Legal Updates

A retailer who received from a manufacturer goods for sale in consignation is liable for goods that were not sold but disappeared

July 2, 2020

A food manufacturer sold goods to a retailer under consignment terms, so that the retailer only pays for the goods it has actually sold. At the end of the contract, the goods remained in the hands of the retailer, and the manufacturer did not collect such despite the retailer repeated demands to collect them, and after a while it became clear that some of the goods disappeared.
The Court held that the retailer is required to pay for the goods he did not return but the manufacturer was partly responsible for the loss of the goods because it did not collect the goods on time. In the sale of consigned goods, the recipient of the goods for sale is considered a custodian of the goods until its sale but because the purpose of guarding the goods is ancillary to the purpose for which the goods was given to it, it is liable for the goods only if damaged due to negligence. Despite the fact that if the goods disappeared, it is the retailer's negligence, the responsibility for collecting the goods upon termination of the agreement is on the manufacturer and therefore the manufacturer has contributory negligence to the disappearance of the goods because it did not collect the goods. For this reason the retailer was held ligable only for about half of the value of the goods left with it and disappeared.