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Difference Between Consignment and Sale

Consignment refers to a commercial arrangement in which goods are sent


to the agent by the owner, and then he sells them on behalf of the owner.
The term consignment is commonly juxtaposed with Sale. Typically, Sale is
a transaction between two parties in which the goods are transferred
from seller to buyer for the money consideration. Consignment is also a
kind of sale.

Comparison Chart

BASIS FOR
CONSIGNMENT
COMPARISON

Meaning When the goods are delivered to the agent by the owner for selling purp
Consignment.

Parties Consignor and Consignee

Relationship between Principal and Agent


parties

Possession and Ownership Possession is transferred, but ownership is not transferred, until they a
consumer.

Returning back of goods The consignee can return the unsold stock to the consignor.

Risk of loss Borne by consignor

Expenses incurred Met by consignor


BASIS FOR
CONSIGNMENT
COMPARISON

Consideration Commission to the agent.

Definition of Consignment
The word consignment is derived from the word consign which means to send.
Consignment is a deal between consignor and consignee, whereby the consignor
plays the role of principal and the consignee is the agent. Consignor delivers the
goods to the consignee for the purpose of selling it to the ultimate consumer on
behalf of the principal. Goods are dispatched to the consignee at cost or invoice.

A portion of sales made by the consignor is given to the consignee in the form of
consideration for the services provided by the agent which is known as the
Commission. There are three types of commission:

Ordinary Commission

Del-credere Commission

Overriding Commission

The expenses, damages, spoilage, normal and abnormal losses are borne by the
consignor because in a consignment sale only the possession of goods is
transferred to the consignee whereas the title of goods lies with the consignor.
However, if the agent sells the goods to the consumer, then the risk and rewards
are transferred with the transfer of goods. He sends a statement to the principal
known as Account Sales. Account Sales contain all the details of goods sold, stock
in hand, normal loss, abnormal loss, commission, etc.
Definition of Sale
A transaction between two parties in which the exchange of goods for price takes
place is known as Sale. It is a contract in which a proposal is made by one party to
buy or sell goods or property for monetary value, and the other party accepts the
proposal. Hence all the essentials of a valid contract like the capacity of parties,
free consent, lawful object, agreement, lawful consideration, etc. should be there.

A sale is a bargain deal between the parties in which the risk and rewards are
transferred from the seller to the buyer with the transfer of goods. The following
are the essential features of Sale:

Minimum two parties must be there.

The objective of the contract is to exchange goods for a mutual benefit


called price.

Only movable property comes under the category of goods which includes
goods existing at the time of the contract as well as future goods.

The consideration paid or promised should be money only.

Sale includes an agreement to sell.

Transfer of goods must be there.

Key Differences Between Consignment and Sale


The following are the major differences between consignment and sale:

1. When goods are forwarded by the owner to his agent conclude the sale, it is
known as Consignment. A Sale is a transaction between two parties whereby
goods are traded for a mutual benefit i.e. price.

2. The parties to a consignment are consignor and consignee whereas the


parties to the sale are buyer and seller.
3. The relationship amidst parties of consignment are of principal and agent,
but if we talk about the sale, they are debtor and creditor.

4. In consignment, only the possession of goods transfers not the ownership.


On the other hand, in the sale, both the ownership and possession are
transferred to the buyer.

5. The consignee can return the unsold goods to the consignor in case of
consignment while, in the sale, the buyer has to take permission of the seller for
returning the goods.

6. In consignment, all the risks and rewards rest with the consignor.
Conversely, in the sale, the risks and rewards are transferred to the buyer by the
seller.

7. The consignee gets remuneration for his services in the form of


commission based on sales made by him. In contrast to sale, whereby the seller
earns profit from the sales made.

Conclusion
There are many forms of sale and consignment is one of the forms of sale. In the
United States of America, Consignment shops are the Second Hand Shops where
the agent sells used goods on behalf of the owners to the customers. The goods
are sold at a price which is less than their original price. A portion of the sale
proceeds is handed to the agents for their services. However, all the second-hand
shops are not consignment shops.

DELCREDRE COMMISSION

A Short Note on the term Del Credere


Commission
Article shared by Anurag Mishra
Sometimes the principal gives extra commission to the agent for the
recovery of credit sales made by him. Thus cash realization becomes
his duty. There are chances of bad-debts out of credit sales. In order to
compensate him for bad-debts loss, some extra commission is given
which is known as Del Credere Commission. This extra commission is
calculated on the total amount of sales unless it is especially given that
extra commission to paid only on credit sales. In others words, for the
ordinary commission, the agent is not responsible for any bad debt
that may occur. If for credit sale some amount cannot be collected, the
consignor will suffer the loss. If the agent has to be made responsible,
he will have to be paid on extra commission, called Del Credere
Commission. For such a commission, which is payable on total sales,
the agent will be responsible for any bad debt, However, if the amount
cannot be collected because of any dispute, the agent will not be liable.