CONSIGNMENTS AND JOINT VENTURES 1. Legal relation between consignors and con relation that exists between a consignor and a consignee is that of principal and agent. While the rights and duties of both parties are usually regu lated by a contract, their relations are governed also, to a large extent, by what is known as "the customs of the trade." A consignment may be defined as a ship ment of merchandise, made by the owner or con signor, to another party, called the consignee, who acts as agent for the consignor in disposing of the goods.
There are two kinds of agents—general agents, who represent the principal in all his business, and special agents, whose authority extends to the per formance of certain acts only. The important ques tion, in any individual case, is to find out just what the agent's duties are. This authority may be di rectly conferred by the consignor; or it may be inci dental—that is, necessary to certain powers expressly conferred; or it may be implied from the fact that the principal has held the agent out to the world as pos sessing that authority. In any event it is only when the agent acts within his authority that he can bind his principals.
2. The factor; his general rights and liabilities.— The factor, or commission merchant, is an agent to whom goods are sent to be sold. He is a bailee with the right to sell goods in his own name for cash or on the usual terms of credit, at any price; he has also the right to receive the money and to execute and deliver to the buyer a binding discharge. He may also war rant the goods, if they are of the kind usually sold with a warranty. He may take negotiable instru ments on a sale on credit. lie has a lien on the goods for the balance of the account in his favor, but a voluntary relinquishment of possession destroys the validity of the lien. A factor cannot barter the goods but under the Factor's Acts an innocent pledgee is protected. The 'statutes known as the Factor's Acts modify the common-law rights and liabilities of the factor; they were passed principally to protect inno cent purchasers, who of course cannot know whose goods the factor is selling, or what instructions, with reference to their sale, the owner may have given.
3. Factor's responsibility for his the rights and duties of both parties may be gov erned by a contract; when there is no contract the customs of the trade shall govern. The principal is bound by these customs. The factor is obliged to protect the property of the consignor while it is in his possession; he must take such care as a reasonably prudent man would take of his own property. He is not called upon to insure the goods against loss by fire or theft.
4. Factor's responsibility to his principal; credit.— If the factor receives specific instructions from his principal, he must follow them absolutely. For ex ample, if he has been advised as to the price at which the goods are to be sold, he would violate instruc tions at his peril. The factor is also bound to sell the goods at the highest prices obtainable, if no specific instructions as to selling price have been given; and if lie sells merchandise on credit for his principal, he is expected to use reasonable prudence and discre tion in extending credit. In other words, he must use the same diligence in ascertaining the responsibility of the purchaser, that the average merchant would use. If the factor can prove that he has fulfilled this requirement, lie will not be held responsible for the loss caused by a purchaser's failure to pay for goods received.
5. Factor and secret profit; books of account.—As an agent, the factor is not entitled to secret profits; he must account for all moneys received in the trans action of his principal's business. Even in the case of illegal transactions, he is required to keep and render accounts. Moreover, an agent who mixes the property or moneys of his principal with his own is liable for any loss that may result.