Inasmuch as his relation to the principal is one of trust, he must act for his principal alone. Thus it has been held that even after an agent has left a prin cipal's employ, the latter may en join him from using trade figures that he learned while he was working for that principal. The factor is bound to give his principal due notice of all information he has gained that may affect the latter's interests. An agent may not buy what he is delegated to sell; therefore factors should not purchase, on their own account, goods which have been intrusted to them for sale by their shippers. Unfortunately some factors are not always honest in this respect.
After the merchandise is sold, the factor must ac count for it to his principal. In order to be able to do this he must keep proper books of account. While it is generally held that if there is no agreement to the contrary the books of a factor are subject to his principal's inspection, a definite provision to the con trary is sometimes included in the contract, for the reason that information obtained from an inspection of the accounts of a factor would reveal to his princi pal the merchants to whom the goods were sold. If the factor makes any secret profits, he is of course under the law accountable to his principal for them.
6. Expenses for which the principal is accountable. —If the agent has made advances to his principal, it is usually held that he has a lien upon the goods in his possession for the amount of his advances, and that he also has a lien for expenses incurred in the scope of the agency, such as marine and fire insurance carried under instructions, and freight or customs duties paid, as well as allowances made to customers and claims made upon him, in order to protect the validity of his sales to them.
7. Del credere agency.—That kind of agency in which the agent guarantees the accounts of the cus tomers who become debtors to the principal thru his solicitation, is known as a del credere agency. In the majority of the states of the Union, contrary to the usual rule governing contracts of guaranty, the con tracts between the principal and the del credere agent do not need to be in writing. In other words, the factor agrees to pay to his principal the price of the goods that have been sold by the time the term of credit extended to the purchaser has expired. Or, if the purchasers fail to pay, the agent must give the principal the price of any goods for which credit has been allowed; thus the principal is relieved of all risk of loss in such cases. Inasmuch as this involves an additional undertaking on the part of the factor, he re ceives an additional commission, sometimes called a "guaranty," if his agency is of this kind. Of course
the factor is not entitled to claim a guaranty sales, since he has assumed no risk in making them. Any transaction under del credere agency practically amounts to a sale to the agent and a resale to the customer, altho actually the title to the goods passes directly from the principal to the third party.
8. Why goods are shipped on consignment.=There are a number of reasons why goods are shipped on consignment. In the first place, a merchant who dis poses of his product thru the agency of a factor is relieved of the burden of developing a market for his goods and of training a sales force.- In other words, he can devote his entire attention to the manufactur ing, or producing, end of his business. 'Factors are often called upon to sell a surplus which the busi ness cannot conveniently dispose of thru its regular channels of business. Or sometimes goods will be shipped on consignment to a business house to be sold at a specific price, because the shipper has not suffi cient faith in the credit-standing of the consignee to be willing to sell him goods on credit.
9. Goods on consignment; the consignee's liability. —When goods are sold outright, the title to the goods passes at once to the buyer; but when merchandise is shipped on consignment, as long as the goods are un sold they remain the property of the consignor. In the latter case, it is the consignee's duty to keep them separate and distinct from his own merchandise, so that they may be readily identified at any time. If the consignee appropriates to his own use either the money he has received for goods sold, or the goods that he still has on hand, he is liable under the crim inal law. Since there is also civil liability, the shipper is protected by a double safeguard.
N. Goods on consignment; live stock and farm pro duce.—Live stock and farm produce are frequently shipped to commission merchants to be sold on con signment, because the shipper cannot know at the time he sends them to market what the market price will be when they arrive, and since the goods are perish able it is necessary that they be disposed of as soon as they reach the market. Generally in cases of this kind the shipper specifies no selling price for the goods, because if the factor should be unable to realize a fixed price the goods would have to be carried, and the shipper would have to bear the carrying charges and whatever loss there might be from deterioration.