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Boulos v. Morrison - 503 So. 2d 1 (La. 1987)

Rule:

Mandate is an act by which one person, a principal, gives power to another, an agent, to transact for him and in his name one or several affairs, La. Civ. Code Ann. art. 2985. An agent's power or authority is composed of his actual authority, express or implied, together with the apparent authority which the principal has vested in him by his conduct. As between principal and agent the limit of the agent's authority to bind the principal is governed by the agent's actual authority. As between the principal and third persons, the limit of an agent's authority to bind the principal is governed by his apparent authority. Apparent authority is a judicially created concept of estoppel which operates in favor of a third party seeking to bind a principal for the unauthorized act of an apparent agent. For the doctrine of apparent authority to apply, the principal must first act to manifest the alleged agent's authority to an innocent third party. Second, the third party must rely reasonably on the manifested authority of the agent. The principal will be bound for the agent's actions if the principal has given an innocent third party a reasonable belief the agent had authority to act for the principal. The burden of proving apparent authority is on the party relying on the mandate.

Facts:

Plaintiffs, Sherif Y. Boulos and Paul J. Durso, partners in a wholesale jewelry and gift business, were in New Orleans to sell wholesale jewelry. Across the street from the hotel in which they were staying, defendant Morris Lew owned a business called Casa Alejandro, which specialized in the sale of electronic equipment to foreign seamen and tourists. On the date of the alleged transaction, Lew was out of town. Paintiffs entered the store, purchased and paid for a Toshiba cassette player, for which Lew's brother-in-law, who was the store manager wrote out a sales slip. While Boulos was making this purchase, Durso was speaking with "Mike" at the front of the store. Believing that Mike was a salesman who was employed by the business, Boulos and Durso gave Mike a substantial sum in exchange for cameras and video equipment, which Mike claimed he would have later that evening. Plaintiffs never received the merchandise and were unable to locate Mike or recover any money from him. According to defendant Lew, he had an "understanding" with Mike to pay Mike a five to ten percent commission on sales to customers that Mike brought in the store. Lew had similar arrangements with other people and shipping companies, but denied that Mike was an "employee." Plaintiffs sought to recover the money from the merchant on the basis of apparent authority.

Issue:

Did plaintiffs carry their burden of proving that a third party had apparent authority to act on the merchant’s behalf?

Answer:

No.

Conclusion:

The Court noted that for the doctrine of apparent authority to apply, the principal must first act to manifest the alleged agent's authority to an innocent third party. Second, the third party must rely reasonably on the manifested authority of the agent. The burden of proving apparent authority is on the party relying on the mandate. Here, the Court held that the plaintiffs have failed to prove any act, which would show that defendant business intended to make Mike an agent of the business. Moreover, plaintiffs failed to prove that they reasonably relied upon Mike’s purported authority. The Court noted that plaintiffs were jewelry merchants who were sophisticated business persons. According to the Court, a third party seeking to benefit from the doctrine of apparent authority may not blindly rely upon the assertions of an agent. He has a duty to inquire into the nature and extent of the agent's power. The Court averred that the facts and circumstances should have caused plaintiffs to question the agent’s authority and good faith.

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