Theory question 104
Wholesale TradeCommerce 2 (answer any five questions)
(a) What is an agency?
(b) Explain the features of the following agents:
(i) Factor
(ii) Broker
(iii) Del-credere agent
(iv) Auctioneer.
Show the model answer
(a) Agency is a relationship in which one person (the agent) is authorised to act on behalf of another (the principal) in dealings with third parties, so that the principal is bound by the agent's acts.
(b) (i) Factor: mercantile agent who has possession of the principal's goods, sells in his own name, can fix the price and give credit, receives payment and is paid factorage/commission.
(ii) Broker: brings buyers and sellers together; does not have possession of the goods; cannot sell in his own name; is paid brokerage; e.g. stock, insurance and produce brokers.
(iii) Del-credere agent: sells goods for the principal and guarantees that buyers will pay; if the buyer defaults he pays; receives extra commission (del credere commission).
(iv) Auctioneer: sells goods by public auction to the highest bidder; has possession of the goods; sale completed by the fall of the hammer; is paid commission; acts first for the seller and, on sale, for the buyer as well.
Give at least two features for each agent.