UCC Section 9-102(a) (20) defines a consignment as a transaction in which a person delivers goods to a merchant for purposes of sale, and (a) the consignee deals In goods of that kind under a name other than the name of the person making delivery, Is not an auctioneer and is not generally known by its creditors to be substantially engaged in selling the goods of others; (b) the goods must have a value of at least $1,000 at the time of delivery; (c) the goods are not consumer goods immediately before delivery; and (d) the transaction does not create a security Interest.
UCC Section 9-319(a) also states that a consignee acquires all of the consignor's rights In the consigned goods if a consignor does not perfect its interest In the consigned goods.
It should require all
consignees to be registered and should see to it that they have legitimate operations, he said.
The consignment agreement is an agreement for good and valuable consideration as each party aims to achieve a material benefit: to the consignor the assets are sold and to the
consignee the remuneration shall be paid.
According to article 176 of the Maritime Law, the carrier issues a Bill of Lading based upon the information provided by the shipper, including the
consignee's details.
The
consignee is the party who shall attend the shipping carrier or its agents to accomplish the procedures required to deliver the cargo.
And the consignor must do more to obtain a priority interest in the consigned goods over the rights of the
consignee's secured creditor with a prior floating security interest in the
consignee's inventory.
A consignor may prefer to characterize its consignment transaction as a "sale on approval" or a bailment not subject to the claims of the
consignee's creditors, rather than as a "sale or return" subject to the claims of creditors.
Results of a recent study on that topic suggest that
consignees may hold the key to success for any drastic change in distribution practices.
