Consignment is an agreement to sell goods on commission. Sometimes businessmen appoint their agent to sell goods with a view to increase sales and earn more profits. Under this system the goods are sent to agents who sell them on commission on the risks of principal.
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In general there are two parties in consignment the consignor and the consignee. A person sends goods to other persons on the conduction that the receiver will try to sell the goods in the best possible manner and will remit the sale proceeds, less expenses and his own remuneration, to the sender. The sender is called consignor or principal, the receiver is called consignee or agent. It should be remembered that the consignee does not purchase the goods; merely the possession of the goods is transferred to him. He becomes liable to the principle only to the extent the goods are sold. The goods that may remain unsold continue to belong to the consignor or the principal. In other words, the agent works only on behalf of and the risk of the consignor. For his services the agent receives a remuneration which is usually calculated as percentage of sales.