A Canadian Consignment Agreement is a commercial arrangement where the owner of goods (the consignor) places merchandise with a retailer, gallery, or other seller (the consignee) who displays and sells the goods on the consignor's behalf. The critical legal feature of a consignment is that title to the goods remains with the consignor until the goods are sold to an end customer — the consignee never owns the goods and acts as the consignor's agent for the purpose of the sale.

The Personal Property Security Act (PPSA), enacted in each common law province, treats certain consignments as deemed security interests. Under Ontario's PPSA (R.S.O. 1990, c. P.10, s. 2), a commercial consignment where the consignee deals in goods of that kind may be treated as a security interest unless the consignor files a PPSA financing statement. Without PPSA registration, the consignor's title may be subordinate to the claims of the consignee's secured creditors — meaning that if the consignee goes bankrupt, the consignor's goods could be seized by the consignee's creditors despite the consignor still owning them.

GST/HST treatment of consignment sales follows specific rules under the Excise Tax Act (R.S.C. 1985, c. E-15). The consignee collects and remits GST/HST on the sale to the end customer. If the consignor is registered for GST/HST, they must also account for the tax on the deemed supply to the consignee. The CRA's administrative policy treats the consignor as having made a taxable supply when the consignee sells the goods, and the consignee as having made a separate taxable supply to the end customer.

A Canadian Consignment Agreement is needed whenever a product owner places goods with a third party for sale without transferring ownership. Art galleries displaying and selling artwork for artists are the classic consignment arrangement — the gallery takes a commission (typically 40-60%) on each sale while the artist retains ownership until the work is sold. Antique dealers, vintage clothing boutiques, and secondhand stores frequently operate on consignment models.

This agreement is essential for emerging consumer product brands placing merchandise with retail stores on a trial basis — the retailer takes no inventory risk because unsold goods are returned to the consignor. Craft producers, artisans, and small-batch manufacturers who cannot afford traditional wholesale distribution use consignment to access retail shelf space without the retailer committing to purchase the inventory outright.

Book publishers consigning inventory to bookstores, jewelry designers placing pieces with boutiques, and furniture makers placing showroom pieces with interior design firms all require consignment agreements. The agreement is also used for industrial equipment demonstrations, where a manufacturer places equipment with a potential customer for evaluation before a purchase decision.

Without a proper consignment agreement — and critically, without a PPSA financing statement registration — the consignor risks losing their goods entirely if the consignee becomes insolvent. The consignee's trustee in bankruptcy may treat the consigned goods as the consignee's property and distribute them to secured creditors.

A comprehensive Canadian Consignment Agreement must identify the consignor and consignee with full legal names, business addresses, and GST/HST registration numbers. The consigned goods must be described in detail — including quantities, descriptions, serial numbers or SKUs where applicable, and the agreed value of each item.

The pricing structure must specify the minimum sale price (below which the consignee cannot sell without authorization), the consignee's commission rate or markup, and how the consignor's net proceeds are calculated. Payment terms should define when the consignee must remit sale proceeds to the consignor — typically within 15-30 days of each sale — and the payment method in Canadian dollars.

A PPSA registration clause is essential — the agreement should state that the consignor intends to file a PPSA financing statement to protect their ownership interest in the consigned goods, and the consignee should consent to this registration. Without PPSA registration, the consignor's title may be subordinate to the consignee's creditors under the deemed security interest provisions.

Insurance requirements must specify that the consignee will maintain adequate property insurance covering the consigned goods against theft, fire, flood, and other perils, with the consignor named as loss payee or additional insured. Include provisions for the return of unsold goods — the notice period, condition requirements, and who bears return shipping costs. The consignee's obligations regarding display, storage, and care of the goods should be specified. Include a termination clause with notice requirements, a governing law clause referencing the applicable Canadian province, and signatures of both parties.