A broker is one whose business is to bring parties together to contract, or in their name to contract for them, in some line of business.
A broker makes it his business to bring parties together to contract, or to make contracts for them. Thus a real estate broker makes it his business to find buyers for sellers and sellers for buyers of real estate. He may in one case simply bring the parties together leaving them to make their own contract, or in another case he may have the larger authority to bind one of them by a contract executed by himself as an agent.
A broker, unlike a factor, does not usually have possession of the goods. His authority is not so broad, and his contracts are generally made in the name of his principal.
A broker usually chooses some one line of trade in which to carry on his business, and he is described in reference to that trade.
There are many sorts of brokers. The common sorts are here briefly discussed.
(1) Real Estate Brokers. A real estate broker brings buyers and sellers of real estate together or makes contracts for them. This is a very numerous class, and their general activities are commonly understood. A real estate broker has no authority to contract for the purchase or sale of real estate or to buy or sell real estate, except as this authority is specially conferred. Often he does not execute the contract himself. He writes up a contract and has the owner sign it and then takes it to the buyer for his signature, or vice versa.
113. For compensation of broker see SEC. 27, supra.
So when a deed is given, the broker's name may not at all appear. Yet in many cases, a power of attorney is conferred on the broker to sign contracts and execute deeds.
Real estate brokers often collect rents, procure insurance, and otherwise concern themselves with the management of real estate.
(2) Insurance Brokers. An insurance broker is one who makes it his business to secure insurance, for those who employ him, from various companies. He differs from an insurance agent who works for and represents a certain, or perhaps several, insurance companies, while the broker is the agent of the insured rather than of the insurer. He does not have as broad authority as a general insurance agent, who may bind the company. A policy is secured by him from the company, rather than executed by him for the company. Consequently there is not usually any act which he can do in signing policies, waiving or inserting provisions therein which can bind the company, although a general insurance agent would have such powers.
(3) Merchandise Brokers. A merchandise broker is one who represents buyers and sellers of merchandise without having possession of it. He usually deals in some one line and is described and known in reference to that line, as for instance, a cotton broker, a sugar broker, a tea and coffee broker, a grain broker. He does not have the authority of a factor from whom he essentially differs in not having the possession of the goods.
(4) Stock Brokers. A stock broker buys and sells stock of corporations for customers. He often differs from the other kinds of brokers and comes to have more the character of a factor. He often has possession of the stock, and buys and sells in his own name. A common practice is for him to sell stock on margin. In that case the buyer becomes the owner of the stock, which is bought by money loaned by him to the customer and the customer's own money in proportions usually of about 90 per cent and 10 per cent. The amount put up by the customer is said to be put up on margin.
The broker usually acts in each instance upon a special authority and has very little implied authority to bind his principal.
A broker does not have possession of the subject matter of the contract as in the case of a factor. His authority is specially conferred and therefore limited. For instance, if one deals with a real estate broker he cannot usually assume that the broker's authority is extensive. He must look to the actual authority that has been expressly conferred. Thus C cannot assume that A, a real estate broker, has any authority to sell B's land. He may take A's word for it, but he is not really protected except upon B's word to that effect, which he should have in writing. Many times indeed a broker has no actual authority but simply brings parties together, whereupon they arrive at their own terms.
Where a broker has actual authority, it is usually to be construed in the light of customs and usages which are of universal use in that locality and trade. If one goes by means of his broker into a market or exchange he usually must be taken to have instructed the broker to proceed in respect to the well known customs and rules that prevail there, and he will be bound by these. This is perhaps more true of stock brokers than of other kinds, because it is their business which is so largely governed by customs, usages and rules.
A broker usually has no authority to receive payment, or to extend credit, as the factor may. In any particular case, however, this authority might appear either expressly or from the circumstances.