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Question about a consignment contract


#1

I applied to a gallery in Fort Worth, TX to consign some of my
jewelry. They have sent me a signed copy of their consignment
agreement. It looks very informal. Would some of you (especially the
attorneys) comment on these considerations.

  1. The owner’s name is signed by an employee and the employee then
    writes by and then writes her first name, like this: Mary Conroe by
    Sharon. I don’t think that constitutes a legal signature, does it?

  2. The Agreement says: Any item(s) received by above mentioned
    gallery will be entered into the inventory of said gallery and a
    copy of the listing provided to Client.

The wording “entered into the inventory” bothers me. Doesn’t that
mean it becomes theirs and that I would have no recourse in case of
bankruptcy, etc.?

I don’t want to miss an opportunity because I am so cautious. I have
acquaintances who consign $600-$700 pieces with pretty much just a
traded list of items.

J. Sue Ellington


#2

The wording “entered into the inventory” bothers me. Doesn’t that
mean it becomes theirs and that I would have no recourse in case of
bankruptcy, etc.?

This is a little off track from this question but…

I remember reading somewhere of the importance that a store,
gallery, etc. accepting items on consignment post this fact where it
can be seen. This provides a distinction between what the location
owns in case of bankruptcy and what it does not. Therefore, the
items on consignment couldn’t be included in any liquidation.

Can anyone who is more knowledgeable elaborate on this?


#3

As a retailer, I take “Entered in Inventory” as entered in the
computer system and a barcode tag printed out and attached to the
item. That’s an insurance company requirement for coverage. Why
don’t you ask.

Also, why aren’t you speaking to the owner and not the salesperson?
If the owner doesn’t have time to speak with you I doubt your items
will be properly represented in the gallery. Also, ask for the owner
to sign the consignment agreement. (Isn’t the your insurance
company’s requirement?)

You should make a friend with the girl who signed the paper for the
owner so she wants to sell your items and then stop by once a month
and check out your display, and invoice what’s sold. When you do
this, bring in fresh merch. Don’t wait a year to come in so thing
wont get confused…

-Stanley
A&M Jewelers
Baltimore, MD


#4

Check with your stone or diamond suppliers. I know they have some
wording about memo on their invoices that may be helpful. Carl


#5
    This is a little off track from this question but... I remember
reading somewhere of the importance that a store, gallery, etc.
accepting items on consignment post this fact where it can be seen.
This provides a distinction between what the location owns in case
of bankruptcy and what it does not. Therefore, the items on
consignment couldn't be included in any liquidation. Can anyone who
is more knowledgeable elaborate on this? 

Here is a very good post on consignment that was presented on
another list (designerjewelrybiz ) by Denise Long of Sarah Graham
Metalsmithing.

"We did a little research about protecting consignment inventory and
found advise given by Scott Blakeley and Thomas Johnson of Blakeley &
Brinkman in Los Angeles that practice commercial and bankruptcy law.
Their recommendation is that first you have a consignment contract
agreement describing the relationship of the parties involved,
generally with the owner as the consignor and the seller as the
consignee. The contract should stipulate description of inventory and
that title to the merchandise only passes to third-party buyers. The
next step is to file a UCC-1(Uniform Commercial Code) financing
statement which also describes the inventory and makes clear what is
delivered on consignment. This form is then filed for each state that
the consignee operates the business. So in effect you need to do this
for each individual (consignment) client and each state represented
by that client.

The reason this is important is that inventory on consignment or
proceeds from the consigned inventory may become the subject of a
competing creditor’s claim–another words bankruptcy. The consignor,
by filing a UCC-1 form can establish a valid, perfected security
interest in their own inventory that will take precedence over any
bankruptcy claim. Without having consignment agreements perfected
through the UCC procedures, these attorneys believe that consignors
are greatly at risk of losing their goods. They go on to say that
without these precautions you are operating at the legal equivalent
of a sale on open account.

There is a company that makes this process a little easier with
regards to the UCC1 finance statement filing. www.nationsearchucc.com
for $15 they will file your UCC1 for you in the state required. Each
state has their own filing fee as well and it does differ state to
state. "

One interesting point is that what you are in essence doing is
providing financing to the gallery in the form of your goods. The
UCC-1 formalizes the loan and allows you to maintain the rights to
your financing (goods) in the case of a bankruptcy. If you are not
already a little leery of doing consignment this should make it even
more clear. By consigning your work you are loaning the gallery the
value of the work for nothing more than the cost of the work. No
bank or other business will loan money for free so you should ask
yourself if the value you receive from the gallery (in most cases it
is only the local public display of your work) is worth the free
loan of your work to them?

Jim Binnion James Binnion Metal Arts Phone (360) 756-6550 Toll Free
(877) 408 7287 Fax (360) 756-2160 http://www.mokume-gane.com
@James_Binnion Member of the Better Business Bureau