The government class book / Designed for the instruction of youth in the principles of constitutional government and the rights and duties of citizens.

by Andrew W. Young

Chapter LVIII.

Principal and Agent, or Factor; Broker; Lien, &c.

§1. An agent, or factor, is a person intrusted with the management of the business of another, who is called principal. The words agent and factor both signify a deputy, a substitute, or a person acting for another; but agent seems to be the more comprehensive term, being applied to one who is intrusted by another with any kind of business; factor more properly denotes an agent employed by merchants residing in other places to buy and sell, and transact certain other business on their account. A factor, from his being commissioned or authorized to act for his principal, and especially if allowed a commission, or a certain rate per cent, of the value of the goods bought or sold, is called a commission merchant.

§2. If a factor advances money on property intrusted to him, he can hold it until the money shall be refunded, and all charges paid. If the actual owner of the property is unknown to the factor, the person in whose name the goods were shipped, is to be deemed the owner.

§3. The right of a factor to hold property against the owner in satisfaction of a demand, is called lien; and the factor may sell the goods to satisfy his claim; but he must pay the surplus, if any, to the principal or owner. A factor can not pledge goods intrusted to him for sale, as security for his own debts. If he disposes of merchandise intrusted or consigned to him, and applies the avails to his own use, with intent to defraud the owner, he may be punished by fine and imprisonment.

§4. How far, in ordinary business, a principal is bound by the acts of an agent, it is not easy to determine. As a general rule the acts of a general agent; that is, one who either transacts all kinds of business for his employer, or who does all acts connected with a particular business or transaction, or which relate to some particular department of business, bind his principal, so long as he keeps within the general scope of his authority, though he may in some special cases act contrary to his private instructions. But an agent employed for a particular purpose, if he goes beyond the limits of his power, does not bind his principal.

§5. An agent is bound, in ordinary cases, to observe the instructions of his principal, even though an act contrary to such instructions should be intended for the benefit of the principal. The agent must bear, personally, all losses growing out of a non-compliance with his orders; and the profit accruing therefrom goes to the benefit of the principal. An agent, however, is excused from a strict compliance with his orders, if, after receiving them, some sudden and unforeseen emergency has arisen, in consequence of which such compliance would operate as an injury to the principal, and frustrate his intention.

§6. When an agent receives no instructions, he must conform to the usage of trade, or to the custom applicable to the particular agency; and any deviation therefrom, unless justified by the necessity of the case, renders him solely liable for any loss or injury resulting from it.

§7. An agent is bound to exercise ordinary diligence and reasonable skill; and he is responsible only for the want thereof. Ordinary diligence is that which persons of common prudence use in conducting their own affairs. Reasonable skill is that usually possessed by persons of common capacity employed in the same business.

§8. If an agent exceed the limits of his authority, he becomes personally responsible to the person with whom he deals, if the limitations of his authority are unknown to such person. He is in like mariner responsible, if he makes a contract in his own name; or if he does not disclose the name of the principal, so as to enable the party with whom he deals to have recourse to the principal in case the agent had authority to bind him. And if the agent even buys in his own name, but for the principal, and without disclosing his name, the principal also is bound, provided the goods come to his use. Also if the principal is under age, or a lunatic, or otherwise incompetent to contract, the agent is liable.

§9. A broker is an agent employed to negotiate sales between parties for a compensation in the form of a commission, which is commonly called brokerage. His business consists chiefly in negotiating exchanges; or in buying and selling stocks, goods, ships, or cargoes; or in procuring insurances and settling losses; and as he confines himself to one or the other of these branches, he is called an exchange broker, stock broker, insurance broker, &c. A broker differs from a factor. He has not the custody of the goods of his principal. He is merely empowered to effect the contract of sale; and when this is done, his agency ends. If a broker executes his duties in such a manner that no benefit results from them, or is guilty of gross misconduct in selling goods, he is not entitled to a commission or compensation.

§10. A lien, as the claim of a factor upon goods intrusted to him for sale, has been noticed. (§3.) The right of lien extends to others than factors. It is intended also for the benefit of manufacturers, mechanics, and other persons carrying on business for the accommodation of the public. A tailor has a lien upon the garment made from another's cloth until he is paid for the making; a shoemaker upon the shoes made from another's leather; a blacksmith upon the horse he has shod; an innkeeper upon the horse or goods of his guest; and common carriers upon the goods they transport. But they cannot hold the property for any other debt; nor can they sell it to satisfy their claim. Whenever a person allows property to go out of his possession, he loses his lien.