that it receives within the five years before the shop receives them.
Three things follow:
- Smaller deliveries, and shops known for consignment, fall outside that definition. Other law in your state governs them instead, and how it treats a shop's creditors is not something a template can settle. That is one more reason the ownership language above should be explicit.
- Some states protect artists by statute. California's consignment law, for example, makes fine art consigned to an art dealer trust property that the dealer's creditors cannot claim, makes the sale proceeds trust funds, makes the dealer responsible for loss and damage, and voids any waiver of those rights (Cal. Civ. Code §§ 1738.6 and 1738.8 (opens in new tab)). But its definition of fine art covers paintings, sculpture, drawings, graphic art, calligraphy and mixed media (§ 1738 (opens in new tab)), not candles, soap or most functional craft. Check whether your state has a similar law and whether your work qualifies.
- The model code is a model. Each state enacts its own version. For a placement large enough that losing it would hurt, a short consultation with a local attorney about whether a UCC-1 filing is worth it costs far less than the stock.
The record behind it. The signed Schedule A for every delivery, with its total retail value. Without it, you cannot show which items were yours or whether a delivery crossed the $1,000 line.
Clause 7: Loss, theft, and damage
7. Risk of loss. From the time the Consignee signs a Schedule A until each item is sold or collected by the Consignor, the Consignee is responsible for loss, theft, and damage to the items, however caused, and will pay the Consignor's share of the retail price for any item that cannot be returned in sellable condition. The Consignee [will / is not required to] carry insurance covering consigned goods.
What it protects. Shoplifting, a knocked-over display, a leaking roof. Without this clause, who bears a theft or a breakage depends on your state's law and on how a court characterizes the arrangement, and the answer is often unclear. Do not rely on the default: write the allocation down.
Expect pushback here. Some shops will only accept consignment if the maker carries the risk, and that may be a trade worth making for a good location. If you agree, write it down rather than leaving it vague, and price the risk in: a shop that won't cover theft should earn a smaller commission.
Paying your share (not the full retail price) for lost items is the fair middle position. You get what you would have earned had it sold, and the shop doesn't lose its commission twice.
The record behind it. The signed Schedule A, plus the shelf counts from your visits. A theft claim is a reconciliation gap with a date range attached. The tighter your counts, the smaller that range.
Clause 8: Display, care, and pulling stock
8. Display and returns. The Consignee will display items in a reasonable, visible location and keep them clean and undamaged. The Consignor may collect any or all unsold items at any time with [7] days' notice. The Consignee may return any unsold item to the Consignor after [90] days on display, with [14] days' notice. Both parties sign a list of the items whenever stock is collected or returned.
What it protects. Two-way flexibility. You can pull stock for a craft fair, a wholesale order, or a shop that isn't selling. The shop can clear slow movers instead of letting them collect dust. The 90-day mark is a sensible default: long enough for a seasonal cycle, short enough that unsold pieces don't sit until they look tired.
The record behind it. The signed return list: a copy of Schedule A titled "Return list", with "Return no." in place of "Delivery no." and "Condition on return" as the last column. Then record a transfer back to your workshop every time stock comes home, so your count for that shop drops on the same day the shelf empties.
Clause 9: Sales tax
9. Sales tax. The Consignee will collect and remit all sales tax due on sales of consigned items under its own sales tax registration, unless the parties agree otherwise in writing.
What it protects. You, from a liability you didn't know about. The shop makes the retail sale, so it is generally the one that collects the tax. Washington's rule is explicit: every consignee selling property belonging to another "is deemed a seller, and shall collect the retail sales tax." The owner may report and pay the collected tax itself only when it is in the business of selling, the sale is made in its name, and it continues in business (WAC 458-20-159 (opens in new tab)). Other states have their own versions of the rule, so check your state's revenue department guidance before you rely on this default.
The record behind it. The monthly reports. They should show sales before tax, which is also the base your commission is calculated on in Clause 4.
Clause 10: Ending the agreement
10. Termination. Either party may end this agreement with [30] days' written notice. Either party may end it immediately if the other breaches it and does not fix the breach within [7] days of written notice. On termination, the Consignee will make all unsold items available for collection and pay all amounts owed within [14] days. Items the Consignor does not collect within [60] days of termination, after [2] written reminders, may be [returned by post at the Consignor's cost / donated].
Consignor signature: [signature]. Name: [printed name]. Date: [date].
Consignee signature: [signature]. Name and title: [printed name, title]. Date: [date].
Attached: Schedule A, Inventory Schedules (one per delivery)
What it protects. A clean exit, with the clock running in your favor. The "two written reminders" step stops a shop from declaring your stock abandoned the week after you were busy with a craft fair. It also gives the shop a way to close out if you move away and stop answering.
The record behind it. Your final count for that shop, which should match the units handed back plus the final report. When it does, the location reads zero and the relationship is closed on paper as well as on the shelf.
At year end: consigned stock is still your inventory
One last record matters even if every shop behaves perfectly. If you keep an inventory, IRS Publication 538 (opens in new tab) lists "goods out on consignment" among the merchandise you include in it. Every candle on a shop's shelf on December 31 belongs in your closing count. Leave them out and your cost of goods sold for the year comes out too high, because those candles have not been sold yet. (Pub 538 also lets small business taxpayers choose a simplified method; if you use one, ask your tax preparer how consigned stock is treated under it.) The year-end inventory count guide covers how to run that count across more than one location.
If each shop is a location and every drop-off is a transfer, that count is already done. Your records show what sits at each address. The agreement says it is yours, and the inventory proves how much there is.
The opening scene goes differently with these records in place. The closing notice still arrives. But you reply the same day with a Schedule A for every delivery, a count of 34 candles and 12 tins at that address, an unpaid balance from the last two reports, and Clauses 6 and 10, which require the shop to make all unsold stock available for collection and pay what it owes. That reply is hard to dismiss in a way that "I think it was around 30" is not.
Set up your first consignment shop as its own location and record the next drop-off as a transfer. Ardent Seller's free plan includes two locations, so your workshop and your first shop are covered. Create your free account before your next delivery.
Related reading
- Multi-location inventory tracking: the setup this agreement depends on, with each consignment partner as its own location and a transfer for every drop-off, pull and return.
- Wholesale pricing for handmade products: when consignment is a fair deal and when a shop is using it to avoid buying your stock outright.
- First Wholesale Account: A Decision Tree: if the same shop offers to buy outright instead, the questions to answer before you accept the order.
- Year-end inventory count for tax purposes: how to count the stock that is sitting on other people's shelves on December 31.
Free resources
Free companion downloads for putting the agreement to work:
- Legal Documents Every Maker Should Have: the consignment agreement is one of ten, and the checklist shows which of the others (a wholesale agreement, your returns policy) a shop placement usually needs alongside it.
- Wholesale Outreach Starter: for when a consignment shop is going well and you want to pitch the next one, or convert this one to wholesale.
This article is provided for educational purposes only and does not constitute legal, tax, or accounting advice. Statutes and agency guidance cited here were checked in October 2026. Contract law, Uniform Commercial Code filing rules, and the sales tax treatment of consignment sales vary by state and change over time. Consult a qualified attorney, CPA, or your state revenue department before signing an agreement or relying on it to protect your stock.