What is an Agent?
An agent is appointed by a principal (the owner of the goods) to trade on their behalf, earning commission as a reward. Agency is the legal relationship between the agent and the principal, allowing the agent to bring the principal into a legal relationship with third parties.
Types of Trade Agents
- Broker: makes bargains and signs contracts on the principal’s behalf (e.g. a plot seller). Brings buyer and seller together, receives a commission called brokerage, doesn’t take possession of the goods, and prepares bought and sold notes when a deal completes.
- Factor agent: sells goods delivered to them by the principal, in their own name, for compensation called factorage. Their commission is higher than a broker’s since they also risk their own assets, and they hold a general lien on goods in their possession.
- Forwarding agent: handles the shipment of export goods on behalf of exporters (and receives goods on behalf of importers), acting as a clearing agent, arranging marine insurance, shipping space, freight rates, and customs formalities.
- Auctioneer: undertakes auction sales on behalf of the principal for goods that are hard to grade in advance. A sale may be “with reserve” (a minimum price set by the principal) or “without reserve”. The auctioneer possesses the goods and sells to the highest bidder at the “knocked down” price.
- Del credere agent: guarantees that customers will pay for goods sold, or pays the principal themselves if they don’t — combining the role of salesperson and insurer. They receive extra “del credere commission” for taking on this higher risk.
Rights and Duties of Trade Agents
Rights: to their remuneration, to be reimbursed for expenses incurred in the business, to stop goods reaching a buyer who hasn’t paid, to resell perishable goods after notifying a defaulting buyer, and to recover unpaid goods from the buyer.
Duties: not to compete with or act against the principal’s interest, to follow the principal’s instructions, not to delegate their duties to someone else, to keep proper accounts of all transactions, and to use only the authority given to them by the principal.
