Definition and Explanation of Consignment:
Learning Objectives:
-
Define and explain the terms
consignment, consignor and consignee.
The word consignment can be generally defined
as the act of sending a quantity of goods by the manufacturers and producers
of one country or place to their agents in another at the risk of the
principals for the purpose of sale.
Goods so sent are known as "consignment". The
sender of the goods is called the consignor. Generally the manufacturers or
producers are consignors. The person to whom goods are forwarded for the
purpose of sale is known as the consignee. The consignment can be
classified as:
-
Outward consignment.
-
Inward consignment.
It is called "outward" when the dispatch
of a quantity of goods from one country to another is made for the purpose
of sale and is called "inward" when the receipt of the quantity of goods is
made for the purpose of sale.
Goods sent on consignment do not become the
property of the consignee. He has not bought them. The ownership remains
with the sender or the consigner. If the goods are destroyed, the receiver
(consignee) is not responsible. The loss will fall on the consignor. The
consignee tries to sell the goods according to the instructions of the
consignor. When the goods have been sold, he will deduct his expenses,
commission, etc., from the sale proceeds and the balance is remitted to the
consignor. The relationship between the consignor and the consignee is that
of principle and agent. The consignee is the agent. The consignee acts
entirely on behalf of the consignor. The consignee is entitled to his
remuneration which is generally fixed on the basis of a commission of sales.
The expenses incurred by the consignee must also be reimbursed by the
principal. It is important to remember that the consignee does not buy the
goods; he merely receives the possession of the goods.
|
