A factor is a type of trader who receives and sells goods on commission, called factorage. A factor is a mercantile fiduciary transacting business that operates in their own name and does not disclose their principal. A factor differs from a commission merchant in that a factor takes possession of goods (or documents of title representing goods, such as a bill of lading) on consignment, but a commission merchant sells goods not in their possession on the basis of samples.[1]
Most modern factor business is in the textile field, but factors are also used to a great extent in the shoe, furniture, hardware, and other industries. The number of trade areas in which factors operate has increased. In the United Kingdom, most factors fall within the definition of a mercantile agent under the Factors Act 1889 (52 & 53 Vict. c. 45), and therefore have the powers of such.[3] A factor has a possessory lien over the consigned goods that covers any claims against the principal arising out of the factor's activity.[4]
The term derives from the Latin for "doer, maker", from facit, "he/she/it does/makes". Historically, a factor had their seat at a sort of trading post known as a factory.
History
Before the 20th century, factors were mercantile intermediaries whose main functions were warehousing and selling consigned goods, accounting to principals for the proceeds, guaranteeing buyers' credit, and sometimes making cash advances to principals prior to the sale of the goods. Their services were of particular value in foreign trade, and factors became important figures in the great period of colonial exploration and development.[5]
Mercantile factors
A relatively large mercantile company could have a hierarchy including several grades of factor. The British East India Company hierarchy ranked "factors" between "writers" (junior clerks) and "junior merchants".[6]
In North America the Hudson's Bay Company, as restructured after merging with the North West Company in 1821, had commissioned officers who included the ranks of chief trader and chief factor. They all shared the profits of the company during its monopoly years.[7]
Judicial factor
In Scottish law, a judicial factor is a kind of trustee appointed by the Court of Session to administer an estate, for a ward (called a pupil) until a guardian (called a tutor) can be appointed (factor loco tutoris), for a person who is incapax, or for a partnership that is unable to function.
Notable factors
- James Douglas (1803–1877) was a Hudson's Bay Company Chief Factor who became Governor of Vancouver Island and later the entirety of British Columbia
- Alexander Grant Dallas (1816–1882) was a Chief Factor who became superintendent of the west-of-the-Rockies portion of the Hudson's Bay Company and the Governor of Rupert's Land in North America, areas now in the United States and Canada
See also
- Beaver Club
- Cotton factor, a broker or commission merchant
- Moose Factory
- York Factory
- Comprador
External links
References
- Christine Rossini, English as a Legal Language, 2nd ed. (London: Kluwer Law International, 1998), 103.^
- UK Legislation, Factors Act 1889, section 1(1), accessed on 17 July 2024^
- W. J. Stewart & Robert Burgess, Collins Dictionary of Law, 2nd ed., s.v. "factor" (Collins, 2001), 163.^