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Someone who lends money and in return takes assignment of the borrower's accounts receivable or other security.

An agent employed to sell goods or merchandise consigned or delivered to him by or for his principal for a compensation commonly called factorage or commission.

When he resides in the same state or country with his principal he is called a home factor; a foreign factor when he resides in a different state or country.

When the agent accompanies the ship, taking a cargo aboard, and it is consigned to him for sale and he is to purchase a return cargo out of the proceeds, such agent is properly called a factor. However, this was usually refered to as a supercargo.

A factor differs from a broker in some important particulars, namely:

He may buy and sell for his principal in his own name as well as in the name of his principal; on the contrary, a broker acting as such should buy and sell in the name of his principal;

A factor is entrusted with the possession, management, disposal, and control of the goods to be bought and sold, and has a special property and a lien on them; the broker, on the contrary, has usually no such possession, management, control, or disposal of the goods, nor any such special property nor lien.

Difference In The Liability Of A Home Or Domestic Factor And A Foreign Factor.

By the usages of trade, or intendment of law, when domestic factors are employed in the ordinary business of buying and selling goods, it is presumed that a reciprocal credit between, the principal and the agent and third persons has been given. When a purchase has been made by such a factor, he, as well as his principal, is deemed liable for the debt; and in case of a sale, the buyer is responsible both to the factor and principal for the purchase money; but this presumption may be rebutted by proof of exclusive credit. Foreign factors, or those acting for principals residing in a foreign country, are held personally liable upon all contracts made by them for their employers, whether they describe themselves in the contract as agents or not. In such cases, the presumption is, that the credit is given exclusively to the factor. But this presumption may be rebutted by a proof of a contrary agreement.

A Factor's Duties.

He is required to use reasonable skill and ordinary diligence in his vocation; in general, he has a right to sell the goods, but he cannot pawn them. The latter, branch of this rule, however, is altered by statute in some of the states. He is bound to obey his instructions, but when he has none, he may and ought to act according to the general usages of trade sell for cash, when that is usual, or give credit on sales, when that is customary. He is bound to render a just account to his principal, and to pay him the monies he may receive for him.

A Factor's Rights.

He has the right to sell the goods in his own name; and when untrammeled by instructions, he may sell them at such times and for such prices as, in the exercise of a just discretion, he may think best for his employer.

He is, for many purposes, between himself and third persons, to be considered as the owner of the goods. He may therefore recover the price of goods sold by him in his own name, and consequently, he may receive payment and give receipts and discharge the debtor, unless notice has been given by the principal to the debtor not to pay.

He has a lien on the goods for advances made by him and for his commissions.

Bell's Commentaries lay down the following rules with regard to the rights of the principal, in those cases in which the goods in the factor's hands have been changed in the course of his transactions.

When the factor has sold the goods of his principal, and failed before the price of the goods has been paid, the principal is the creditor, and. entitled to a preference over the creditors of the factor.

When bills have been taken for the price, and are still it the factor's hands, undiscounted at his failure; or where goods have been taken in return for those sold; the principal is entitled to them, as forming no part of the divisible fund.

When the price has been paid in money, coin, bank notes, etc., it remains the property of the principal, if kept distinct as his.

When a bill received for goods, or placed with the factor, has been discounted, or when money coming into his hands has been paid away, the endorsee of the bill, or the person receiving the money, will be free from all claim at the instance of the principal.

When the factor sinks the name of the principal entirely; as where he is employed to sell goods and receives a del credere commission for which he engages to guarantee the payment to the principal, it is not the practice to communicate the names of the purchasers to the principal except where the factor fails. Under these circumstances the principal is the creditor of the buyer and has a direct action against him for the price. But bona fide persons contracting with the factor in his own name are entitled to set off the factor's debt to them. Where the factor is entrusted with the money or property of his principal to buy stock, bills and the like and misapplies it, the produce will be the principal's if clearly distinguishable.

When the factor purchases goods for the behalf of his principal, but on his own general current account without mention of the principal, the goods vest in the factor and the principal has only an obligation against the factor's estate. But when the factor, after purchasing the goods, writes to his principal that he has bought such a quantity of goods in consequence of his order, and that they are lying in his warehouse or elsewhere, the property would seem to be vested in the principal.

It may therefore be laid down as a general rule that when; the property remitted by the principal, or acquired for him by his order; is found distinguishable in the hands of the factor; capable of being traced by a clear and connected chain of identity, no one link of it degenerating from a specific trust into a general debt; then the creditors of a factor who is bankrupt have no right to the specific property. Much discrimination is requisite in the application of this doctrine.

A factor has no right to barter the goods of his principal, nor to pledge them for the purpose of raising money for himself or to secure a debt he may owe. But he may pledge them for advances made to his principal, or for the purpose of raising money for him, or in order to reimburse himself to the amount of his own lien. Another exception to the general rule that a factor cannot pledge the goods of his principal is that he may raise money by pledging the goods for the payment of duties or any other charge or purpose allowed or justified by the usages of trade.