In trade consignment, the trader, referred to as consignor, sends goods to the consignee, who sells it on his behalf.
This kind of agreement is widely used for trading books, tires, and vehicles, besides other situations in which the seller wants to display and sell his products and, for that purpose, uses a distribution network of one or more consignees who, in turn, do not have to spend their working capital to acquire the products.
As a general rule, a deadline is established in the consignment agreement for the consignee to sell the product. After such deadline, he should return it to the consignor.
As to economic aspects of the operation, the consignee is usually free to sell the products for the price that best suits him. However, he must respect the minimum price previously agreed for payment to the consignor.
The main characteristic of the consignment agreement is the fact that, if products are not physically delivered to the consignee, there is no assignment of ownership from the consignor to the consignee. During the tenure of the consignment, there is no assignment of product ownership. It only occurs, simultaneously, when the consignee sells the product to a third party.
When consignee sells the product, the same operation is carried out between him and the consignor for the price previously agreed upon.
Consignor
Consignee