Jewelry and Gems Delivered to Prospective Sellers “On Memorandum”

What does it mean to deliver goods “ON MEMO” in the Jewelry Business?

There has long been a practice in the jewelry business for one wholesaler to provide jewelry to another jeweler “On Memo,” which is essentially a consignment of the jewelry. Title to the merchandise only changes hands if the consignee sells the merchandise to a third party. It then becomes the selling jeweler’s obligation to pay the original wholesaler the value of the jewelry, or return it.

One circumstance that sometimes arises is that the consignee sells the jewelry but fails to pay the wholesaler. Since the title to the merchandise still remains in the original wholesaler, the sale of the goods without payment to the wholesaler – consignor constitutes what is considered to be tortious conduct – Conversion – and the seller can be held personally liable for the tort of Conversion, which involves the converting of something that does not belong to you to your own use. New York law provides that an individual may be held personally liable for tortious conduct committed in the name of a corporation.

I once had an unusual case where a diamond ring was delivered by a jewelry salesman in New York to a New York retail store on behalf of an Arizona wholesaler. The document evidencing the consignment was a piece of paper called a Memo, which described the jewelry, the number of carets in the diamond, and a price of $6,000. After some 9 months the retailer failed to either pay for the goods or return them to the wholesaler. The New York retailer claimed that the ring was not a diamond, but rather, was cubic zirconium. The retailer was steadfast in defense of the lawsuit I started on behalf of the wholesaler, and the case proceeded to trial. The salesman who delivered the merchandise to the retailer testified that his company does not sell cubic zirconium, and the only goods he ever gives or sells to customers are true diamonds. He was unable to testify that he remembered this particular diamond, but his course of conduct to only keep real diamonds in his salesman’s case was his best evidence the gods were diamonds. He also testified to his writing on the Memo, which established a value of the goods and a brief description including the number of carets in the diamond. Arizona I once had an unusual case where a diamond ring was delivered by a jewelry salesman in New York to a New York retail store on behalf of an Arizona wholesaler. The document evidencing the consignment was a piece of paper called a Memo, which described the jewelry, the number of carets in the diamond, and a price of $6,000. After some 9 months the retailer failed to either pay for the goods or return them to the wholesaler. The New York retailer claimed that the ring was not a diamond, but rather, was cubic zirconium. The retailer was steadfast in defense of the lawsuit I started on behalf of the wholesaler, and the case proceeded to trial. The salesman who delivered the merchandise to the retailer testified that his company does not sell cubic zirconium, and the only goods he ever gives or sells to customers are true diamonds. He was unable to testify that he remembered this particular diamond, but his course of conduct to only keep real diamonds in his salesman’s case was his best evidence the gods were diamonds. He also testified to his writing on the Memo, which established a value of the goods and a brief description including the number of carets in the diamond.

The jewelry retailer testified that the item was cubic zirconium and he sold it to a frequent customer for $450.00. He had a sales receipt that did not give the name of the supposed purchaser, and he was unable to identify this supposed frequent purchaser. He first claimed the merchandise was cubic zirconium at least 9 months after he took the product On Memo.

The salesman’s testimony was more credible than the retailer’s testimony, and the plaintiff was awarded judgment that was paid shortly after the Judge ruled in plaintiff’s favor.

So what should a wholesaler learn from this scenario? You should require the consignee retailer to inspect the diamond and acknowledge in writing it is what the Memo says it is. The Memo should make it clear that title to the jewelry has not passed to the consignee until payment has been made, but that the risk of loss is borne by the holder of the jewelry, which means that any insurance against theft or loss should be paid by the consignee. If the consignee will not agree to such terms, the salesman should take the goods and leave the store. Also, the full name, address and telephone number of the recipient of the goods On Memo should clearly be stated on the Memo, in order to know who might need to be held responsible if the goods are not paid for or returned.

– SDG

Justice's scales, illustrating a website about collections services in New York State.

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