Managing Bailed, Loaned or Consigned Items

In my blog “Knowledge To Negotiate” I wrote a post called “Bailment, Consignment, Loan of Product” that explains each of these items and the differences between them. As a contract manager if you have items that are provided to another party through any of these approaches you need to managed them differently.

In a consignment, the item is transferred to they consignee for their use or sale in accordance with the terms of the consignment. In a consignment the primary responsibility of the contract manager it to manage the accounting of:
1) What was provided to the consignee,
2) What has been used, consumed, or sold by the consignee, and
3) What is owed the consignor as a result of that use, consumption or sale.
A second responsibility is to manage the return of any remaining materials at the end of the consignment period making arrangements for there return, resale, or disposal.
A third responsibility is checking to make sure that the consignee is meeting the requirements of the consignment agreement and documenting any problems with that. That could mean things like verifying that the consignee has the required insurances; the consignee not being able to account for inventory, unauthorized sales, improper storage, or handling of the materials. It would include any act or failure to act that could cause damage to the materials that you still own.
The last portion of responsibility to manage the collection of any monies or credits due.


In a bailment situation the bailee holds the materials awaiting further instructions by the bailor. For example a supplier could have a warehouse agent hold materials while awaiting instructions for shipment to supplier’s customer. In a bailment the primary responsibility of the contract manager it to manage the accounting of:
1) what was provided to the bailee,
2) what the bailor has instructed the bailee to ship to a third party and
3) what the remaining inventory is to ensure there is no shortages of inventory.
A second responsibility is to manage the return of any remaining materials at the end of the bailment period making arrangements for the return, sale, or disposal.
A third responsibility is checking to make sure that the bailee is meeting the requirements of the bailment agreement and documenting any problems with that. That could mean things like checking to ensure they have the required insurance coverage. Documenting the bailee not being able to account for inventory, unauthorized use or sales, improper storage, or handling of the materials. That would also include any act or failure to act that could cause damage to the materials that you still own.
The last part is managing the collection of any monies or credits due for any loss of damage to the materials while held with the bailee.

In a loan of product situation the party is expected to use what has been loaned and the loan agreement will normally require that they insure the item while its in their hands. They may also be responsible to maintain and repair the item if repairs are needed during the period in which the item is loaned. The expectation in any loan of product is the loaned item will be returned in the same condition as it was loaned with only normal wear and tear excepted. With a loan of product situation the contract manager will seek to ensure that the loaned product is being managed in accordance with the conditions of the loan agreement. Loan agreements will require that the item be insured, and maintained. They may also include restrictions on the use of the loaned item. For example if a company owned a production tool used to make a product, they may want to restrict the use of that tool to only them. In a loan of product the primary responsibility of the contract manager it to manage the accounting of what was provided was provided that must be returned., A second responsibility is to manage the return of the loaned product. A third responsibility is checking to make sure that the requirements of the loan agreement are being met and documenting any problems with that. That could mean things like checking to ensure they have the required insurance coverage. Documenting any failure to meet requirement maintenance requirements, unauthorized use of the loaned product, improper use storage, or handling of loaned product. That would also include any act or failure to act that could cause damage to the loaned product.
The last part is managing the collection of any monies or credits due for any loss or damage to the product while held with the user or any costs required to put the loaned product back in good working condition as a result of the user failing to properly use or maintain the loaned product.


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