There’s usually a lot of confusion between bailment and consignment.
Often, what people think of consignment is actually a type of bailment, and vice-versa. To bring clarity to these two kinds of legal relationships, they are discussed briefly below.
Bailment vs. Consignment
Bailment is an arrangement wherein physical possession of personal property is transferred from one person (the bailor) to another (the bailee), who then has possession of this property.
The property is given for safekeeping and does not provide ownership to the bailee.
There are three types of bailment:
(1) For the benefit of the bailor and bailee
(2) For the sole benefit of the bailor
(3) For the sole benefit of the bailee
Let’s start off with the first one. A bailment for the mutual benefit of the parties is created when there is an exchange of actions between the parties.
The easiest example is when a bailor entrusts a broken item to a bailee and the bailee receives a fee in exchange for the repair he provides. Obviously, both parties have something to gain.
Now, a bailment that’s purely for the benefit of bailor transpires when the bailee acts gratuitously. For example, at a bar, the bailee has free parking for its customers, the bailors. The bailee acts without expecting compensation for the service, and the bailors are the ones that completely gain from this provision.
And for the last one, which is for the complete benefit of the bailee, the perfect example is the loan of a book. The bailor doesn’t charge the bailee for the use; it is all for the latter’s enjoyment.
Consignment, on the other hand, involves a seller or supplier (the consignor) delivering goods to a third party, buyer, customer or distributor (the consignee), without receiving payment until the consignee is able to resell the goods to the third party, or uses the goods.
This arrangement also includes the “automatic right of return by the consignee, conditioned on sale or approval, even if the consignor delivers goods that perfectly conform to the contract,” as well as “the consignor retaining title and risk, until the transfer of both goods and contract is triggered by a sale to a third-party buyer, or approval by the consignee.”
People usually go into a consignment agreement for the following purposes:
- To strategize costs. Since payment is not given on delivery, buyers don’t have to use their own funds; instead, they can pay for the goods from the resale. This provides all parties a mutually advantageous financing program and the seller still gets to retain his title.
- Manage inventory risks by enabling the buyer to try the goods for a particular period, have the seller sell the goods, and do away with warehouse costs.
Given these definitions, you can see that they have very different dynamics. Their conditions and intentions are certainly not the same. Hopefully, this clears some confusion and people will no longer interchange one for the other.
Bailment and Consignment have very different dynamics. Stayed informed about all your bail options with Eight Ball Bail Bonds, Call Us at 1-866-910-2245 Today!