FACTOR, in commerce, is an agent or correspondent
residing beyond the seas, or in some remote part, commissioned by merchants to buy or sell goods on their account, or assist them in carrying on their trade.
A factor receives from the merchants, his constituents, in lieu of wages, a commission or factorage, according to the usage of the place where he resides, or the business he transacts, this being various in different countries, on the purchases and sales of different commodities. He ought to keep strictly to the tenor of his orders; as a deviation from them, even in the most minute particular, exposes him to make ample satisfaction for any loss that may accrue from his non-observance of them. When unlimited orders are given to factors, and they are left to sell or buy on the best conditions they can, whatever detriment occurs to their constituents, they are excused, as it is to be presumed they acted for the best, and were governed by the dictates of prudence. But a bare commission to sell is not sufficient authority for the factor to trust any person, wherefore he ought to receive the money on the delivery of the goods; and, by the general power, he may not trust beyond one, two, or three months, &c. the usual time allowed for sales, otherwise he shall be answerable out of his own estate. If a factor sells on the usual trust to a person of good credit, who afterwards becomes insolvent, he is discharged; but not if the man's credit was bad at the time of sale. If a factor gives a man time for payment of money contracted on sale of his principal's goods, and, after that time is elapsed, sell him goods of his own for ready money, and the man becomes insolvent, the factor in equity ought to indemnify his principal; but he is not compellable by the common law. A factor should always be punctual in the advices of his transactions, in sales, purchases, freights, and more especially in draughts by exchange. If he purchases goods for another at a price limited, and afterwards they rise, and he fraudulently takes them for his own account, and sends them to another part, in order to secure an advantage that seemingly offers, he will, on proof, be obliged, by the custom of merchants, to satisfy his principal for damages. If a factor, in conformity with a merchant's orders, buys with his money, or on his credit, a commodity he shall be directed to purchase; and, without giving advice of the transaction, sells it again to profit, and appropriates to himself the advantage, the merchant shall recover it from him, and besides have him amerced for his fraud. When factors have obtained a profit for their principal, they must be cautious how they dispose of it; for, if they act without commission, they are responsible: and if a merchant remits goods to his factor, and about a month after draws a bill on him, the factor, having effects in his hands, accepts the bill, then the principal breaks, and the goods are seized in the factor's hands
for the behalf of the creditors, it has been conceived the factor must answer the bill notwithstanding, and come in a creditor for so much as he was obliged, by reason of his acceptance, to pay. A factor who enters into a charter-party with a master for freight, is obliged by the contract; but if he loads aboard generally, the principal and the lading are liable for the freightment, and not the factor. If a factor, having money in his hands belonging to his principal, neglect to insure a ship and goods, according to order; if the ship miscarries, the factor, by the custom of merchants, shall make good the damage; and if he make any composition with the insurers after insurance, without orders so to do, he is answerable for the whole insurance.
As fidelity and diligence are expected from the factor, so the law requires the like from the principal: if, therefore, a merchant remits counterfeit jewels to his factor, who sells them as if true; if he receive loss or prejudice by imprisonment or other punishment, the principal shall not only make full satisfaction to the factor, but to the party who bought the jewels.
What is here said of factors, is meant of such as reside abroad to act for merchants, and may be applied to supercargoes, who go a voyage to dispose of a cargo, and afterwards return with another to their principals: but it is also the custom of the merchants of the highest credit throughout the world, to act mutually in the capacity of factors for each other. The business so executed is called commission business, and is generally desirable by all merchants, provided they have always effects in their hands, as a security for all the affairs which they transact for the account of others. And this class of traders of established reputation, have current as well as commission account, constantly between them, and draw on, remit to, and send commissions to each other only by the intercourse of letters, which, among men of honour, are as obligatory and authoritative as all the bonds and ties of law.