A brand sends goods to a partner's shop on the understanding that the partner pays once they sell. Three months later a stock check shows part of the goods gone, the shop says it knows nothing, and the sales money that should have been transferred has not arrived. Who is liable? Almost every time the problem traces back to one point: when the goods were handed over, the parties never made clear whether this was a consignment or an outright sale, and they kept no records.
This guide explains the difference between the two, the consignee's duties, what the contract should say, what evidence to keep, who bears the loss when stock disappears, and when non-payment may go beyond a civil dispute into a criminal one. If you are still choosing a sales structure, read agent, broker or reseller. If you are ending a relationship with stock left over, read terminating a distributor agreement.
The short answer
Liability turns on two things: how the contract (or a provable agreement) allocates the risk, and whether the consignee breached its duty of care. In an outright sale the goods belong to the buyer, so loss falls on the buyer, who still owes the price. In a genuine consignment the goods still belong to the supplier, but the consignee must look after them as someone acting for another, and must hand over the money it receives.
The law. A consignee that sells on behalf of the owner is generally an agent under Civil and Commercial Code Section 797, and if it sells in its own name in the course of its trade it may be a commercial agent under Section 833. An agent must act with care, follow instructions, report progress and account (Sections 809 to 812), and must hand over all money and property received in connection with the agency (Section 810). The criminal offence in point is embezzlement under Criminal Code Section 352.
Our practical view. Consignment disputes are won or lost on paper, not on the word "consignment". An owner holding signed delivery notes, stock reports and monthly sales reports recovers goods and money far more easily than one relying on chat messages, who spends months proving what was sent.
Hypothetical. Phupha Mudmee, a silk-weaving business in Khon Kaen, sends 120 mudmee silk pieces at a list price of 1,800 baht each to a gift shop in Udon Thani. They agree orally that the shop will transfer money on the 15th of each month for what it has sold. The delivery slip lists items but carries no recipient signature. Four months later the shop has transferred only once. A visit finds 60 pieces on the shelf. The shop says it sold 48 pieces (86,400 baht) and has not transferred, and that 12 pieces (21,600 baht) are unaccounted for. We use this example throughout.
1. How does consignment differ from an outright sale?
| Point | Outright sale | Consignment |
|---|---|---|
| Ownership | Passes to the buyer on delivery or as agreed | Stays with the supplier until sale to the end customer |
| Duty to pay | Pays the agreed price whether or not it resells | Pays when sold, on the agreed cycle |
| Unsold goods | Buyer's risk | Must be returned to the supplier |
| Goods lost | Buyer bears the loss and still owes the price | Depends on the contract and the consignee's fault |
| Status of recipient | Buyer | Agent, or commercial agent in some cases |
The label the parties use does not bind a court, which looks at substance: whether the slip says "sale" or "consignment", whether the price is a fixed sale price or a list price, whether the recipient may return goods, and whether stock is checked. If your documents are mixed, for example an invoice that says "sold" while you discussed returns, use one contract that settles the point. On conflicting order documents see quotation and purchase order with conflicting terms.
In the hypothetical there is no document saying outright sale, and money was to be paid once goods sold, which supports consignment, but other evidence is still needed.
2. What duties does a consignee have under the law?
Once the consignee is treated as an agent, the duties worth citing in the contract and in a demand are:
- Act with care in looking after and selling the goods, and follow the owner's reasonable instructions (Sections 809 to 812).
- Report progress and account when the owner asks.
- Hand over in full the money and other property received in connection with the agency (Section 810).
- Not contract with the owner on its own behalf without consent (Section 805).
A caution: a "commercial agent" under Section 833 sells in its own name, so end customers may not know whose goods they are. The owner cannot easily claim from them directly and must look to the consignee. That makes control on the consignee's side very important.
3. What should a consignment agreement say?
- Title. Goods stay the supplier's until sold to the end customer; the consignee keeps them separate and does not pledge them or use them as security.
- Risk and insurance. Who bears loss, damage and theft, from what moment, and whether the consignee must insure and for how much.
- Price. Minimum list price, permitted discounts and the consignee's share or remuneration.
- Stock counts. Frequency (for example monthly), the right to inspect on notice, and who signs the count.
- Sales reporting. Format and deadline, for example by the 5th of the following month.
- Remittance deadline. For example by the 15th, with default interest or a reasonable penalty (see Sections 379 to 383; a court may reduce a disproportionate penalty).
- Shrinkage allowance. If any, a clear rate or amount and how it is proved.
- Return of unsold stock. Time limit, who pays freight and the condition required.
- Termination. Grounds, notice period and a closing stock count on the termination date.
A clause you can adapt:
Clause 4 Title and risk
4.1 The goods listed in the attached delivery note remain the property of the Consignor until the Consignee has sold them to a customer and received payment.
4.2 The Consignee shall store the goods separately and bears the risk of loss or damage from the time it signs for them,
unless it proves the cause was force majeure it could not prevent.
Clause 5 Counts and reports
5.1 The Consignor may count the stock once a month on 2 working days' notice.
5.2 The Consignee shall send a sales report by the 5th of the following month.
5.3 The Consignee shall remit the price of goods sold by the 15th of the following month.
4. What evidence should you keep?
Evidence falls into three stages: delivery, holding and sale.
- Delivery. A delivery note signed by the consignee showing items, product codes, quantities, list prices and date, with photos of the goods and packaging.
- Holding. Stock cards or stock reports counted together, and shelf photos each round.
- Sale. POS reports or a sales book, receipts and the monthly sales report the consignee sends.
Documents may be electronic. Electronic signatures and reliably stored messages can serve as evidence under the Electronic Transactions Act B.E. 2544. Still, ask the consignee to confirm the figures by email or chat each round, because silence in response to our report is not as clear an acceptance as a signature.
5. If stock goes missing, who bears the loss?
The sequence of questions:
- What was actually delivered? Without a signed receipt, the owner must prove it by other evidence.
- How does the contract allocate risk? If the consignee bears it, the consignee compensates, subject to the agreed terms and any shrinkage allowance.
- If the contract is silent, ask whether the consignee exercised the care expected of an agent. If it was careless, for example left the store unlocked or let others take goods, it must compensate in contract or tort (Section 222 on damages).
- The owner's own fault. Never counting stock despite a right to do so may reduce damages under Section 223.
- Force majeure, such as flood or fire the consignee proves it could not prevent, where the contract does not put that risk on the consignee, may lead to a different result.
In the hypothetical, the outcome for the 12 missing pieces depends on whether Phupha Mudmee can prove it sent 120 pieces and whether the shop kept them with reasonable care. Do not assume full recovery in advance.
6. The reconciliation table to run every cycle
| Line | Formula | Example (pieces) |
|---|---|---|
| Opening balance | Stock at start per stock card | 120 |
| Add: further deliveries | Per delivery notes | 0 |
| Less: sold per report | From POS or sales book | 48 |
| Less: returned to owner | Per return notes | 0 |
| Expected balance | 120 + 0 − 48 − 0 | 72 |
| Counted | From the joint count | 60 |
| Variance | 72 − 60 | 12 |
| Value of variance | 12 × 1,800 baht | 21,600 baht |
| Money to remit | 48 × 1,800 baht less contractual share | 86,400 baht before the share |
Every non-zero variance needs a written explanation each cycle. Letting variances accumulate over several cycles makes them very hard to prove later. For sellers on several channels who must reconcile fees against payouts, see multi-platform e-commerce reconciliation.
7. Is non-remittance embezzlement?
Most non-payment is a civil dispute about a debt, but some cases may be embezzlement under Criminal Code Section 352: a person holding another's property (or property in which another has a share) dishonestly appropriates it for itself or a third party, for example by selling consigned goods, keeping the money and denying the sale, or taking consigned stock to sell elsewhere. Facts that help show dishonest intent include concealing sales, falsifying reports, going silent, moving the goods or denying the arrangement existed.
Points to know: the offence is compoundable (Section 356), and the victim must file a complaint within three months of the day it learns of the offence and the offender (Criminal Procedure Code Section 96). A police report is not a debt-collection tool, and threatening a complaint to force payment can create problems for the person making the threat. Take advice on whether the facts meet the elements, and pursue the civil route in parallel.
8. Steps to recover goods and money
- Gather and fix the evidence. Delivery notes, reports, messages, photos, and the reconciliation table from section 6.
- Request a count and reports in writing, citing the contractual right and setting a firm date.
- Send a demand letter stating the amount owed, a deadline (for example 7 to 15 days) and that you will act under the law if it is not met. Use registered mail with return receipt, plus email.
- Take back goods. Unsold stock that is still yours should be collected against a signed return note. Do not enter and take goods without permission.
- Negotiate a signed acknowledgement of debt with the agreed figure and an instalment plan if any.
- Sue in the civil courts, following debt collection and enforcement and unpaid invoices from business customers.
- Assess the criminal route within the three months in section 7 if the facts fit.
A short demand you can adapt:
Dear ... (Consignee)
Re: Delivery note no. ... dated ...: 120 silk pieces. Your report shows 48 pieces sold,
but the payment due on the 15th has not been received, and our count on ... found 60 pieces remaining.
Please pay 86,400 baht and explain the 12 missing pieces in writing by ...
If you do not, I reserve my rights under the law.
Checklist before sending goods on consignment
Documents
- A written consignment contract that states clearly it is not an outright sale
- Each delivery note lists items, quantities and list prices and carries the recipient's signature
- Photos of the goods and packaging at delivery
Controls
- A stock-count cycle and a named person who signs the count
- A deadline for the sales report and a date for remittance
- A reconciliation table each cycle, with a written reason for any variance
Risk
- Who bears the risk of loss, and insurance
- Any shrinkage allowance and the conditions for returning goods
- A procedure on default: demand letter, penalty and termination
Further reading
- Agent, broker or reseller — choose a sales model that matches the real relationship
- Terminating a distributor agreement — handling leftover stock and customers when you part ways
- Multi-platform e-commerce reconciliation — matching sales to payouts
- Unpaid invoices from business customers — the order of steps for business debts
- Debt collection and enforcement — suing and enforcing when demands fail
- Quotation and purchase order with conflicting terms — when the parties' documents contradict each other
- Product recall responsibilities — dividing duties between brand, manufacturer and distributor
A safe consignment states who owns the goods, who bears the risk, when stock is counted and when money is remitted, and keeps the records every cycle.
We help draft and review consignment agreements, delivery notes and reconciliation tables, and prepare demand letters for goods and money. For an initial consultation, call +66 92 254 2045 or send us the details. See also contracts and business documents.
This guide is published by Suwanvara Law Firm — a Khon Kaen law firm established in 1986. General information only, not legal advice on a specific matter.
