CHAPTER III.

OF CONTRACTS WITH A FACTOR, BROKER, OR AGENT, ON BEHALF OF HIS PRINCIPAL; AND OF THEIR RESPECTIVE LIABILITIES.

IN

N mercantile dealings and transactions between merchants, contracts for the sale and disposition of merchandize, are most commonly entered into through the intervention of factors, brokers, or agents: and when these persons act within the scope of the authority committed to them, their principals are bound by such contracts as they may enter into. There is a material difference between a factor and broker, not in name only, but in many important particulars; and the distinction between the two was very much considered and explained in a recent case of Baring v. Corrie, in which the Lord Chief Justice Abbott observes, (a) “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; the latter, 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, therefore, who trusts a broker, has a right to expect that he will not sell in his own name." And Mr. Justice Holroyd in the same case says, "That a factor who has the possession of goods, differs materially from a broker: the former is a person to whom goods are sent or consigned, and he has not only the possession, but in consequence of its being usual to advance money upon them, has also a special property in them, and a general lien upon them. When, therefore, he sells in his own name, it is within the scope of his authority; and it may be right, therefore, that the principal should be bound by the consequences of such sale; amongst which, the right of setting off a debt due from the factor is one. But the case of a

(a) 2 Barn. & Ald. 142.

broker is different; he has not the possession of the goods, and so the vendee cannot be deceived by that circumstance; and besides, the employing of a person to sell goods as a broker does not authorize him to sell in his own name. If, therefore, he sells in his own name, he acts beyond the scope of his authority, and his principal is not bound. But it is said, that by these means, the broker would be enabled by his principal to deceive innocent persons. The answer, however, is obvious, that that cannot be so, unless the principal delivers over to him the possession and indicia of property. The rule stated in the case of Hern v. Nichols, 1 Salkeld, 289. must be taken with some qualifications: as, for instance, if a factor, even with goods in his possession, acts beyond the scope of his authority, and pledges them, the principal is not bound; or if a broker, having goods delivered to him, is desired not to sell them, and sells them, but not in market overt, the principal may recover them back. The truth is, that in all cases, excepting where goods are sold in market overt, the rule of caveat emptor applies."

The general duty of a factor or agent is to procure the best intelligence of the state of trade at his place of residence; of the course of exchange; of the quantity and quality of goods at market, their present price, and the probability that it may rise or fall; to pay exact obedience to the orders of his employers; to consult their advantage in matters referred to his direction; to execute their business with all the despatch that circumstances will admit; to be early in his intelligence, distinct in his accounts, and punctual in his correspondence. (b) And being entrusted with the possession, as well as the disposal and management of the goods of his principal, he is bound to take due and proper care of them; such a degree of care as a prudent man would take of his own property. (c) Another important part of his duty is the protection of the property of his principal by an available insurance (d); and also to take care that in the importation and exportation of goods, proper entries are made at the custom-house, and that the duties are duly paid thereon. (e) So, in the sale of goods, a factor should not only observe the instructions of his principal, but when left to exercise his own judgment and discretion in the disposal of them, he should use his utmost skill and knowledge, and sell for the best prices, and for ready money, or customary credit (ƒ): but when he sells on credit, he should be very careful to deal with persons of known responsibility. (g). A factor cannot legally make himself the purchaser; nor if employed to purchase, can he be the

seller, unless with the express consent of the principal, having full knowledge of all the attendant circumstances. (h)

Brokers are noticed in the stat. 1 Jac. 1. c. 21. s. 1. "as persons employed in the contriving, making, and concluding bargains between merchant English, and merchant strangers, and tradesmen, concerning their wares and merchandizes, to be bought and sold and contracted for, and monies to be taken up by exchange between such merchant and merchants, and tradesmen." And sec. 8. of the same statute speaks of brokers in London using and exercising the ancient trade of brokers between merchant and merchant. And by the stat. 6 Ann. c. 16. persons acting as brokers in London, must be admitted by the court of the Mayor and Aldermen, under such restrictions and limitations for their honest and good behaviour, as they shall think fit; and shall pay 40s. upon admission, and the same sum annually, under a penalty of 251. for acting without. And in 1708, one year after the passing of the statute of Anne, the court of Mayor and Aldermen of the city of London, made certain rules and regulations for the government of brokers, which have since been and are still in force; and by virtue of which every person, previous to his being admitted a broker, is required to enter into a bond to the mayor, commonalty, and citizens of London, in a penalty of 500l., and also to take an oath, the forms of which are prescribed by the same rules and regulations. The condition of the bond, amongst other things, provides, "That the broker shall upon every contract by him made, declare and make known to such person or persons with whom such agreement is made, the name or names of his principal or principals, either buyer or seller, if thereunto required; and that he shall not directly or indirectly, by himself or any other, deal for himself in buying any goods, wares, or merchandizes, to barter or sell again upon his own account, or for his own benefit or advantage, or make any gain or profit in buying or selling any goods, over and above the usual brokerage. (i) In a late case, where the condition of the bond was brought under the consideration of the Court of Common Pleas, (k) it was held, that if a broker be authorized by his principal to make a purchase for him in his (the broker's) own name, and the contract note be accordingly made out in the broker's name, without inserting that of his principal, such a purchase by the broker does not operate as a breach of the condition of his bond, especially where the broker enters the name of his principal as being the buyer, in the book kept by him for that purpose. Neither does the condition of the bond absolutely prohibit a broker from dealing as a trader on his own account, but it only operates as a prohibition sub

103.

(h) Vide Lowther v. Lowther, 13 Ves. Coles v. Trecothick, 9 Ves. 234. Crave v. Ballard, 3 Bro. Ch. Cas. 119. (i) See the Condition of the Bond and

the oath at large in 1 Merivale's Rep. 156. and Holt's Ni. Pri. Cas. 431.

(k) Kemble v. Atkins, 7 Taunt. Rep. 260. 1 Mo. Rep. 6. S.C.

modo, that is, it imposes upon him a penalty in the event of his trading. But if, in any transaction in which he is really engaged as a principal, he act ostensibly as a broker, such conduct is a gross fraud, in respect of which he can obtain no remedy in a court of justice. (1) So, if a broker allow a third person, who has not been duly admitted as a broker, to have a concurrent and equal authority with himself, in his business of a broker, it is no breach of that part of the condition of the bond which prohibits his employing any person under him to act as a broker. (m)

An agent is one employed to act for another either for a general or special purpose, and therefore, in its enlarged signification, comprehends a factor and broker, though the latter are confined to mercantile transactions: but an agent is not so limited, for he is frequently employed to transact the general business not only of merchants and traders, but of others; and the authority of an agent is created either by deed, by simple writing, by parol, or by mere employment, according to the nature of the business to be transacted: and his authority is either general or special with reference to its object, i. e. according as it is confined to a single act, or is extended to all acts connected with a particular employment. A general authority does not import an unqualified one, but that which is derived from a multitude of instances, whereas a particular authority is confined to an individual instance. And whether the authority is general or not, is to be collected from the general dealing between the principal and agent, and not merely from private instructions. (n) If an agent is entrusted with a general power, he must exercise a sound and honest judgment in those matters which are left to his discretion; for he will not be justified in taking unreasonable or unusual measures, or doing any thing contrary to the interest of his principal. If, however, his proceedings are challenged, the principal must prove that he might have done better, and was guilty of wilful mismanagement. But when his power is limited, he must strictly adhere to his orders, which should always be given in writing. If he exceeds his power, though with a view to his employer's interest, he will be liable for the consequences. For example, if he gives credit, when none ought to be given, or longer credit than directed, for the sake of a better price; and the buyer afterwards becomes insolvent, he shall be answerable for the debt. (0)

Although opinion will never justify a factor in acting contrary to orders, necessity sometimes will. As, if he be limited to sell goods at

(1) Ex parte Dyster, 1 Merivale's Rep. 155. 2 Rose Rep. 349. S.C.

(m) Lord Mayor of London v. Brandon, 2 Stark. Rep. 14. Holt's Ni. Pri. Cas. 438. S. C.

(n) Per Lord Ellenborough in Whitehead v. Tuckett, 15 East Rep. 408. And see Pickering v. Busk, 15 East, 38.

(0) Vide Mal. Lex. Mer. 81. and Sadock v. Burton, Yelv. 202.

a fixed price; and the goods be perishable, and not in a condition to be kept, and the factor has no time or opportunity for consulting with the principal, it is apprehended he may sell them for ready money under the price limited, in order to prevent a total loss. (p) But in such case it would be adviseable to call in two sworn brokers, or other competent persons to examine the commodity.

A factor, broker, or agent cannot delegate his power to another without an express authority from his principal for that purpose. (q) And in the execution of the power given to a factor or agent, all contracts, and other acts should be expressed to be made and done by him in the name and on the account of his principal, otherwise the principal may not in all cases be bound by them, and in that event the factor or agent might be personally liable. (r) And a factor or agent who has power to sell the goods of his principal, cannot bind or affect the property of them by tortiously pledging, or otherwise disposing of them, either by way of security for, or in satisfaction of his own debt. (s) And where goods are thus pledged or disposed of, the principal may recover them back by action of trover against the pawnee, without tendering to the factor or agent what may be due to him, or without any tender to the pawnee of the sum for which the goods are pledged. And it is no excuse that the latter was wholly ignorant that the former held the goods as a mere factor or agent. (t) But a factor who has a lien on the goods of his principal may deliver them over to a third person as a security to the extent of his lien, with notice of his lien, and may appoint such third person as his servant to keep possession of the goods for him. And in that case the principal must tender the amount of the lien due to the factor before he can be entitled to recover back the goods so pledged. (u)

If goods are consigned to a factor or agent, who afterwards becomes bankrupt, and the goods remain in specie in his hands at the time of such bankruptcy, the principal may recover them from the assignees by action of trover: or, if the factor sells the goods, and his assignees afterwards receive the money, the principal may recover it from them in an action of assumpsit for money had and received. (v) So, where the factor sells goods and takes notes in payment from the vendee, payable at a future day, and his assignees afterwards receive the

(p) But see 2 Mod. 100. (9) Bunb. 166.

(r) Vide 9 Co. 76. b. 1 Term. Rep. 181. 6 Term. Rep. 176, 7. Com. Dig. tit. Attorney, C. 14.

(s) Vide the cases of Paterson v. Tash, Stra. 1178. Maans v. Henderson, 1 East. Rep. 337. Newsom v. Thornton, 6 East. Rep. 17. M'Combie v. Davies, Ib. 538. Martini v. Coles, 1 Maule & Sel. 146.

(t) M'Combic v. Davies, 7 East. Rep. 5. See also Hartop v. Hoare, Stra. 1187. Daubigny v. Duval, 5 Term Rep.

604.

(u) Vide M'Combie v. Davies, 7 East. Rep. 7. Per Lord Ellenborough Ch. J. Pickering v. Busk, 15 East. Rep. 44.

(v) Scott v. Surman, Willes's Rep. 400. See also 6 East. Rep. 26. in notis.