Legal Definitions - factor's act

A factor's act is a specific type of law designed to protect individuals or businesses who purchase goods from an authorized agent, known as a "factor," who is selling on behalf of the original owner. This statute creates a legal presumption that the agent had the owner's full permission and authority to sell the goods, even if, in reality, the agent exceeded their actual instructions or acted without specific approval for that particular sale.

The primary purpose of a factor's act is to ensure that innocent buyers are not penalized if an agent misrepresents their authority or breaches their agreement with the owner. Instead, the law places the responsibility on the owner who entrusted the goods to the agent, requiring the owner to pursue any claims against their agent rather than against the unsuspecting buyer.

Here are some examples illustrating how a factor's act might apply:

• Art Gallery Consignment: An artist, Sarah, places several paintings with "Artistic Visions Gallery" (the factor) to be displayed and sold. Their agreement states the gallery should obtain Sarah's final approval for any sale exceeding $5,000. A collector, David, purchases a painting for $6,000 from the gallery. Unbeknownst to David, the gallery owner sold it without getting Sarah's final approval, violating their internal agreement.

  How it illustrates the term: Under a factor's act, David, the buyer, would be protected. The law presumes that Artistic Visions Gallery, as Sarah's agent, had the authority to sell the painting and that Sarah approved the sale. Sarah would have to pursue her claim against the gallery for breaching their consignment agreement, not against David, who is considered an innocent purchaser and now legally owns the painting.

• Agricultural Produce Broker: A farmer, John, delivers a large shipment of organic produce to "Fresh Harvest Brokers" (the factor) to sell to various grocery stores. John instructs the broker to sell the produce only to stores within a specific geographic region. However, Fresh Harvest Brokers sells a portion of the produce to a supermarket chain outside that region, which was not explicitly authorized by John. The supermarket chain, unaware of this restriction, pays for and receives the produce.

  How it illustrates the term: The factor's act would protect the supermarket chain. The law assumes that Fresh Harvest Brokers, acting as John's agent, had the authority to sell the produce to any buyer. John's private instructions to the broker do not affect the validity of the sale to the supermarket, which is an innocent third-party buyer. John's recourse would be against Fresh Harvest Brokers for breaching their agency agreement, not against the supermarket for purchasing the goods.

• Luxury Watch Consignment: Maria consigns her vintage luxury watch to "Timeless Treasures," a high-end consignment shop (the factor), to sell on her behalf. Her agreement with Timeless Treasures specifies a minimum sale price of $15,000. A customer, Emily, purchases the watch from Timeless Treasures for $14,000, a price the shop owner offered without consulting Maria or adhering to the minimum. Emily has no knowledge of the consignment agreement's terms.

  How it illustrates the term: In this situation, the factor's act would protect Emily, the buyer. The law presumes that Timeless Treasures, as Maria's agent, had the authority to sell the watch at the price offered. Emily is an innocent purchaser who relied on the agent's apparent authority. Maria's claim for the difference in price or for breach of contract would be against Timeless Treasures, not against Emily, who now legally owns the watch.