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Bouvier's Law Dictionary, Revised 6th Edition (1856)

FACTOR, contracts. An agent employed to sell goods or merchandise consigned
or delivered to him by, or for his principal, for a compensation commonly
called factorage or commission. Paley on Ag. 13; 1 Liverin. on Ag. 68; Story
on Ag. Sec. 33; Com. Dig. Merchant, B; Mal. Lex Merc. 81; Beawes, Lex Merc.
44; 3 Chit. Com. Law, 193; 2 Kent, Com. 622, note d, 3d. ed.; 1 Bell's Com.
385, Sec. 408, 409 2 B. & Ald. 143. He is also called a commission merchant,
or consignee.
2. When he resides in the same state or country with his principal, he
is called a home factor; and a foreign factor when he resides in a different
state or country. 3 Chit. Com. Law, 193; 1 T. R. 112; 4 M. & S. 576; 1
Bell's Com. 289, Sec. 313.
3. When the agent accompanies the ship, taking a cargo aboard, and it
is consigned to him for sale, and he is to purchase a return cargo out of
the proceeds, such agent is properly called a factor; he is, however,
usually known by the name of a supercargo. Beawes, Lex More. 44, 47; Liverm.
on Ag. 69, 70; 1 Domat, b. 1, t. 16, Sec. 3, art. 2.
4. A factor differs. from a broker, in some important particulars,
namely; he may buy and sell for his principal in his own name, as well as in
the name of his principal; on the contrary, a broker acting as such should
buy and sell in the name of his principal. 3 Chit. Com. Law, 193, 2101 541;
2 B. & Ald. 143, 148; 8 Kent, Com. 622, note d, 3d. ed. Again, a factor is
entrusted with the possession, management, disposal, and control of the
goods to be bought and sold, and has a special property and a lien on them;
the broker, on the contrary, has usually no such possession, management,
control, or disposal of the goods, nor any such special property nor lien.
Paley on Ag. 13, Lloyd's ed; 1 Bell's Com. 385.
5. Before proceeding further it will be proper to consider the
difference which exists in the liability of a home or domestic factor and a
foreign factor.
6. By the usages of trade, or intendment of law, when domestic factors
are employed in the ordinary business of buying and selling goods, it is
presumed that a reciprocal credit between, the principal and the agent and
third persons has been given. When a purchase has been made by such a
factor, he, as well as his principal, is deemed liable for the debt; and in
case of a sale, the buyer is responsible both to the factor and principal
for the purchase money; but this presumption may be rebutted by proof of
exclusive credit. Story, Ag. Sec. 267, 291, 293; Paley, Ag. 243, 371; 9 B. &
C. 78; 15 East, R. 62.
7. Foreign factors, or those acting for principals residing in a
foreign country, are held personally liable upon all contracts made by them
for their employers, whether they describe themselves in the contract as
agents or not. In such cases, the presumption is, that the credit is given
exclusively to the factor. But this presumption may be rebutted by a proof
of a contrary agreement. Story, Ag. Sec. 268; Paley, Ag. 248, 373; Bull. N.
P. 130; Smith, Merc. Law, 66; 2 Liverm. Ag. 249; 1 B. & P. 398; 15 East, R.
62; 9 B. & C. 78.
8. A factor is liable to duties, which will be first considered; and,
afterwards, a statement of his rights will be made.
9.-1. His duties. He is required to use reasonable skill and ordinary
diligence in his vocation; in general, he has a right to sell the goods, but
he cannot pawn them. The latter branch of this rule, however, is altered by
statute in some of the states. See Act of Penna. April 14, 1834, Sec. 3, 4,
6, postea[?], 20. He is bound to obey his instructions, but when he has none,

he may and ought to act according to the general usages of trade sell for
cash, when that is usual, or give credit on sales, when that is customary.
He is bound to render a just account to his principal, and to pay him the
moneys he may receive for him.
10.-2. His rights. He has the right to sell the goods in his own name;
and, when untrammeled by instructions, he may sell them at such times and
for such prices, as, in the exercise of a just discretion, he may think best
for his employer. 3 Man. Gran. & Scott, 380. He is, for many purposes,
between himself and third persons, to be considered as the owner of the
goods. He may, therefore, recover the price of goods sold by him, in his own
name, and, consequently, he may receive payment and give receipts, and
discharge the debtor, unless, indeed, notice has been given by the
principal to the debtor not to pay. He has a lien on the goods for advances
made by him, and for his commissions.
11. Mr. Bell, in his Commentaries, vol. 1, page 265, 5th ed., lays down
the following rules with regard to the rights of the principal, in those
cases in which the goods in the factor's hands have been changed in the
course of his transactions.
12.-1. When the factor has sold the goods of his principal, and failed
before the price of the goods has been paid, the principal is the creditor,
and. entitled to a preference over the creditors of the factor. Cook's B. L.
4th ed. p. 400.
13.-2. When bills have been taken for the price, and are still in the
factor's hands, undiscounted at his failure; or where goods have been taken
in return for those sold; the principal is entitled to them, as forming no
part of the divisible fund. Willes, R. 400.
14.-3. When the price has been paid in money, coin, bank notes, &c.,
it remains the property of the principal, if kept distinct as his. 5 T. la.
277; 2 Burr. 1369 5 Ves. Jr. 169; 2 Mont. B. L. 233, notes.
15.-4. When a bill received for goods, or placed with the factor, has
been discounted, or when money coming into his hands has been paid away, the
endorsee of the bill, or the person receiving the money, will be free from
all claim at the instance of the principal. Vide 1 B. & P. 539, 648.
16.-5. When the factor sinks the name of the principal entirely; as,
where he is employed to sell goods, and receives a del credere commission,
for which he engages to guarantee the payment to the principal, it is not
the practice to communicate the names of the purchasers to the principal,
except where the factor fails. Under these circumstances, the following
points have the principal is the creditor of the buyer, and has a direct
action against him for the price. Cook's B. L. 400; and vide Bull. N. P. 42
2 Stra. 1 1 82. But persons contracting with the factor in his own name, and
bona fide, are entitled to set off the factor's debt to them. 7 T. R. 360.
2. Where the factor is entrusted with the money or property of his principal
to buy stock, bills, and the like, and misapplies it, the produce will be
the principal's, if clearly distinguishable. 8 M. & S. 562.
17.-6. When the factor purchases goods for the behalf of his
principal, but on his own general, current account, without mention of the
principal, the goods vest in the factor, and the principal has only an
obligation against the factor's estate. But when the factor, after
purchasing the goods, writes to his principal that he has bought such a
quantity of goods in consequence of his order, and that they are lying in
his warehouse, or elsewhere, the property would seem to be vested in the
principal.
18. It may therefore be laid down as a general rule, that when the
property remitted by the principal, or acquired for him by his order, is
found distinguishable in the hands of the factor, capable of being traced by
a clear and connected chain of identity, in no one link of it degenerating
from a specific trust into a general debt, the creditors of the factor, who
has become bankrupt, have no right to the specific property. Much
discrimination is requisite in the application of this doctrine, as may be
seen by the case of Ex parte Sayers, 5 Ves. Jr. 169.
19. A factor has no right to barter the goods of his principal, nor to
pledge them for the purpose of raising money for himself, or to secure a
debt he may owe. See ante, 9-1. But he may pledge them for advances made to
his principal, or for the purpose of raising money for him, or in order to
reimburse himself to the amount of his own lien. 2 Kent, Com. 3d. ed:, 625
to 628; 4 John. R., 103; Story on Bailm. Sec. 325, 326, 327. Another
exception to the general rule that a factor cannot pledge the goods of his
principal, is, that he may raise money b pledging the goods, for the payment
of 'duties, or any other charge or purpose allowed or justified by the
usages of trade. 2 Gall. 13; 6 Serg. & Rawle, 386; Paley on Ag. 217; 3 Esp.
R. 182.
20. The legislature of Pennsylvania, by an act entitled "An act for the
amendment of the law relating to factors passed April 14, 1834, have made
the following provisions. This act was prepared by the persons appointed to
revise the civil code of that state, and was adopted without alteration by
the legislature. It is here inserted, with a belief that it will be found
useful to the commercial lawyer of the other states.
21.-1. Whenever any person entrusted with merchandise, and having
authority to sell or consign the same, shall ship, or otherwise transmit
tile same to any other person, such other person shall have a lien thereon.
22.-I. For any money advanced, or negotiable security given by him on
the faith of such consignment, to or for the use of the person in whose name
such merchandise was shipped or transmitted.
23.-II. For any money or negotiable security, received for the use of
such consignee, by the person, in whose name such merchandise was shipped or
transmitted.
24.-2. But such lien shall not exist for any of the purposes
aforesaid, if such consignee shall have notice by the bill of lading, or
otherwise, before the time of such advance or receipt, that the person in
whose name such merchandise was shipped or transmitted, is not the actual
owner thereof.
25.-3. Whenever any consignee or factor, having possession of
merchandise, with authority to sell the same, or having possession of any
bill of lading, permit, certificate, receipt, or order, for the delivery of
merchandise, with the like authority, shall deposit or pledge such
merchandise, or any part thereof, with any other person, as a security for
any money advanced, or negotiable instrument given by him on the faith
thereof; such other person shall acquire, by virtue of such contract, the
same interest in, and authority over, the said merchandise, as, he would
have acquired thereby if such consignee or factor had been the actual owner
thereof. Provided, That such person shall not have notice by such document
or otherwise, before the time of such advance or receipt, that the holder of
such merchandise or document is not the actual owner of such merchandise.
26.-4. If any person shall accept or take such merchandise or document
from any such consignee or factor, in deposit or pledge for any debt or
demand previously due by, or existing against, such consignee or factor, and
without notice as aforesaid, and if any person shall accept or take such
merchandise or document from any such consignee or factor, in deposit or
pledge, without notice or knowledge that the person making such deposit or
pledge, is a consignee or factor only, in every such case the person
accepting or taking such. merchandise or document in deposit or pledge,
shall acquire the same right and interest in such merchandise as was
possessed, or could have been enforced, by such consignee or factor against
his principal at the time of making such deposit or pledge, and further or
other right or interest.
27.-5. Nothing in this act contained shall be construed or taken:
I. To affect any lien which a. consignee or factor may possess at law,
for the expenses and charges attending the shipment, or transmission and
care of merchandise consigned, or otherwise intrusted to him.
28.-II. Nor to prevent the actual owner of merchandise from recovering
the same from such consignee or factor, before the same shall have been
deposited or pledged as aforesaid, or from the assignees or trustees of such
consignee or factor, in the event of his insolvency.
29.-III. Nor to prevent such owner from recovering any merchandise, so
as aforesaid deposited or pledged, upon tender of the money, or of
restoration of any negotiable instrument so advanced, or given to such
consignee or factor, and upon tender of such further sum of money, or of
restoration of such other negotiable instrument, if any, as may have been
advanced or given by such consignee or factor to such owner, or on tender of
a sum of money equal to the amount of such instrument.
30.-IV. Nor to prevent such owner from recovering, from the person
accepting or taking such merchandise in deposit or pledge, any balance or
sum. of money remaining in his hands as the produce of the sale of such
merchandise, after deducting the amount of money or the negotiable
instrument so advanced or given upon the security thereof as aforesaid.
31.-6. If any consignee or factor shall deposit or pledge any
merchandise or document as aforesaid, consigned or intrusted to him as a
security for any money borrowed, or negotiable instrument received by such
consignee or factor, and shall apply and dispose of the same to his own use,
in violation of good faith, and with intent to defraud the owner of such
merchandise, and if any consignee or factor shall, with the like fraudulent
intent, apply or dispose of, to his own use, any money or negotiable
instrument, raised or acquired by the sale or other disposition of such
merchandise, such consignee or factor shall, in every such case, be deemed
guilty of a misdemeanor, and shall be punished by a fine, not exceeding two
thousand dollars, and by imprisonment, for a term not exceeding five years.