Consignment and Sale, Definitions, Features and Differences

Consignment and Sale: Consignment is a business transaction whereby the seller gives an agent some goods to sell on behalf of the seller. A sale involves a mutual agreement between two people where ownership, title and possession of the properties are transferred by the seller to the buyer for a consideration in money.

What Is Consignment?

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What Is Sale?

Consignment Features

• The consignor dispatches goods to the consignee or agent for selling at a profit.
• Under this arrangement, the consignor is the principal, and the consignee is the agent.
• The products are not owned by the consignee, but they are required to pay back the sales proceeds to the consignor at the time of sale.
• The consignee is not liable for losses or damage to goods but should take reasonable care of them.
• Besides, since they belong to him/her, any unsold items must be returned by the consignee to his/her rival.
• This means that if there are more losses than gains, then these are fully borne by the seller while if there are gains more than losses, then both parties stand a chance to gain.

Sale Features

• In a sale, a minimum of two parties are involved.
• The contract's objective is the exchange of goods for a mutually agreed-upon benefit, which is the price.
• Only movable property, including both existing and future goods at the time of the contract, falls under the category of goods.
• The consideration involved in the transaction must be in the form of money.
• Sale includes an agreement to sell.
• It is essential for there to be a transfer of goods in a sale transaction.

Difference Between Consignment and Sale

• Consignment occurs when the owner dispatches goods to an agent for selling, while a sale is a transaction where goods are exchanged for a mutually agreed-upon price.
• Consignment involves the consignor and consignee as the parties, whereas a sale involves a buyer and a seller.
• The consignment relationship is that of principal and agent, whereas in a sale, it is characterized as debtor and creditor.
• In consignment, only possession of goods is transferred, not ownership. Conversely, in a sale, both ownership and possession are handed over to the buyer.
• In consignment, the consignee may return unsold items to the consignor, whereas in a sale, the buyer needs the seller's approval for returns.
• Risk and benefits in consignment stay with the consignor, but in a sale, they are passed to the buyer by the seller.
• The consignee receives remuneration through commission based on sales made, while in a sale, the seller profits directly from the sales.