Of the Nature of the Employment of a Factor.—A factor is an agent, who is commissioned by a merchant or other person to sell goods for him, and to receive the produce. Foreign factors are agents residing here, commissioned by merchants resident abroad, or the contrary. Home factors are agents resident in England, commissioned by merchants also resident in England. A factor is usually paid for his trouble by a commission of so much per cent. on the goods sold. But sometimes he acts under a del credere commission; in which case, for an additional premium beyond the usual commission, he undertakes for the credit of the persons to whom he sells the goods consigned to him by his principal.

"Del credere is an Italian mercantile phrase, which has the same signification as the Scotch word warrandice, or the English word guarantee. A factor, who has general orders to dispose of goods for his principal to the best advantage, is bound to exercise that degree of diligence which a prudent man exercises in his own affairs, and consequently the factor is authorized to dispose of the goods according to the best terms which can be obtained at the time; and if it shall appear that he has done so, and that he has sold the goods to persons in reputed good circumstances at the time, and to whom at that time he would have given credit in his own affairs, he will not be liable to his principal, although some of these should fail; and for such trouble the factor is generally paid by a commission of so much per cent. upon the goods sold. According to the above practice the principal runs all the risk, and the factor is sure of his commission whether the event be favourable or not. Many merchants do not choose to run this risk, and to trust so implicitly to the prudence and discretion of their factor; and, therefore, the agreement called del credere was invented, by which the factor, for an additional premium beyond the usual commission, when he sells his goods on credit, becomes bound to warrant the

solvency of the purchasers." Arg. Mackenzie v. Scott, 6 Bro. P. C. 287, Tomlin's ed.

In Grove v. Dubois, 1 T. R. 112, the effect of a commission del credere was discussed, and the court decided that it was not merely a conditional undertaking and guarantee from the person taking it, that he would pay if some other person did not, but that it was an absolute engagement from him, and made him liable in the first instance; and the same doctrine was acquiesced in, and acted upon, in Bize v. Dickason, 1 T. R. 285, cited in Koster v. Eason, 2 M. & S. 112, ante, p. 313; but this doctrine has since been questioned, and may now be considered to be overruled, later cases having been established, that the commission imports, that if the vendee does not pay, the factor will, and that it is a guarantee from the factor to the principal against any mischief to arise from the vendee's insolvency. Hornby v. Lacy, 6 M. & S. 171. See Morris v. Cleasby, 4 M. & S. 574; Baker v. Langhorn, 6 Taunt. 519. “A higher reward is paid, in consideration of their taking greater care in sales to their customers, and precluding all question whether the loss arose from negligence or not, and also for assuming a greater share of responsibility than ordinary agents, riz. responsibility for the solvency and performance of their contracts by the vendees. This is the main object of the reward being given to them, and though it may terminate in a liability to pay the debt of another, that is not the immediate object for which the consideration is given." Per Parke, B., Couturier v. Hastie, 8 Exch. 56. It is not necessary, therefore, that the del credere commission should be evidenced by writing under the Statute of Frauds. S. C. Where a factor, under a commission del credere, sold goods, and took accepted bills from the purchasers, which he indorsed to a banker at the place of sale, and having received the banker's bill (payable to the factor's order) on a house in London, indorsed and transmitted it to his principal, who got it accepted; it was held, that on the failure of the acceptor and drawer of this bill, the factor was answerable for the amount. Mackenzie v. Scott, 6 Bro. P. C. 280, Tomlin's ed.

A factor differs from a broker in some important particulars. A factor may buy and sell in his own name as well as in the name of his principal. A broker is always bound to buy and sell in the name of his principal. A factor is entrusted with the possession, management, control, and disposal of the goods to be bought or sold, and has a special property in them, and a lien on them. A broker, on the contrary, has usually no such possession, management, control or disposal of the goods, and consequently has no such special property or lien. Storey on Agency, s. 34. But the character of factor and broker is, in practical business, frequently combined (see post, p. 808).

Power and Authority.-By the common law, a factor, as such,

had not any authority to pledge, so as to transfer his lien to the pawnee, or to barter (a), but only to sell the goods of his principal (b). Hence, if a factor pledged the goods of his principal, the latter might recover the value of them in trover, against the pawnee, on tendering to the factor what was due to him, without making any tender to the pawnee (c). The same rule held with respect to a bill of lading which had been indorsed to a factor by his principal: for the bill of lading, which is the symbol of the delivery of possession, cannot give a factor a greater authority than the actual possession of the goods themselves. Hence, as a factor could not pledge the goods of his principal by a delivery of the goods, so neither could he do it by an indorsement and delivery of the bill of lading; for, although the indorsement of a bill of lading gave the indorsee an irrevocable right to receive the goods, where it was intended as an assignment of the property in the goods, yet it would not have that operation, where it was intended as a deposit only, by a person who was not authorized to make such deposit (d). Nor did the factor acquire an authority to pledge, where bills were drawn by the principal in advance of a consignment made to the factor for sale (e). But the law on this subject is now altered, see post, p. 815.

The mere relation of principal and factor confers ordinarily, and in the absence of any special instructions, an authority to sell, at such times and for such prices as the factor may, in the exercise of his discretion, think best for his employer (f); and it is not, it seems, his duty, in the absence of any special contract, to sell for ready money only (g). He has not, as a position of law, authority to sell to repay himself advances made to his principal, after notice that he (the factor) requires to be repaid, and contrary to orders given him by his principal, although if there be a well-understood practice with factors to sell to repay themselves advances, such a practice would be evidence that the advances were made on the footing of an agreement that the factor should have an irrevocable authority to sell, in case the principal made default (h).

Where goods are permitted to remain at a wharf in the name of a broker, who is accustomed to deal in the article, and the broker sells them, the principal will be bound by such sale, although he did not expressly authorize the broker to sell (i). But this is not so of a common person, not a general agent, and who is not in the habit of buying and selling for third parties, unless the real owner, by allowing such person to have the possession and indicia of pro

(a) Guerreiro v. Peile, 3 B. & Ald. 616. (b) Shipley v. Kymer, 1 M. & S. 484; Boyson v. Coles, 6 M. & S. 14.

(c) Daubigny v. Duval, 5 T. R. 604. (d) Newsom v. Thornton, 6 East, 17. (e) Graham v. Dyster, 6 M. & S. 1.

(f) Smart v. Sandars, 3 C. B. 380. (g) Boorman v. Brown, 3 Q. B. 511; (in error) 11 Cl. & F. 1.

(h) Smart v. Sandars, 5 C. B. 895.

(i) Pickering v. Busk, 15 East, 38. See also Whitehead v. Tuckett, 15 East, 400.

perty, holds such person out to the world as the real owner (k). A factor may sell on credit, although not particularly authorized by the terms of his commission so to do, for such is the daily usage (1).

An agent employed generally, to do any act, is authorized to do it only in the usual way of business. Hence, as stock is sold usually for ready money only, a broker employed to sell stock cannot sell it upon credit, without a special authority, although acting bonâ fide, and with a view to the benefit of his principal (m). A person who employs a broker on the Stock Exchange, impliedly gives him authority to act in accordance with the rules there established, although such principal may himself be ignorant of the rules (n). So where a Liverpool broker, acting for both parties, negotiated a sale by the plaintiff to the defendant of certain wool, "the names of the vessels to be declared as soon as the wools were shipped," and by the custom of Liverpool it was usual, where the contract contained a stipulation that notice of an event should be given by the vendor to the vendee, for the vendor to give notice to the broker, who communicated it to the vendee, it was held that the defendant was bound by such usage, although the broker omitted to communicate such notice to the vendee (o). "I consider it to be clear law, that if there is at a particular place an established usage in the manner of dealing and making contracts, a person who is employed to deal or make a contract there has an implied authority to act in the usual way, and if it be the usage that he should make the contract in his own name, he has authority to do so" (p).

Factors may be bankrupts (q). When goods are consigned to joint factors, they are in the nature of co-obligors, and are answerable for one another for the whole (r).

According to the general rule of law, a sale by a factor creates a contract between the owner and buyer (s). This rule is not affected by a custom on a Stock Exchange, that a contract made by a broker for an undisclosed principal, shall be regarded as the contract of the broker only (t); and it holds even in cases where the factor acts upon a del credere commission (u). Hence, if a factor sells goods, and the owner gives notice to the buyer to pay the price to him and not to the factor, the buyer will not be justified

(k) Dyer v. Pearson, 3 B. & C. 38. (1) Per Willes, C. J., Willes, 406. (m) Wiltshire v. Sims, 1 Campb. 258. (n) Sutton v. Tatham, 10 A. & E. 27; Bayley v. Wilkins, 7 C. B. 886.

(0) Greaves v. Legg, 11 Exch. 642.
(p) Per Parke, B., Baycliffe v. Butter-
worth, 1 Exch. 428; but see Bowlby v.
Bell, 3 C. B. 284.

(q) 12 & 13 Vict. c. 106, s. 65.
(r) Godfrey v. Saunders, 3 Wils. 114.

(s) Scrimshire v. Alderton, 2 Str. 1182. But this is rather an exception to the general rule of law, which is, that in order to bind a principal upon a written contract made by his agent, it should be in his own name, and appear to be his own contract. Storey on Agency, s. 161. (t) Humphrey v. Lucas, 2 Car. & K.

152.

(u) Hornby v. Lacy, 6 M. & S. 166.

in afterwards paying the factor; and the owner will be entitled to recover the price in an action against the buyer, unless the factor has a lien on such price (x). If a factor sells goods in his own name, the purchaser has a right to set off a debt due from the factor to him in an action by the principal for the price of the goods (y). Where a contract, not under seal, is made with an agent in his own name, for an undisclosed principal, either the agent or the principal may sue upon it; the defendant, in the case where the principal sues, being entitled to be placed in the same situation at the time of the disclosure of the real principal, as if the agent had been the contracting party. This is a well-established rule of law, frequently acted upon in sales by factors, agents, or partners, but it may equally be applied to other cases (z). Thus where a factor, acting under a del credere commission, sells goods as his own, and the buyer does not know of any principal, the buyer may, in an action brought against him by the principal, set off a debt due to him from the factor (a). But if goods are bought by a broker who does not mention the name of his principal, the principal cannot set off against the price of the goods a debt due to him from the broker, but is still liable to the vendor (b).

There is, however, a distinction between a factor and a broker. A factor is a person to whom goods are consigned for sale by a merchant residing abroad or at a distance from the place of sale, and he usually sells in his own name, without disclosing that of his principal (c); the merchant, therefore, with full knowledge of these circumstances, trusts him with the actual possession of the goods, and gives him authority to sell in his own name. But the broker is in a different situation, he is not trusted with the possession of the goods, and he ought not to sell in his own name. The principal who trusts a broker has a right to expect that he will not sell in his own name. Hence, where an action was brought by a merchant to recover the price of his own goods, and the demand was resisted on the ground that the defendants, who were buyers of the goods, did not purchase them of the plaintiffs, but of Coles and Co., and that they had a counter demand against Coles and Co., which they were entitled to set off against the price of the goods; it was held, that the defendants had not any right of set-off; for the plaintiff's had not enabled Coles and Co. to appear as proprietors of the goods; and although Coles and Co. had not disclosed the name of their principal, and were merchants as well as brokers, yet in this case they had delivered to the plaintiffs a sold note, in the proper form, supposing them to have sold in their character of

(x) See Drinkwater v. Goodwin, Cowp.

251.

(y) Per Lord Tenterden, C. J., Taylor v. Kymer, 3 B. & Ad. 334.

(z) Sims v. Bond, 5 B. & Ad. 389.
(a) George v. Clagett, 7 T. R. 359. See

Blackburn v. Scholes, 2 Campb. 343 ; Purchell v. Salter, 1 Q. B. 197.

(b) Waring v. Favenck, 1 Campb. 85. (c) See Johnston v. Usborne, 11 A. & E. 557.