Consignment Agreements for Jewellers in Malaysia: How to Protect Your Stock in Someone Else's Store

You place RM200,000 of jewellery with a hotel boutique. No written agreement, just a WhatsApp chat and a verbal understanding. Six months later, half the pieces are missing and the boutique owner claims they were never received.

A proper consignment agreement isn't bureaucracy. It's the difference between recovering your stock and losing it forever.

This guide covers:

• What consignment legally means
• Essential agreement clauses
• Insurance requirements that protect you
• Common agreement mistakes
• Template elements you can use

What Consignment Legally Means

In a consignment arrangement:

Party	Role
Consignor (you)	Own the goods, retain title
Consignee (them)	Hold goods for sale on your behalf
Customer	Buys from consignee, title passes from you

Key point: You own the goods until they're sold. The consignee is a bailee, not an owner. This matters for liability and insurance.

The Legal Relationship

As a bailee, the consignee has a duty of care but isn't automatically liable for every loss. The agreement defines what happens when things go wrong.

Scenario	Without Agreement	With Proper Agreement
Stock stolen in break-in	Liability unclear	Agreement defines who bears loss
Stock damaged on display	Dispute about responsibility	Agreement defines liability
Stock "missing"	Hard to prove what was there	Inventory documentation proves
Consignee doesn't pay after sale	Dispute about terms	Payment terms are clear

Essential Agreement Clauses

A proper consignment agreement addresses these areas:

1. Parties and Stock Description

Element	What to Include
Full legal names	Consignor and consignee business names
Addresses	Registered and operating addresses
Contact persons	Who handles consignment matters
Stock description	Detailed inventory as schedule

The stock description should be a separate schedule that's updated as pieces are added or removed.

2. Title and Ownership

Clear statement that title remains with you until sale to end customer.

Why this matters: If the consignee goes bankrupt, your stock is your property, not part of their assets that creditors can claim.

Sample language: "Title to and ownership of the Consigned Goods shall remain with the Consignor at all times until such goods are sold to an end customer."

3. Term and Termination

Element	What to Specify
Initial term	How long the arrangement lasts
Renewal	Automatic or requires renewal
Termination notice	How much notice to end
Return of stock	Timeline and process for return

4. Pricing and Commission

Element	What to Specify
Retail price	Who sets it, any minimums
Commission rate	Consignee's percentage
Discount authority	Can consignee discount, by how much
Payment terms	When consignee pays you after sale

Be specific. "Commission of 25%" is clearer than "reasonable commission."

5. Inventory and Reporting

Requirement	Purpose
Initial inventory	Complete list of what's consigned
Regular reporting	Sales reports, remaining stock
Physical verification	Right to audit stock at location
Stock count frequency	How often counts happen

Build in the right to physically verify stock at reasonable times.

6. Care and Security Standards

This is where many agreements fail. Be specific about what you expect:

Standard	Specify
Display requirements	How pieces should be displayed
Safe storage	Overnight storage requirements
Security systems	Minimum alarm, CCTV standards
Handling	Who can handle, under what conditions
Access control	Who has access to stock

If you're placing high-value pieces, you can require specific safe grades or monitored alarms.

7. Insurance Requirements

This is critical. The insurance clause protects you when things go wrong.

Requirement	Purpose
Minimum coverage	Consignee must maintain adequate coverage
Coverage type	What perils must be covered
Your stock covered	Their policy must cover goods held for others
Proof of insurance	Certificate required
Named interested party	You're notified if policy lapses

Sample language: "The Consignee shall maintain insurance covering loss or damage to the Consigned Goods from all risks including theft, fire, and damage, with a minimum limit of [amount]. The Consignee shall provide a certificate of insurance upon request and notify the Consignor immediately if such coverage lapses or is cancelled."

8. Loss and Damage Liability

Even with insurance requirements, clarify who bears the risk:

Scenario	Liability
Theft despite reasonable care	Specify who bears loss
Damage during normal display	Typically consignee
Damage by consignee's staff	Consignee
Force majeure events	Address specifically

You can structure it as:

• Consignee liable for all losses (they must insure adequately), or
• Consignee liable only for negligence (you maintain coverage for other losses)

The first is cleaner for you, but consignees may resist.

9. Sale and Payment Process

Element	Specify
Notification of sale	Must consignee notify you?
Payment timing	Within X days of sale
Payment method	Bank transfer, cheque, etc.
Reconciliation	Monthly statements
Disputed sales	How to handle returns

10. Termination and Return

Element	Specify
Return condition	Pieces returned in original condition
Return timeline	Within X days of termination
Return shipping	Who arranges and pays
Shortfall resolution	What happens if pieces are missing at return

Insurance Clauses That Matter

The insurance section deserves special attention.

What to Require

Requirement	Why It Matters
"All-risk" or comprehensive coverage	Covers more perils than named-peril policies
Coverage includes goods held for others	Their policy must cover your stock
Adequate limits	Must cover full value of your stock
Agreed security standards	Policy must be valid based on their security

What to Verify

Don't just accept "yes, we have insurance." Verify:

Document	What to Check
Insurance certificate	Coverage type, limits, dates
Policy wording (if possible)	Whether goods held for others are covered
Named perils or all-risk	All-risk is better
Exclusions	What isn't covered

Your Own Coverage

Even if the consignee has insurance, consider whether your own Jeweller's Block covers stock at consignment locations.

Your Policy	What to Check
"Stock at premises" definition	Does it include consignment locations?
Consignment extension	Specifically covers stock with consignees?
Notification requirements	Must you notify insurer of consignment?
Limits	Adequate for total consignment exposure?

Having your own coverage means you don't depend on the consignee's insurer paying.

Common Consignment Agreement Mistakes

Mistake 1: No Written Agreement

"We've worked together for years, we trust each other."

Trust is fine until there's a dispute. Written agreements aren't about distrust. They're about clarity when something unexpected happens.

Mistake 2: Vague Inventory

"Assorted gold pieces, approximate value RM100,000."

This is useless when pieces go missing. Each piece should be individually described with photos.

Mistake 3: No Insurance Verification

"They said they have insurance."

Did you see the certificate? Does it cover goods held for others? Is the limit adequate? Saying they have insurance means nothing.

Mistake 4: No Audit Rights

If you can't verify the stock is there, you won't know it's missing until it's too late. Build in regular verification.

Mistake 5: Unclear Payment Terms

"They'll pay me when pieces sell."

When exactly? Within 7 days? 30 days? And what if they don't? Vague terms create disputes.

Mistake 6: No Security Standards

You control security at your shop. You don't control it at theirs. If they have no safe and leave pieces in the window overnight, your stock is at risk.

Template Inventory Schedule

Every consignment needs a detailed inventory. Include:

Field	Example
Item number	C001
Description	18k yellow gold pendant with 0.5ct diamond
Weight	5.2g
Agreed value	RM4,500
Photo reference	Photo attached
Date consigned	15 February 2026
Condition notes	Excellent, no scratches

Both parties sign the inventory. Update it whenever pieces are added, sold, or returned.

What Happens When Things Go Wrong

Scenario: Stock Missing at Audit

Step	Action
1	Document what's missing against inventory
2	Get consignee's written explanation
3	File police report if theft suspected
4	Notify your insurer
5	Notify consignee's insurer
6	Refer to agreement for liability

Scenario: Consignee Refuses to Pay

Step	Action
1	Document sales made per agreement
2	Send formal demand letter
3	Refer to agreement terms
4	Consider legal action if unresolved

Scenario: Consignee Goes Bankrupt

Step	Action
1	Assert ownership of stock immediately
2	Provide inventory proving ownership
3	Arrange collection of your property
4	Your stock is not part of their estate

Clear title language in the agreement protects you here.

FAQ

Do I need a lawyer to draft a consignment agreement?

For significant values or ongoing relationships, yes. Template agreements are a starting point, but a lawyer ensures proper protection under Malaysian law.

Can I use the same agreement for all consignees?

A standard template works, but verify insurance and security standards for each consignee. The schedule of goods and pricing will be specific to each relationship.

What if a consignee won't sign a written agreement?

Don't proceed. If they won't commit to basic terms in writing, they're not a reliable partner for holding your valuable stock.

How often should I verify consigned stock?

Monthly for high values. Quarterly for lower values or trusted relationships. Build this into the agreement.

What commission is normal for jewellery consignment?

Typically 20-35% depending on the consignee's profile, location, and the pieces involved. Prime hotel boutiques may command higher rates.

Can I require a security deposit?

Yes, some consignors require a deposit against the stock value. This provides some protection but may limit which consignees will work with you.

What happens if the consignee sells below agreed price?

The agreement should address this. Common approaches: consignee keeps the commission and absorbs the shortfall, or you share the reduction. Specify in advance.

Should insurance be in my name or theirs?

Their insurance covers their premises and goods in their care. Your insurance covers your property wherever it is. Ideally, you have both: their coverage as primary, yours as backup.

MINT Conclusion

Consignment agreements aren't about distrust. They're about clarity. When thousands of ringgit of your jewellery sits in someone else's shop, you need written terms that address what happens when things go wrong.

The insurance clauses matter most. Verify coverage, require adequate limits, and check whether your own policy covers consigned stock.

MINT provides Jeweller's Block coverage for Malaysian jewellers, including consignment extensions that protect your stock wherever it's located.

Speak with MINT about coverage