In the case of Pickering v. Busk, 1812, 15 East 38, the buyer of goods caused the goods to be transferred in the books of the warehouseman to the broker through whom he had bought, and the broker sold the goods to a second purchaser for value in good faith and without notice. It was held that the latter obtained a good title, and the general principle of estoppel was stated thus:
Strangers can only look to the acts of the parties and to the external indicia of property, and not to the private communications which may pass between a principal and his broker; and if a person authorize another to assume the apparent right of disposing of property in the ordinary course of trade, it must be presumed that the apparent authority is the real authority.
The broad principle above stated, applicable to cases in which the owner of goods has constituted another person his ostensible agent for sale, has not always been applied consistently by the courts (see 44), and the various Factors Acts, together with some provisions of the Sale of Goods Act, are only partially successful efforts to state some of the cases in which the owner of goods is estopped because he has clothed another person with ostensible agency for sale or with ostensible ownership.
In the United Kingdom the Factors Act, 1889, (which was, subject to certain exceptions, made applicable to Scotland in 1890) superseded the earlier legislation relating to sales and pledges of goods by parsons in possession of the goods or of documents of title to the goods. As to the history of the legislation, see Cole v. North Western Bank, 1875, L.R. 10 C.P. 354; Chalmers, Sale of Goods, 7th ed. 1910, pp. 152, 153; Ewart, Estoppel, pp. 353 ff.; notes in 2 R.C. at pp. 433 ff., to Hollins v. Fowler, 1875, L.R. 7 H.L. 757, 2 R.C. 409.
As has already been noted in the Introduction, 2, the Factors Act, 1889, has been adopted in Alberta, British Columbia, New Brunswick, Nova Scotia, Ontario, Prince Edward Island and Saskatchewan.
As to the law in Manitoba, see Stewart v. Richardson, 1920, 30 Man. R. 481.
The following is the text of The Factors Act in Ontario, R.S.O. 1914, c. 137, each section being followed by a note referring to the corresponding section of the original statute: 1. This Act may be cited as The Factors Act. [U. K. s. 17: This Act may be cited as The Factors Act, 1889].
2. - (1) In this Act -(a) "Document of title" shall include any bill of lading and warehouse receipt, as defined by The Mercantile Law Amendment Act, any warrant or order for the delivery of goods, and any other document used in the ordinary course of business as proof of the possession or control of goods, or authorizing or purporting to authorize, either by endorsement or delivery, the possessor of the document to transfer or receive goods thereby represented;
(b) "Goods" shall include wares and merchandise;
(c) "Mercantile agent" shall mean a mercantile agent having in the, customary course of his business as such agent authority either to sell goods, or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods;
(d) "Pledge" shall include any contract pledging or giving a lien or security on goods, whether in consideration of an original advance or of any further or continuing advance or of any pecuniary liability.
(2) A person shall be deemed to be in possession of goods or of the documents of title to goods where the goods or documents are in his actual custody or are held by any other person subject to his control or for him or on his behalf.
[In the United Kingdom the Factors Act, 1889, s. 1, contains similar provisions, but there are verbal differences in the definition of "document of title." See 43 for the text of the different statutory definitions of document of title, bill of lading and warehouse receipt].
Dispositions by Mercantile Agents.
3. - (1) Where a mercantile agent is, with the consent of the owner, in possession of goods or of the documents of title to goods, any sale, pledge or other disposition of the goods, made by him when acting in the ordinary course of business of a mercantile agent, shall, subject to the provisions of this Act, be as valid as if he were expressly authorized by the owner of the goods to make the same; provided that the person taking under the disposition acts in good faith, and has not at the time thereof notice that the person making the disposition has not authority to make the same.
(2) Where a mercantile agent has, with the consent of the owner, been in possession of goods or of documents of title to goods, any sale, pledge or other disposition which would have been valid if the consent had continued, shall be valid notwithstanding the determination of the consent; provided that the person taking under the disposition acts in good faith and has not at the time thereof notice that the consent has been determined.
(3) Where a mercantile agent has obtained possession of any documents of title to goods by reason of his being or having been, with the consent of the owner, in possession of the goods represented thereby, or of any other documents of title to the goods, his possession of the first mentioned documents shall, for the purposes of this Act, be deemed to be with the consent of the owner.
(4) For the purpose of this Act the consent of the owner shall be presumed in the absence of evidence to the contrary.
[This section is copied from s. 2 of the Factors Act 1889].
4. A pledge by a mercantile agent of the documents of title to goods shall be deemed to be a pledge of the goods.
[This section is copied from s. 3 of the Factors Act 1889].
5. Where a mercantile agent pledges goods as security for a debt due from or liability incurred by the pledgor to the pledgee before the time of the pledge, the pledgee shall acquire no further right to the goods than could have been enforced by the pledgor at the time of the pledge.
[This section is copied from s. 4 of the Factors Act 1889].
6. The consideration necessary for the validity of a sale, pledge or other disposition of goods by a mercantile agent, in pursuance of this Act, may be either a payment in cash, or the delivery or transfer of other goods, or of a document of title to goods, or of a negotiable security or any other valuable consideration; but where goods are pledged by a mercantile agent in consideration of the delivery or transfer of other goods, or of a document of title to goods, or of a negotiable security or of other valuable consideration, the pledgee shall acquire no right or interest in the goods so pledged in excess of the value of the goods, document, security or other valuable consideration when so delivered or transferred in exchange.
[This section is copied from s. 5 of the Factors Act 1889].
7. For the purposes of this Act an agreement made with a mercantile agent through a clerk or other person authorized in the ordinary course of business to make contracts of sale or pledge on his behalf shall be deemed to be an agreement with the agent.
[This section is copied from s. 6 of the Factors Act 1889].
8. - (1) Where the owner of goods has given possession of the goods to another person for the purpose of consignment or sale, or has shipped the goods in th,e name of another person, and the consignee of the goods has not had notice that such person is not the owner of the goods, the consignee shall, in respect of advances made in good faith to or for the use of such person, have the same lier. on the goods as if such person were the owner of the goods, and may transfer any such lien to another person.
(2) Nothing in this section shall limit or affect the validity of any sale, pledge or disposition by a mercantile agent.
[This section is copied from s. 7 of the Factors Act 1889].
Dispositions by Sellers and Buyers of Goods. [The next following three sections of the Factors Act were repealed in Ontario by the Sale of Goods Act, 1920. . As to ss. 9 and 10 of the Ontario Factors Act corresponding with ss. 8 and 9 of the Factors Act, 1889, see now 44, where the similar provisions of the Sale of Goods Act (Ont.s. 26; U.K. s. 25) are set out. S. 11 of the Ontario Factors Act related to the effect upon an unpaid seller's lien or retention or stoppage in transitu of a sale or pledge of the goods by the buyer to a third person, and was in the same terms as the provision on this subject now contained in the Sale of Goods Act (Ont. s. 46; U.K. s. 47), discussed in chapter 7, 75. In the United Kingdom s. 10 of the Factors Act, 1889, relates to the same subject and was not repealed by the Sale of Goods Act, 1893].
12. For the purposes of this Act the transfer of a document of title may be by endorsement, or where the document is by custom or by its express terms transferable by delivery, or makes the goods deliverable to the bearer, then by delivery.
[This section is copied from s. 11 of the Factors Act 1889].
13. - (1) Nothing in this Act shall authorize an agent to exceed or depart from his authority as between himself and his principal, of exempt him from any liability for so doing.
(2) Nothing in this Act shall prevent the owner of goods from recovering them from/his agent at any time before the sale or pledge thereof, or shall prevent the owner of goods pledged by an agent from having the right to redeem the goods at any time before the sale thereof, on satisfying the claim for which the goods were pledged, and paying to the agent, if by him required, any money in respect of which the agent would by law be entitled to retain the goods or the document of title thereto, or any of them by way of lien as against the owner, or from recovering from any person with whom the goods have been pledged any balance of money remaining in his hands as the produce of the sale of the goods after deducting the amount of his lien.
(3) Nothing in this Act shall prevent the owner of goods sold by an agent from recovering from the buyer the price agreed to be paid for the same, or any part of that price, subject to any right of set off on the part of the buyer against the agent.
[This section is copied from s. 12 of the Factors Act 1889, with some modifications. The latter statute has the words "civil or criminal" after the word "liability" in sub-s. 1, and the words "or his trustee in bankruptcy" after the word "agent" where it first occurs in sub-s. 2].
14. The provisions of this Act shall be construed in amplification and not in derogation of the powers exercisable by an agent independently of this Act.
[This section is copied from s. 13 of the [Factors Act 1889].