Retailers have to invest significant sums to obtain and maintain an inventory for their customers. It is much easier for a retailer to pay for merchandise once it has been sold. A conditional sales agreement is an attractive option because it allows the retailer to finance the purchase of the goods it intends to sell to its customers.

The manufacturer or distributor of the goods will only agree to grant this type of financing if it has some assurance that it will be paid or that it will be able to recover its goods, which is why it is vital to properly document a conditional sales arrangement in order to distinguish it from a traditional sale in which the seller loses its title to the goods sold. This template sets out the main elements of the legal and financial framework of this type of agreement to sell goods.

Unlike a conditional sale, under a consignment sale, a person holds property in the name of the owner, sells it and remits the profits to the owner (consignor). In such a case, there is no transfer of ownership from the supplier to the consignee (see template L03200 for a consignment sale).

We recommend using this template to govern the relationship between a manufacturer or distributor of goods (vendor) and a retailer who sells the goods (purchaser). The conditional sale allows the vendor to make its products available to the customers of the purchaser, and allows the purchaser to keep the vendor’s goods in inventory, without having to pay the vendor immediately. This template was created to contractually define an ongoing relationship between a vendor and purchaser. However, by making minor modifications, our template can also be used for the purposes of a single transaction.

0.00 INTERPRETATION
0.01 Definitions
0.01.01 Agreement
0.01.02 Breach
0.01.03 Confidential Information
0.01.04 Delivery Note
0.01.05 Force Majeure
0.01.06 Law
0.01.07 Legal Representatives
0.01.08 Loss
0.01.09 Merchandise
0.01.10 PARTY
0.01.11 Person
0.01.12 Prime Rate
0.02 Entire Agreement
0.03 Applicable Law
0.04 Non-Compliance
0.04.01 Severability
0.04.02 Substitute Provision
0.05 Miscellaneous
0.05.01 Cumulative Rights
0.05.02 No Waiver
0.05.03 Time and Days
a) Time of the Essence
b) Computation of Time
c) Delays
0.05.04 Financial References
0.05.05 Gender and Number
0.05.06 Headings
0.05.07 Presumptions
0.05.08 Approval
1.00 PURPOSE
1.01 Sale
1.02 Title
2.00 TERMS OF PAYMENT
2.01 Monthly Instalments
2.02 Compulsory Instalments
2.03 Termination
3.00 SECURITY
4.00 MUTUAL REPRESENTATIONS AND WARRANTIES
4.01 Status
4.02 Capacity
4.03 Binding Agreement
4.04 Canadian Resident
4.05 Canadian Status
4.06 Insurance
4.07 Nominee
4.08 Independent Legal Advice
4.09 Business in Good Standing
4.10 Legal Proceedings
5.00 REPRESENTATIONS AND WARRANTIES OF VENDOR
5.01 Merchandise
6.00 REPRESENTATIONS AND WARRANTIES OF PURCHASER
6.01 Financial Position
7.00 MUTUAL OBLIGATIONS AND DUTIES
7.01 Confidential Information
7.01.01 Undertaking
7.01.02 Duration of Undertaking
7.01.03 End of Agreement
a) Request for Return
b) Destruction
7.01.04 Penalty
7.02 Insurance
7.02.01 Insured Risks
7.02.02 Amount of Coverage
7.02.03 Insurer
7.02.04 Prior Notice
7.02.05 Additional Named Insured
7.02.06 Certificates of Insurance
7.02.07 Notice of Modification or Cancellation
7.03 Continuation of Representations and Warranties
7.04 Indemnification
7.04.01 Scope
7.04.02 Procedure
7.05 Disclosure of Agreement
7.05.01 Undertaking
7.05.02 Default
7.06 Further Assurances
8.00 OBLIGATIONS OF VENDOR
8.01 Place of Delivery
8.02 Delay and Quantities
8.03 Warranty
8.03.01 Limitation
8.03.02 No Liability
8.04 Renewal of Stock
9.00 OBLIGATIONS OF PURCHASER
9.01 Non-Competition
9.01.01 Scope of Undertaking
9.01.02 Breach of Undertaking
a) Automatic Penalty
b) Payment
c) Protective Measures
9.01.03 Reasonableness of Clause
9.02 Receipt and Payment
9.03 Return of Excess Merchandise
9.04 Storage
9.05 Encumbrances
9.06 Transfer of Risks
9.07 Insurance
9.07.01 Coverage
9.07.02 Premiums
9.08 Inventory
9.09 Best Efforts
9.10 Guarantee
9.11 Compliance
9.12 Moving of Merchandise
9.13 Register
9.14 Sale Proceeds
9.15 Inspection
9.16 Access
10.00 SPECIAL PROVISIONS
10.01 Assignment
10.01.01 Prohibition
10.01.02 Exception
10.02 Force Majeure
10.02.01 Limitation on Liability
10.02.02 Duty
10.02.03 Right of Other PARTY
10.03 Relationship Between the PARTIES
10.04 Remedies
10.04.01 Choice
10.04.02 No Limitations
11.00 GENERAL PROVISIONS
11.01 Notice
11.02 Dispute Resolution
11.02.01 Good Faith Negotiations
a) Written Notice
b) Meeting
c) Legal Proceedings
d) Protective Measures
11.02.02 Mediation
a) Process
b) Mediator
c) Settlement
d) Legal Proceedings [OR Arbitration]
11.02.03 Arbitration
a) Notice
b) Reply
c) Appointment of a Third Arbitrator
d) Confidentiality
e) Hearing
f) Ruling
g) Costs
h) Supplementary Rules
11.03 Choice of Forum
11.04 Counterparts
11.05 Amendment
11.06 No Waiver
12.00 TERMINATION
12.01 Event of Default
12.01.01 Without Notice
12.01.02 With Prior Notice
12.02 As of Right or by Mutual Consent
12.03 Repossession of Merchandise
12.04 Payment of Unsold Merchandise
13.00 DURATION
13.01 Definite Term
13.02 Renewal
13.03 Non-Renewal
13.04 Survival
14.00 SCOPE
14.01 Subsequent Sales
14.02 Legal Representatives
14.03 Previous Agreements

SCHEDULE 0.01.09 – MERCHANDISE
SCHEDULE 2.01 – PRICE LIST