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Factor's Lien: A Comprehensive Guide to Its Legal Definition and Applications
Definition & Meaning
A factor's lien is a legal claim that allows a factor, or an agent who sells goods on behalf of a principal, to retain possession of the principal's property until they receive full payment for their services. This lien applies to various aspects of the principal's property, including:
The goods in the factor's possession
The proceeds from those goods
Securities taken for payment
General accounts of the principal
Any debts related to the agency
Interest on subsequent advances
However, a factor's lien does not cover debts that are unrelated to the agency agreement.
Table of content
Legal Use & context
Factor's liens are commonly used in commercial law, particularly in transactions involving consignment sales. They provide a layer of security for factors by ensuring they can recover their costs and commissions before releasing the goods to the principal. This legal concept is relevant in various areas, including:
Commercial transactions
Debt recovery
Agency law
Users may find legal forms related to factor's liens useful when drafting agreements or resolving disputes. US Legal Forms offers templates that can help streamline these processes.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A clothing manufacturer hires a factor to sell its products. The factor retains the unsold clothing in their possession until the manufacturer pays for the marketing and sales expenses incurred.
Example 2: A furniture store consigns items to a factor. If the factor sells the furniture but the store has not paid for previous advances, the factor can keep the proceeds from the sale until the debt is settled. (hypothetical example)
State-by-state differences
Examples of state differences (not exhaustive):
State
Factor's Lien Regulations
California
Factors must provide written notice of the lien to the principal.
New York
Factors can enforce the lien through legal proceedings if necessary.
Texas
Specific requirements for documentation and notice are mandated.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Difference
Security Interest
A legal claim on collateral that secures a loan.
Factor's lien is specific to goods in possession, while a security interest can apply to a broader range of assets.
Mechanic's Lien
A claim against property for unpaid work or materials.
Mechanic's liens pertain to construction and repair, while factor's liens relate to goods sold on consignment.
Common misunderstandings
What to do if this term applies to you
If you are a factor or a principal dealing with a factor's lien, consider the following steps:
Review your agency agreement to understand your rights and obligations.
Ensure all documentation regarding the lien is clear and properly filed.
If disputes arise, consider using US Legal Forms for templates to address the issue legally.
Consult a legal professional if the situation becomes complex or contentious.
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