In the United States, consignment is an arrangement whereby the owner of an item hands the object over to a seller while maintaining ownership of the item until it is sold. After the sale, the seller typically pays the sale price to the original owner, less an agreed-upon percentage for himself. Because the owner of the item retains ownership until it is sold, she normally can cancel the arrangement at any time and ask for her item back. The owner may assume some risk of loss should anything happen to the item while the seller has possession of it, unless a contract has made provisions for such an occurrence. Consignment-selling offers affordable bargain shopping in many areas of the world, but legal restrictions and rules may vary by country or region.
This type of sale provides advantages to both sellers and owners of retail goods. The seller benefits by not having to put up his own money to buy an item with no guarantee that it will sell. The owner doesn't generally have to work as hard to get a seller to handle her goods as she would if the person were buying the item at wholesale. She also may be able to command a higher percentage of the final sale price for herself. Consignment shops and galleries also tend to offer new and unknown artists an opportunity to get greater exposure for their work than they might otherwise have if selling their work directly to buyers.
Questions sometimes arise as to the extent of both the owner's and the seller's liability for damage to goods sold this way. In the U.S., under a state's Uniform Commercial Code, a negligent seller would usually have to compensate an item's owner for damage caused by the seller's negligence. Damage caused by something outside the seller's control, such as a flood, might mitigate the seller's responsibility, however, depending on the laws in the state where the item is being offered for sale.
Owners of items being sold on consignment may face another risk: if a shop or gallery goes bankrupt, creditors may be able to seize all goods on the premises to offset the seller's debt. If this happens, the owner of the item may not be able to reclaim her property and will instead have to file a claim against the seller in hopes of some compensation. In the U.S., owners can protect themselves by filing a UCC Form 1 with the county government in the area where the store is located. This establishes a lien on the item, so that the owner can claim it should the seller run into financial trouble.
