A consignment agreement is a contract under which an owner (the consignor) places goods with a seller (the consignee) who only pays for them once they are sold to an end customer. Until that sale, ownership stays with the consignor and the consignee merely holds the goods. Dutch law does not have a named contract type for this arrangement: it is a mixed contract, usually combining elements of mandate under article 7:414 of the Civil Code with storage and, on sale, purchase.
That legal starting point decides everything that follows: who bears the loss if the stock is damaged, what happens to the goods and to the proceeds if the consignee goes bankrupt, and whether the arrangement is in truth a commercial agency with mandatory rules attached. This article sets out the Dutch rules on each of those points and the clauses that a workable consignment agreement needs.
What a consignment agreement is under Dutch law
In a consignment arrangement, delivery of the goods and transfer of ownership are deliberately separated. The consignor hands over the goods so that the consignee can display and sell them, but does not transfer title. In the terms of Book 3 of the Civil Code, the consignee becomes a holder of the goods and holds them for the consignor, who remains owner and remains in possession through the consignee. Only when the consignee sells to a customer does title pass, and it passes directly from the consignor to that customer through the consignee.
This is not the same as a sale subject to retention of title, although the two are constantly confused. In a retention of title arrangement under article 3:92 of the Civil Code, the goods have been sold to the buyer and delivered, and ownership passes automatically once the price is paid; the buyer owes the price whether or not the goods are resold. In a consignment arrangement no sale between the parties has taken place at all, and the consignee owes nothing until it has sold. If the goods do not sell, they simply go back.
Consignment compared with an ordinary sale
| Feature | Consignment | Sale, with or without retention of title |
|---|---|---|
| Payment | Only after resale to a customer | Due on the agreed date, resold or not |
| Ownership before resale | Stays with the consignor | Passes on delivery, or on payment where title is retained |
| Unsold stock | Returned to the consignor | Remains with the buyer |
| Position on the consignee’s insolvency | Owner reclaims identifiable goods | Seller relies on the retention of title clause |
| Typical use | Galleries, boutiques, spare parts held at a client’s site | Ordinary wholesale supply |
Consignment is used where the consignee is unwilling or unable to carry the stock risk: art galleries selling for artists, fashion retailers testing a new label, food producers placing goods in independent shops, and suppliers keeping spare parts on a customer’s premises so that they are available immediately. In each case the commercial logic is the same, and so is the legal exposure.
Ownership, and why the customer still gets good title
Under article 3:84 of the Civil Code, transfer of ownership requires a valid legal basis, delivery and a transferor who is entitled to dispose of the goods. The consignee is not the owner, so strictly speaking it cannot transfer what it does not have. Dutch law solves this in two ways, and both need to be reflected in the contract.
The first is the mandate the consignor gives: the consignee is authorised to sell the goods for the consignor’s account, and where it acts in its own name the rules on mandate in articles 7:414 and following apply. The second is article 3:86 of the Civil Code, which protects a buyer who acquires a movable thing for consideration, in good faith and by actual delivery, even if the seller was not entitled to dispose of it. This is why a customer who buys a painting from a gallery keeps it, and it is also the risk: a consignee that sells outside the agreed conditions, at the wrong price or to the wrong party, still passes good title, and the consignor is left with a claim in damages rather than a claim to the goods.
Two drafting consequences follow. Set out precisely what the consignee may and may not do, including minimum prices, discounts, bundling and any prohibition on transferring the goods to a third location. And record who bears the loss where the consignee sells in breach of those limits, because in relation to the customer the sale will normally stand.
Risk, care and insurance while the goods are with the consignee
Because the consignor remains owner, the loss of goods that are destroyed or stolen falls on the consignor unless the contract says otherwise, and unless the consignee is at fault. The consignee is obliged to exercise the care of a good contractor under article 7:401 of the Civil Code and is liable for damage caused by a shortcoming attributable to it under article 6:74. Where the storage element predominates, the rules on deposit in Book 7 add a further duty to return the goods in the condition in which they were received.
In practice, three arrangements prevent most disputes. First, agree expressly that the consignee bears the risk of loss, theft and damage from the moment of delivery until the goods are returned, and require insurance for replacement value with the consignor named as an interested party. Second, require physical and administrative segregation: the goods must be identifiable as belonging to the consignor, by labelling, a separate storage area and stock records showing serial or batch numbers. Third, agree on inspection and stock-count rights on reasonable notice. Identification is not a formality; it is what determines whether you can recover your goods when it matters.
If the consignee becomes insolvent
This is the scenario the whole contract is written for. Because the consignor is and remains the owner, the goods do not fall into the consignee’s bankruptcy estate and the consignor can reclaim them from the trustee. That right is only as good as your ability to identify the goods: stock that has been mixed with the consignee’s own inventory, relabelled or built into something else is often unrecoverable, and the burden of proof lies on the party claiming ownership.
A common fear is that the consignee’s bank will have taken a pledge over its entire inventory. A non-possessory pledge can only be created by a party entitled to dispose of the goods, and the third-party protection that exists for a possessory pledge does not apply to it. Consignment stock that is clearly identifiable therefore generally stays outside the bank’s security. What does slow matters down is a cooling-off period ordered by the court under article 63a of the Bankruptcy Act, during which third parties cannot recover assets without the trustee’s permission; it can be imposed for two months and extended once by the same period.
The greater exposure is not the goods but the money. Proceeds collected by the consignee before its bankruptcy usually end up in its general account, and the consignor then ranks as an ordinary unsecured creditor for those amounts. Short settlement cycles are the first line of defence. Beyond that, the law of mandate offers a route where the consignee sold in its own name: under article 7:420 of the Civil Code the principal can, in cases including the mandatary’s bankruptcy, take over the mandatary’s rights against the customer by written notice. Recording that mechanism in the contract, together with a pledge over the receivables from resale, is worth far more than a general assurance of solvency.
Commission, settlement and reporting
Consignment stands or falls on information. The consignee knows what has been sold and the consignor does not, so the contract must impose a reporting duty with a fixed frequency and a fixed format: units sold, price achieved, discounts applied, returns, and closing stock per item. Tie the payment obligation to that report, and give the consignor the right to audit the underlying records and to count the stock, with a consequence if the count does not match.
Set the commission in a way that cannot be argued about: a percentage of the actual selling price including or excluding VAT (say which), or a fixed amount per item, with a rule for goods sold at a discount and for goods that are bundled. Fix the settlement period in days from the report, and state what happens to money already received when the agreement ends. Late payment between businesses attracts statutory commercial interest under article 6:119a of the Civil Code without a reminder being necessary, and Dutch law caps contractual payment terms between businesses; a large company contracting with a small or medium-sized supplier cannot validly agree a term longer than thirty days. Do not copy a ninety-day term from a foreign precedent.
The boundary with commercial agency and distribution
This is the trap that costs the most. If the consignee does not simply sell goods it holds, but acts as a permanent intermediary who negotiates or concludes sales in the name of the consignor for remuneration, the relationship can qualify as a commercial agency agreement under article 7:428 of the Civil Code. That qualification depends on the substance of the relationship, not on the title of the document, and it brings mandatory rules with it: statutory notice periods, a duty to provide information, and a potential claim to goodwill compensation on termination under article 7:442 of the Civil Code. Agreements labelled consignment are regularly reclassified in litigation after termination, precisely when the compensation claim arises.
Keep the distinction sharp in the drafting and in the actual conduct of the parties. A consignee that buys nothing, holds stock, sells in its own name at its own retail price and remits the proceeds less a commission is a long way from an agent; one that solicits orders in the consignor’s name at the consignor’s prices is close to one. If the intention is a genuine agency or distribution relationship, draft it as such, with the termination and compensation regime consciously chosen. Our article on where party autonomy meets mandatory law explains why the label on the contract does not settle the question.
Selling to consumers: who answers for the goods
Where the consignee sells to consumers, the consignee is the seller in law and carries the conformity obligation under article 7:17 of the Civil Code: the goods must correspond with what the buyer was entitled to expect. Complaints, repairs and refunds are therefore the consignee’s problem first, and the contract should say how the consignor supports that, from spare parts to a returns policy. The consignee in turn has a statutory right of recourse against its own supplier, so the consignor should expect those claims to come back and should set a time limit and an evidence requirement for them.
Product safety and product liability are separate again. Under Book 6 of the Civil Code the producer is liable for damage caused by a defective product, and a supplier that does not identify the producer can be treated as the producer itself; for goods imported from outside the European Union, the importer takes that position. A revised European product liability directive was adopted in 2024 with a transposition deadline in December 2026, so implementing Dutch legislation is expected; until it enters into force the current provisions of Book 6 continue to apply. Regulatory compliance duties, from CE marking to chemicals and waste-equipment obligations, follow the goods and not the contract, so allocate responsibility for them expressly and require the consignor to supply the documentation.
The clauses that matter
A workable consignment agreement is short, but nothing may be left implicit. It identifies the goods precisely, by article number, batch or serial number, condition and, where relevant, expiry date, in an annex that is updated with every delivery. It states in terms that ownership remains with the consignor until the sale to the end customer and that the consignee holds the goods for the consignor. It sets out what the consignee may do: the price or price formula, the discount limits, whether promotions need consent, and where the goods may be kept.
It then deals with risk and insurance, with segregation and labelling, with reporting and audit, with commission and the settlement period, and with returns: who pays the freight, in what condition goods must come back, and what happens to items that are damaged or missing at the count. It fixes a term and a notice period, and it says what happens on termination, including whether the consignee may buy the remaining stock and at what price. Finally it settles the governing law and the forum. Do not sign a consignment agreement before each of those points has an answer in the text.
Two sample clauses
Ownership and risk. The Goods remain the property of the Consignor until the moment
of sale to an end customer, at which moment ownership passes directly from the
Consignor to that customer. The Consignee holds the Goods for the Consignor, keeps
them separate from its own stock and marks them as the property of the Consignor.
The Consignee bears the risk of loss, theft and damage from delivery until return,
and insures the Goods for their replacement value.Term, termination and unsold Goods. This agreement is entered into for one year and
may be terminated by either party on thirty days written notice. Within ten days of
the end date the Consignee provides a full stock list and either returns the unsold
Goods at its own expense or purchases them at the price stated in Annex 1, at the
Consignor's option. Amounts received for Goods sold before the end date remain
payable in accordance with clause [X].Cross-border consignment
Where the parties are established in different countries, three questions come on top. The applicable law follows from the Rome I Regulation if it has not been chosen expressly; choose it, because the default rules can point at the law of the consignee’s country and change the property and termination analysis completely. Jurisdiction follows the Brussels I bis Regulation, which allows an express choice of court; a Dutch court or arbitration under the rules of the Netherlands Arbitration Institute are both workable, and the language of the proceedings can be agreed.
Property law is the exception to that freedom. Rights in the goods are governed by the law of the country where the goods are located, so a consignor sending stock abroad should check locally whether ownership is respected in the same way and whether registration or possession requirements apply there. Add to that the carriage arrangements, where the CMR Convention governs liability for international road transport and limits the carrier’s liability by weight, so insurance should cover the gap. Our guide to international commercial contracts sets out the mistakes that recur.
The VAT treatment of consignment stock, including the call-off stock simplification for intra-EU movements and the proof required for exports, is a matter for a tax adviser. It is genuinely important to the cash flow of the arrangement, but it is not legal advice we give, and the contract should simply record who files what and who bears any assessment.
Law & More drafts and reviews consignment agreements for suppliers, retailers, galleries and distributors, and advises when a consignee fails to account, sells outside the agreed terms or becomes insolvent. If you would like your consignment agreement checked before goods are shipped, or you need to recover stock or proceeds, the commercial contract lawyers at Law & More are happy to help.
