Factors of Mercantile Agents

Introduction

Mercantile agent is a special agent who has the authority to sell goods, transfer items for sale, acquire goods, or collect money to secure commodities on behalf of its client in the ordinary course of business. To clarify, a commercial or mercantile agent is a person who has received goods or papers of title in his or her capacity as a mercantile agent (not in any other private capacity). However, such words do not cover all of the mercantile agent’s meanings.

Factors of Mercantile Agent

Mercantile agents may be classified:

(a) On the basis of rights, and

(b) On the basis of functions.

(a) On the basis of  rights:

  1.  General Mercantile Agents are agents who have complete power to undertake all commercial duties on behalf of their principal. The principal is bound by all such actions. Factors, commission agents, branch managers, and other general commercial agents are examples.
  2. Special/Particular Mercantile Agent, i.e., an agent hired to do a special or particular or unique task for his principal. He ceases to be an agent after the specific job is completed.

(b) On the basis of the functions:

(A) Factor

“A factor has been described as an agent engaged by his principal to sell products or items mercandise or supplied to him for compensation,” writes Storey. As a result, a factor is a general agent who sells the goods & commodities given to him on a commission basis under his own name.

He possesses the following powers:

(a) To sell something under his own name;

(b) To offer products on credit at a place & time of his choice;

c) To be reimbursed for the items;

(d) To keep a lien on goods for costs that are owed to him.

(B) Commission Agent:

In exchange for a commission, a commission agent operates on behalf of his principal in the purchase and sale of products. He buys and sells in his own name, but he is not responsible for the transaction & also not bear the trade risks. He is an expert in the goods & products with which he deals, & he is also aware of market trends in that commodity.

The following are the duties of a commission agent:

a) To purchase products at the most acceptable prices and resell them at the highest possible profit;

 b) To acquire orders from buyers and arrange for the items to be delivered in his own name from suppliers;

c) Arrange for things to be packed, transported, and delivered;

d) Providing credit and collecting payments;

e) To recover his commission and incidental charges from the principal.

(C) Del Credere Agent:

A del credere agent guarantees his principal’s payment for any items he sells, regardless of whether he receives payment or not, and he is entitled to an extra commission over and above his regular income for the additional risk he carries. The “del credere commission” is the additional commission paid for such a guarantee. As a result, the principal of a del credere agent is guaranteed full payment of the goods’ sale proceeds.

(D)  Broker:

A broker, according to Storey, is “an agent engaged to make agreements and contracts in issues of trade, commerce, or navigation between two parties for a compensation, generally referred to as brokerage.” He is a person whose major function is to link a buyer with a seller & vice versa; in other words, a broker’s job is done when a transaction is made between an interested buyer and a cautious seller. A broker usually does not take custody of items & goods, but rather negotiates for their usage.

His chief characteristics are:

(a) He merely needs to make a purchase and sale contract by finding a buyer for an intending seller and vice versa;

  • He does not accept delivery or possession of the items he is selling;
  • When a transaction is completed, he re-pares the BOUGHT NOTE & SOLD NOTE and delivers them to the buyer & seller, respectively.
  •  He deals primarily with manufactured products, real estate, shares, stocks, as well as other sorts of investment transactions.
  • He generally focuses on a specific field, such as stock brokers, ship brokers, or insurance brokers;
  •  He is entitled to a brokerage commission in exchange for his services;
  •  He may be employed by many principals on  the same time.

E)  Auctioneers :

An auctioneer is a mercantile agent for commercial purposes who sells his principal’s goods at auction. He takes custody of the goods and advertises the auction date and location in daily newspapers, pamphlets, & catalogues.

The products that will be auctioned are exhibited at the auction site for the advantage of potential or intending bidders. Generally, the seller offers the lowest price from which the auctioneer begins his auction. The lowest price is referred to as the “UPSET PRICE.”

There are two types of auction sales: “WITH RESERVE” and “WITHOUT RESERVE.” In the case of an auction “with reserve,” no transaction may take place below the seller’s minimum price, known as the “Reserve Price.” In a “without reserve” auction, the auctioneer is obligated to sell the item to the highest bidder.

The price at which a bid is accepted is known as the “knocked down price,” since an auctioneer’s acceptance of a bid is signaled by the latter by hitting a hammer on the desk. After the highest bid is accepted, the auctioneer acts as both the seller as well as the buyer’s representative. The auctioneer is entitled to a commission, which is a proportion of the sale profits that is normally agreed upon between the auctioneer and the seller prior to the auction.

A) Underwriters

Underwriters are individuals who promise a business that if the public does not purchase all of the company’s shares, they will purchase & pay for the remaining shares indicated in the underwriting agreement.

Thus, underwriters eliminate the risk of a company’s shares not being purchased by the general public since they agree to acquire the shares that are not purchased by the general public. The underwriters are entitled to an underwriting commission of not more than 5 percent in the case of shares & 2.5 percent in the event of debentures (the maximum  rates fixed by the Indian Companies Act of 1956)

B) Forwarding Agent Forwarding 

Agents dispatch products to foreign countries on behalf of their principals and play a significant role in international trade. They take control of products in their native country, then arrange for its shipment & insurance before sending them to another country.

C) Clearing Agents

They assist their principals in importing goods and items from other countries. When the goods arrive at the target port, they accept delivery & arrange for transportation to their principal’s warehouses after paying import & custom duties as well as port charges.

D) Warehouser

A warehouse keeper is an agent who, in consideration for storage charges, stores the goods of his principal in his godown to be delivered to the person directed by the principal. In the event that his charges are not paid by the principal, he might use his right of lien over the goods which was in his possession.

References

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