Expert: Shasta McLaughlin - 11/13/2008

Question
Hello,
I am interested in selling other people's crafts along with my own. If I sell other people's items on consignment, do I need to worry about liabilty insurance if something happens once the product is purchased or is that only the responsibilty of the seller?
Thanks!

Answer
Ann,

It all depends on the legal terms of the contract you create with the seller and how you communicate that to the buyer.  There is always a chance that someone will try to tie a legal issue to you the seller even if you didn't create the item.  Talking to a lawyer and an insurance agent who sells insurance to retail stores wouldn't hurt.

Incorporating your business and having someone unrelated to your business be your registered agent can also help protect your personal assets in the case of your company being sued.

I would require each person selling items on consignment to mark each item with a company name, address, phone, and email (if they had one).  I would make it very clear to each customer purchasing an item that if they had a problem with the item to first contact the address on the item.  I would also mention to them that if they received poor customer service on correcting problems with an item to please let me know. I would have a strict policy on fixing problems for customers.  People consigning items would get one warning on correcting problems for customers and then I would ask them to come get their items.  You should include this information on the contract with the person placing items on consignment and could include it on a card that went in the bag with each purchase for the customer.

Again it wouldn't hurt to have a lawyer go over your contract for placing items on consignment.  It could save you time, heartache and money in the long run.

Good luck,

Shasta