Factor (Lat., from facere, to do or make), one who conducts business for another. The word originally had almost the same meaning as agent (Lat. agere, to act). But while agent was used to represent every one who acted in any way in the stead of another, factor became limited to those who so act in mercantile transactions. Factor is then a mercantile agent, herein being like a broker; but the difference between them is principally this: a broker acts for his principal in reference to mercantile property which the principal retains in his hands; while the factor has possession of the goods sent to him for sale, or takes possession of those which he buys for his principal. From this difference others have grown; and the most important of these is, that the broker buys and sells as agent, while the factor may buy and sell in his own name, the person dealing with him not always knowing whether the factor or some one else owns the goods. In the United States, among merchants, the phrase commission merchant has taken the place of factor, and means much the same thing; but the word factor is retained as a law term, and the law of factors is the law of commission merchants.
Besides regular commission merchants, any one intrusted with the possession of property belonging to another, and authorized by the owner to dispose of it, may be a factor, as a supercargo. So a common carrier may be a factor; and while he acts as such, he is responsible only as a factor, that is, only for injuries or losses caused by want of due care; but when he has sold goods as factor, and has received the money which it is his duty to bring home as carrier, his obligations as carrier revive, and he is now liable for any loss not caused by the act of God or the public enemy. A factor is a general agent, and as such binds his principal.-The most general duty of a factor, as of every agent, is to obey the instructions he receives. But he is considered by the law merchant as an agent having much discretion, and an equal responsibility; while therefore he is bound to obey definite and positive instructions, he is not bound to pay such regard to mere intimations or wishes, because he may well believe that, whatever his principal might desire or consider expedient, if he did not give positive directions it was because he preferred leaving the decision to the discretion of his factor.
And even if he have positive and precise instructions, his departure from them will be justified if it was caused by an unforeseen emergency, and if he acted in good faith, and certainly for the actual advantage of his principal. If, however, a factor buys goods for his principal and sends them to him in distinct violation, of an order, his principal may reject the same, and may return them to his factor; or, if the nature of the goods and the circumstances of the case render it certainly expedient, he may sell the goods for his factor, and remit to him or credit him with the proceeds. A factor generally acquires no right to his commissions until the service by which he is to earn them is wholly rendered, unless prevented without his fault from completing his service, in which case he may have a reasonable compensation. Nor has he any claim for compensation unless he conducts his business with proper care and skill, and he is liable in damages for any loss his principal sustains by his want of care and skill; nor can he claim any compensation for any illegal or immoral service. A factor cannot delegate his power and right, except so far as he is authorized to do so, either expressly, or by the established usage, or by the peculiar circumstances of the case.
In the absence of positive instructions, it is the duty of the factor to obey and conform to the common usage of that business, and he can, in general, bind his principal only within that usage. He has a considerable discretion, but is bound to use it with reasonable care, and with perfect good faith. Thus, if he hastens a sale improperly, and without reasonable cause or excuse, as, for example, if he hurries a sale, clearly against the interest of the principal, for the purpose of realizing at once his own advances, such a sale would be considered a fraudulent sacrifice of his principal's property, and would render him liable in damages. The factor is bound to insure the property of his principal when instructed to do so, and also if a general, well established, and well known usage requires it of him, and particularly if there have been antecedent acts or usages between him and his principal, from which his principal might reasonably have expected that he would effect insurance, and therefore omit doing this himself.-In general, the principal has the right of revoking the authority he has given to his factor at any time before the fac- tor has made any advances upon the goods; and may then demand them, paying of course whatever legal claims the factor may have, not for his commissions, but for expenses properly incurred, about the goods, and for any special services he has been called upon to render.
But it is a question whether, if a commission merchant has made advances upon goods, he; has not now acquired an interest in them and an authority over them, which his principal cannot defeat by revocation. The prevailing i doctrine in the United. States is that a factor by advances upon goods acquires an interest in the goods themselves, and that his authority over them is therefore irrevocable. In England the courts hold otherwise, and a factor who has made advances upon goods is denied the power to sell them or any part of them if positively prohibited by his principal; while in the United. States he may sell so much as will cover his advances and charges, the principal having power over only the surplus or residue after the factor's advances are repaid. The factor is not obliged to sell, but after demand and reasonable delay may have his action against his principal for his advances.-The question what power a factor has to pledge the goods consigned to him has been much agitated. By placing the goods in his possession, the principal may be said to give to his factor the power of acting as an owner, to the injury of others.