Consignment Sale Law and Legal Definition

Consignment sale is an arrangement in trade in which a seller or the consignor sends goods to a buyer or consignee without getting payment for the goods then itself. The consignee or the buyer pays the amount only when the goods are sold. It is actually a delivery of goods not amounting to sale. The seller retains the ownership of the goods until the payment is made in full by the buyer. The unsold goods will be taken back after some period. It is also referred to as ‘sale or return’.

The seller is usually responsible for loss, shrinkage, or damage of its merchandise while in the control and custody of the buyer. A defect with consignment sale is that the consignee does not have the same pressure to sell the merchandise in question as it would if it owned the product. The unsold goods will be returned to the consignor usually at the consignor's expense.