THE CONSIGNMENT CONTRACT
Okay, so now you know where you are going to consign your products and you’ve worked out what percentage of the selling price you will receive. Now, you need to sign the contract. Never do consignment without a contract!!!
RULE NO. 1 : READ EVERY WORD OF THE CONTRACT. KNOW WHAT EVERY PART MEANS.
One cannot emphasize enough - NEVER, NEVER sign any any contract you have not read and understood! If you don’t know what it means, ask. Don’t accept a vague answer saying, “it’s just legalese.” “Legalese” usually carries a lot of impact and can be extremely important.
Read the contract very carefully. It should cover all aspects of your relationship with the shop.
Check to be sure each of the issues listed below is dealt with and you are satisfied with each provision.
1) Percentage of selling price to be paid to you (the crafter). Be sure the percentage you have discussed and agreed upon is the same as the one written in the contract.
2) When will payment be made for any sales. Most shops pay in 30 or 60 day cycles.
3) DO NOT accept any provision that allows the store to lower the marked price on an item at a specific point in time. This is a practice often used in consignment thrift shops but is NOT used in the gift/craft business arena.
4) If the store runs any type of sale that would reduce the selling price of your product, your payment should still be based on the original price you agreed to. (For example: If the shop has a 10% off sale for a specific holiday or such and an item you agreed to price at $20.00 sells for $18.00 during that sale, your percentage will still be based on the $20 price.)
5) The contract should specify a specific schedule for reporting to you regarding sales. Many shops issue bi-weekly or monthly e-mails.
6) How long will the shop keep merchandise if it is not selling. Most shops will return unsold merchandise after a specific time - often 3 or 6 months.
7) Who is responsible for lost, stolen or damaged merchandise? Do they carry insurance for these situations? Will you be paid your full percentage for such losses?
8) Some shop contracts will demand exclusive rights to sell your merchandise in a specific geographic area. This issue is entirely up to you but, generally, anything beyond a 5 mile radius for exclusive territory is excessive.
9) The contract should state that the shop is responsible for paying all applicable sales taxes on the total selling price. Do not agree to any other arrangement on this issue.
10) Some shops will have a clause pertaining to special custom orders on your merchandise.
11) Some contracts will also specify how an item can be tagged with regard to identifying you as the crafter. It is not unusual for a shop to request that you do not provide a website or phone number on your personal tagging. Most will allow you to include your name or your business name on that tag. Some will allow a non-sales venue internet address such as an e-mail or blog address. ** This is generally considered a reasonable request on their behalf.
12) Contracts may include language regarding a shop’s inventory listing procedure.
Just because something is in a pre-printed contract, it does not mean it must be included. Negotiation can occur and clauses can be crossed out and initialed by all parties or written in and initialed by all parties. Any changes written into a printed contract MUST be initialed by both parties.
Be sure you are given a copy of the signed contract. I also request a written alternative phone number and contact address for the store owner to be written on the contract.
If by chance the store does not provide its own contract, you should be prepared with one of your own making. Sample contracts abound online for free. Simply search the term “consignment sales agreements” (or contracts).
Part IV of the Consignment Selling Experience will cover inventory sheets and any other miscellaneous information I feel you may find helpful.