Legal Definitions - sale and return

Sale and return is a type of sale where the buyer can return the goods to the seller, even if they conform to the contract, if the goods were delivered primarily for resale. This transaction is a type of consignment in which the seller (usually a distributor) sells goods to the buyer (often a retailer), who then tries to resell the goods, but a buyer who cannot resell is allowed to return them to the seller. Title and risk of loss are with the buyer until the goods are returned.

Example: A distributor sells 1000 units of a product to a retailer on a sale and return basis. The retailer is only able to sell 800 units and returns the remaining 200 units to the distributor. The distributor takes back the 200 units and refunds the retailer for the cost of those units.

This example illustrates how sale and return works in a business-to-business transaction. The distributor takes on the risk that the retailer may not be able to sell all the units, but the retailer is not stuck with unsold inventory.