Consignment Disputes in California: Unpaid Sales, Unreturned Goods, and the Retailer's Creditors

Last updated: November 2026. Reviewed by Pavel Kolmogorov, California business litigation attorney (State Bar No. 321018).

A consignment is a delivery of goods to a merchant to sell, with the supplier keeping ownership until a sale. In a California consignment dispute, the consignor can sue for the proceeds of what was sold and demand the return of what was not. A separate risk is the retailer's other creditors. Unless the consignor filed a financing statement, those creditors may be able to reach consigned goods while they sit in the store. (Com. Code, §§ 9102, subd. (a)(20), 9319.) Kolmogorov Law, P.C. represents businesses in these disputes.

Call (909) 235-6116 or contact us online to discuss unpaid consignment sales or goods a retailer will not return.

What a consignment is under the Commercial Code

The label on the paperwork does not decide the question. Division 9 defines a consignment as a transaction, "regardless of its form," in which a person delivers goods to a merchant for the purpose of sale and four conditions are met. The merchant deals in goods of that kind under a name other than the deliverer's, is not an auctioneer, and is not generally known by its creditors to be substantially engaged in selling the goods of others. Each delivery is worth $1,000 or more. The goods are not consumer goods immediately before delivery. And the transaction does not create a security interest that secures an obligation. (Com. Code, § 9102, subd. (a)(20).) Division 9 applies to a transaction that fits. (Com. Code, § 9109, subd. (a)(4).) A deal that fails a condition, such as a delivery worth less than $1,000, is not a consignment under that definition.

Some deals called consignments are something else. If the retailer buys the goods with a right to return what it cannot resell, the deal is a "sale or return" under the Code. Goods held on sale or return are subject to the claims of the buyer's creditors while in the buyer's possession. (Com. Code, § 2326, subds. (1), (2).) Our page on sale of goods disputes covers contracts of sale.

Who owns consigned goods when the retailer has creditors

Between the two parties, the consignor ordinarily owns the unsold goods. Against outsiders the answer changes. While the goods are in its possession, the consignee is "deemed to have rights and title to the goods identical to those the consignor had" for one purpose. That purpose is deciding the rights of the consignee's creditors and of purchasers for value. (Com. Code, § 9319, subd. (a).)

A lender with a lien on all of the retailer's inventory may be able to treat the consigned goods as part of its collateral. So may a creditor that obtains a lien on the retailer's property through a court. The exception applies when a perfected security interest held by the consignor would have priority over that creditor. (Com. Code, § 9319, subd. (b).)

The filing that protects a consignor

The Code treats the consignor's interest as a security interest. (Com. Code, § 1201, subd. (b)(35).) It is classed as a purchase money security interest in inventory. (Com. Code, § 9103, subd. (d).)

A financing statement generally must be filed to perfect a security interest. (Com. Code, § 9310, subd. (a).) An unperfected interest is generally subordinate to a person that becomes a lien creditor before it is perfected. (Com. Code, § 9317, subd. (a)(2).) A consignor that files a financing statement within 20 days after the retailer receives the goods takes priority over a lien creditor whose rights arose between attachment and filing. (Com. Code, § 9317, subd. (e).)

Beating an earlier inventory lender takes more. The consignor's interest must be perfected when the retailer receives possession of the goods. If the lender already had a financing statement on file covering that type of inventory, the consignor must also send it a signed notification. The lender must receive it within five years before the retailer receives the goods. It must say that the sender has or expects to acquire a purchase money security interest in the retailer's inventory, and it must describe that inventory. (Com. Code, § 9324, subds. (b), (c).) See our page on UCC-1 filings for what a financing statement is.

A consignor that never filed still has its contract rights against the retailer. What it may lack is priority over the retailer's other creditors.

If you are the consignor: getting paid or getting the goods back

Start with the agreement's terms on reporting, payment dates, returns, and termination. Then make a written demand with three parts: an accounting of every unit sold, payment for those units, and return of the rest by a stated date.

Unpaid proceeds are a contract claim, handled like the receivables discussed on our page on collecting unpaid invoices. A retailer that keeps goods it does not own after a proper demand may be liable for conversion. A court can order specific goods returned before trial through claim and delivery. A claim for an accounting fits when only the retailer knows what was sold.

Speed matters when the retailer looks unstable. Search the public filings against it before deciding how long to negotiate.

If you are the retailer holding consigned goods

Keep consigned stock identifiable and report sales on the schedule the agreement sets. Do not describe consigned goods to a lender as your own inventory. If a lender has a lien on all inventory, tell the consignor before a dispute forces the issue. Whether sale proceeds are held for the consignor or simply owed to it depends on the agreement, unless a statute says otherwise. By statute, an art dealer that takes an artist's own work of fine art for sale does not own it by taking it. Neither does a shop that takes for sale goods a person used or bought for household use. What the consignor is owed from a sale is the consignor's property or is held in trust. (Com. Code, § 2326, subd. (4); Civ. Code, §§ 1738.5, 1738.6.) Return unsold goods on a proper demand, and document shrinkage or damage when it happens.

What to bring to the first meeting

Bring the consignment agreement and any emails that set its terms. Add delivery records, the inventory list with values, sales reports, payments received, and your demand with any reply. Bring any financing statement you filed and anything you know about the retailer's lenders or other creditors.

Frequently asked questions

A retailer has my goods on consignment, sold some, and stopped answering. How do I get paid or get the goods back?

Send a written demand for an accounting, payment for the units sold, and return of the rest. If the retailer does not comply, a California consignor may sue for the proceeds as a contract claim and for conversion of goods wrongfully kept. A court may also order specific goods returned before trial. Move quickly if the retailer has other creditors.

Who owns goods on consignment in California?

Between the parties, the consignor does until a sale. As against the retailer's creditors, California Commercial Code section 9319 treats the retailer as having the consignor's rights and title while the goods are in its possession. The exception applies when the consignor holds a perfected security interest that has priority.

Does a consignor need to file a UCC-1 financing statement?

For a consignment covered by Division 9 of the California Commercial Code, filing is how the consignor protects its ownership against the retailer's creditors. Section 9310 generally requires a filed financing statement to perfect a security interest, and the Code treats a consignor's interest as one. Without it, a lien creditor may take priority.

The store selling our products on consignment is closing, and its bank claims a lien on all inventory. Can the bank take our goods?

It may be able to, if the arrangement is a consignment under California Commercial Code section 9102 and you did not perfect your interest. Section 9319 lets the store's creditors treat consigned goods in its possession as the store's. A timely filing and notice to the bank under section 9324 can give the consignor priority.

What is the difference between a consignment and a sale or return?

In a consignment the supplier keeps ownership and the merchant sells for it. In a sale or return, the merchant buys the goods for resale and may send back what does not sell. Under California Commercial Code section 2326, goods held on sale or return are subject to the claims of the buyer's creditors while the buyer has them.

Talk to a California business contract attorney

To discuss unpaid consignment sales, goods a retailer will not return, or a consignor's demand, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is a business litigation firm in Irvine, California. Related pages: breach of contract, conversion claims, and collecting unpaid invoices.

This page provides general information about California law and is not legal advice. Outcomes depend on the agreement, any filings, the other creditors, and the court.