Related Expertise
- Account collection
- Addition or departure of shareholders
- Bankruptcy and Restructuring
- Buy-Sell Agreement
- Change in the legal form of a company
- Commercial litigation (shareholders, employees or others)
- Company Book
- Consignment Contract
- Contract of partnership
- Convertible debenture
- Corporate reorganization and restructuring
- Corporate resolutions
- Creation of a subsidiary
- Director’s liability
- Drafting of articles of constitution
- Franchising
- Governance and Internal Management
- Implementation of a Tax Memo
- Intellectual Property
- Joint Venture Agreement
- Legal Publicity of Enterprises
- Management Company
- Planning and Tax Litigation
- Preparation and review of commercial leases
- Securities and access to public markets
- Share subscription agreement
- Shareholders Agreement
- Starting a business
- Strategic Partnership
- Taxation and tax litigation
- Term Sheet
- The Letter of Intent of the Offer to Purchase
- Trusts (estate and asset protection)
- Unfair competition, Duty of loyalty
In the context of a company’s business activities and commercial strategy, the consignment contract can prove to be a particularly interesting and flexible tool. Indeed, this type of contract, although innominate under the Civil Code of Québec —meaning it is not specifically defined or named as such in the legislation—nonetheless constitutes a recognized and enforceable legal mechanism. It generally allows the owner of a good, referred to as the supplier, to carry out a sale through the intermediary of a merchant, who acts as the consignee under the agreement.
Consignment Contracts: A Flexible Tool for Business and Commerce
Under the terms of a typical consignment agreement, the consignee remains in physical possession of the goods in question, but at no point does legal ownership transfer to the consignee. The consignee holds the goods for the account and benefit of the supplier and undertakes to sell them to a third party, if possible. Importantly, the consignee is obligated to remit the sale price to the supplier only after the property has been successfully sold. This payment is often made in exchange for a commission, which is usually predetermined and offered by the supplier as an incentive to facilitate the sale.
Key Features of a Consignment Contract
Another key feature of the consignment contract lies in its absence of obligation to sell on the part of the consignee. This means that if the consignee is unable or unwilling to sell the goods, they may be returned to the supplier without penalty, compensation, or any negative financial consequence. This low-risk model makes the arrangement attractive for merchants who are hesitant to invest capital in purchasing inventory outright.
Advantages of Consignment Contracts for Suppliers
A supplier may understandably wonder what the real advantage is of using a consignment contract rather than a more traditional distribution contract, particularly if the consignee bears minimal legal obligations. The main advantage, however, lies precisely in this lack of obligation: it significantly reduces resistance from merchants. When a supplier—especially a newly established company—wants to enter the market and gain exposure, retailers may be reluctant to take on inventory they are unsure they can sell. For them, such purchases represent a financial risk. The consignment contract shifts that risk of non-sale back to the supplier, who retains ownership until the sale occurs.
Mitigating Risk and Expanding Market Reach
From this perspective, the consignment model functions as a risk-mitigation tool for the consignee. It encourages participation by lowering barriers to entry and motivating retailers to collaborate. In turn, the supplier gains access to new sales channels and market visibility without requiring the merchant to commit financially upfront. Moreover, if the commission rate offered is sufficiently attractive, it may incentivize the consignee to make considerable marketing efforts or to actively promote the product, increasing the likelihood of sales success.
Thus, while the supplier retains financial exposure until the goods are sold, the consignment contract can be a strategic commercial vehicle that facilitates the diffusion and acceptance of new products, potentially contributing meaningfully to a company’s commercial expansion.
Bernier Fournier: Expertise in Commercial Contracts
The lawyers at Bernier Fournier have a highly developed business network and know how to use it judiciously when drafting and negotiating commercial contracts. They will be able to assist you in asserting your legal and financial interests at all stages of your company’s growth.