Consignment Risk for Watch and Jewellery Dealers in Singapore: Liability and Insurance Guide

A customer leaves their S$45,000 Rolex Daytona with you for consignment sale. Three weeks later, your shop is burgled. The watch is gone. Who pays? If you don't have the right insurance, the answer is you — out of pocket, for the full value. This guide explains the consignment liability gap that catches Singapore watch and jewellery dealers off guard.

The Consignment Liability Problem

When you take a watch or piece of jewellery on consignment, you don't own it — but you're responsible for it. This creates a gap that standard business insurance doesn't cover.

What Happens When Things Go Wrong

• Theft: Your shop is robbed, consigned items taken
• Fire: Premises destroyed, consigned goods lost
• Employee theft: Staff member pockets a consigned Patek Philippe
• Damage: Consigned piece damaged while in your care

In each scenario, the owner expects compensation. Your standard stock insurance only covers your inventory — not goods you're holding for others.

Singapore Law: Bailment Principles

In Singapore, consignment arrangements are governed by bailment law — the legal framework for when one party (the bailor/consignor) entrusts property to another (the bailee/consignee).

Key Legal Principles

Singapore's bailment law derives from English common law, supplemented by the Sale of Goods Act 1979. Key principles:

• Duty of care: As bailee, you must exercise reasonable care over consigned goods
• Return obligation: You must return goods in the same condition (or account for their sale)
• Burden of proof: If goods are damaged or lost, you must prove you weren't negligent
• Unauthorised use: Using consigned goods contrary to the agreement can constitute conversion

The Burden of Proof Issue

This is critical: if a consigned S$80,000 Patek Philippe Nautilus goes missing from your safe, the burden falls on you to prove you weren't negligent. The consignor doesn't have to prove you were — you have to prove you weren't.

This reversal of the normal burden of proof makes consignment risk particularly dangerous for dealers.

Conversion Liability

Under Singapore law, "conversion" occurs when you deal with someone else's property in a way that's inconsistent with their ownership rights. If you:

• Sell a consigned piece below agreed price without permission
• Refuse to return goods when demanded
• Sub-bail goods to a third party without authorisation

You may be liable for conversion — even without intent to steal.

Real Scenarios: What Can Go Wrong

Scenario 1: The Smash-and-Grab

Situation: Your Orchard Road showroom is hit by a smash-and-grab robbery. Thieves take 12 watches including 3 consigned pieces worth S$180,000 combined.

Your stock insurance: Covers your 9 owned watches.

The 3 consigned watches: Not covered unless you have "goods held in trust" coverage.

Your liability: S$180,000 to the consignors — from your own funds.

Scenario 2: The Fire

Situation: Electrical fault causes fire in your Far East Plaza unit. Safe survives, but display stock destroyed — including 8 consigned pieces.

Problem: Fire insurance covers the premises and your stock. Consigned goods? Only if specifically covered.

Scenario 3: The Trusted Employee

Situation: Your sales manager of 5 years has been systematically removing consigned pieces, replacing them with well-made replicas. By the time you discover this, S$350,000 in consigned goods is gone.

Your exposure: Full liability to consignors, plus potential criminal investigation, plus reputation damage.

Scenario 4: The Disputed Sale

Situation: You sell a consigned Rolex GMT-Master II for S$18,000. The consignor claims they never agreed to that price — they wanted S$22,000 minimum. No written agreement exists.

Problem: Without clear documentation, you may owe the difference — or face legal action.

The Insurance Gap

What Standard Business Insurance Covers

• Your owned inventory
• Your fixtures and fittings
• Your premises
• General liability

What Standard Business Insurance Does NOT Cover

• Goods held in trust (consignment)
• Customer property for repair/service
• Memo goods from suppliers
• Items on approval sent to customers

This is the gap. And it's exactly where jewellers block insurance differs from standard coverage.

Jewellers Block: Consignment Coverage

A proper jewellers block policy explicitly covers "goods held in trust" — the industry term for consigned merchandise.

What JB Consignment Coverage Includes

• Consigned goods while on your premises
• Consigned goods in your safe/vault
• Consigned goods in transit (with your knowledge)
• Customer property left for repair
• Memo goods from suppliers

Coverage Limits

JB policies typically specify:

• Overall limit for goods held in trust
• Per-item limit (e.g., maximum S$50,000 per piece)
• Transit sub-limits

Ensure your limits reflect your actual consignment exposure — many dealers underestimate this.

Consignment Agreements: Your First Line of Defence

Before insurance even comes into play, a proper consignment agreement protects both parties.

Essential Clauses for Singapore Dealers

1. Item Description and Value

• Detailed description (brand, model, serial number, condition)
• Agreed value for insurance and liability purposes
• Photographs documenting condition

2. Minimum Sale Price

• Lowest acceptable price
• Process for price reductions
• Who decides final sale price

3. Commission Structure

• Your percentage
• When commission is earned
• Expenses deducted from proceeds

4. Duration

• Consignment period
• Renewal terms
• Return procedures

5. Insurance Responsibility

• Who insures the goods
• Minimum coverage required
• Proof of insurance provision

6. Liability Allocation

• Who bears risk of loss/damage
• Exclusions (e.g., acts of God)
• Indemnification clauses

7. Return Conditions

• Notice period for retrieval
• Condition upon return
• What happens if unsold

Sample Liability Clause

Valuation Issues

Disagreements over value cause significant disputes.

The Problem

A consignor believes their vintage Rolex Submariner 5513 is worth S$35,000. You assess it at S$28,000. If it's stolen, what do you owe?

The Solution: Agreed Value

Document the agreed value at consignment intake:

• Both parties sign off on the figure
• This becomes the basis for any insurance claim
• Removes ambiguity if loss occurs

Appraisal Option

For high-value pieces, consider independent appraisal at intake. The cost is minor compared to a disputed S$100,000 claim.

Security Requirements for Consigned Goods

Your insurance policy will specify security minimums. For consigned goods specifically:

Storage Requirements

• Must be kept in UL-rated safe overnight
• Separate tracking from owned inventory recommended
• Regular reconciliation with consignment records

Documentation

• Intake photos of every consigned piece
• Condition reports
• Chain of custody records

Display Limitations

Some policies limit how many consigned items can be displayed simultaneously, requiring others to remain in the safe.

Regulatory Considerations

PSPM Act Implications

If you're PSPM registered and consigned items contain precious metals/stones, your AML/CFT obligations apply. You must:

• Conduct CDD on the consignor
• Maintain records of the consignment arrangement
• Report any suspicious circumstances

Secondhand Goods Dealer Licence

Your SHGD licence obligations extend to consignment transactions. Record-keeping via SHOTS applies.

Claiming on Consignment Losses

If a consigned item is lost or stolen:

Immediate Steps

1. Secure the scene (don't disturb evidence)
2. Notify police immediately — file a report
3. Notify your insurer within policy timeframes (usually 24-48 hours)
4. Notify the consignor — don't delay this difficult conversation
5. Gather documentation — consignment agreement, photos, valuation

Documentation Needed

• Original consignment agreement
• Agreed value documentation
• Intake photographs and condition report
• Police report
• CCTV footage (if available)
• Inventory records showing item was present

Claim Process

Your insurer will:

1. Verify coverage for goods held in trust
2. Confirm item was properly documented at intake
3. Review security compliance
4. Assess the loss value against agreed/policy limits
5. Pay claim (minus any deductible)

You then compensate the consignor according to your agreement.

Red Flags: When to Be Cautious

Consignor Red Flags

• Reluctant to provide identification
• Can't explain how they acquired the watch
• Pushing for unrealistic values
• Pressure to skip documentation
• Multiple items with removed serial numbers

Protect Yourself

• Full CDD on every consignor
• Verify ownership where possible
• Check serial numbers against stolen databases
• Trust your instincts — decline if something feels wrong

Key Takeaways for Singapore Dealers

• Consignment creates liability — you're responsible for goods you don't own
• Standard insurance doesn't cover it — you need "goods held in trust" coverage
• Burden of proof is reversed — you must prove non-negligence if goods are lost
• Written agreements are essential — especially agreed value and insurance clauses
• Document everything — photos, condition reports, chain of custody
• JB insurance covers consignment — verify your limits match your exposure
• Regulatory obligations apply — PSPM and SHGD requirements extend to consigned goods
• Security requirements must be met — policy conditions apply to all stock, consigned or owned

Consignment is a valuable business model for Singapore watch and jewellery dealers — it expands your inventory without capital outlay. But the liability exposure is real. Get the right insurance coverage, use proper agreements, and document every piece that enters your care.