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Interstate Elec. Co. v. Frank Adam Elec. Co. - 173 La. 103, 136 So. 283 (1931)

Rule:

The true limit of the agent's authority to bind the principal as between the principal and third persons is the apparent authority with which the agent is invested, and when a third person has ascertained the apparent authority with which the principal has clothed the agent, he is under no further obligation, in the absence of circumstances putting him on inquiry, to inquire into the agent's actual authority, as the presumption is that one known to be an agent is acting within the scope of his authority. The fact that the agent's apparent authority is different from the actual authority conferred does not relieve the principal of responsibility.

Facts:

Plaintiff Interstate Electric Company was engaged in the business of selling at wholesale electrical material in the city of New Orleans. Defendant Frank Adam Electric Company was engaged in the manufacture of electrical switchboards, junctions, boxes, and cabinets. Originally, defendant had a local or resident manager in New Orleans named Reed. While Reed was its manager, defendant specifically informed plaintiff that Reed was clothed with full power and authority to bind it in the fixing of prices and the making of contracts. W. J. Keller succeeded Reed as defendant's local manager.

Plaintiff entered into a contract with purchaser Douglass Electric Construction Company to install in Hotel Dieu certain switchboards, boxes, and panels. It ordered its parts from defendant through its resident manager Keller. After accepting the order, defendant refused to comply with its contract by shipping the material and supplies, making it impossible for plaintiff to carry out its contract with the Douglass Company. Plaintiff was damaged in the sum of $ 2,189, the difference between the price at which the supplies were sold to the Douglass Company and the price at which the defendant had agreed to sell to plaintiff. The trial court ruled in favor of plaintiff in its lawsuit for defendant's alleged violation of a contract of sale. Defendant contended that Keller was not clothed with power and authority to bind it in the premises, and that no specifications accompanied the "purported order" for the supplies.

Issue:

In plaintiff's action for the violation of a contract of sale, was defendant manufacturer's local manager clothed with apparent authority as an agent to bind defendant as the principal?

Answer:

Yes

Conclusion:

The Supreme Court of Louisiana affirmed the trial court's judgment in favor of plaintiff Interstate Electric. The testimony conclusively showed that for many years plaintiff had been purchasing goods from defendant Frank through defendant's local, resident manager, who made all contracts and fixed the prices, and that never until this transaction arose did defendant suggest to plaintiff that its local manager did not have full authority to bind it. All orders for goods were placed with defendant's manager, who fixed the prices, made the contracts, sent them to headquarters, where they were accepted and filled without question. By its course of conduct and dealings defendant had led plaintiff to believe that Keller had full authority to bind it. More than that, defendant had specifically informed plaintiff that Reed, who preceded Keller as manager, did have such authority, and when Keller succeeded Reed, defendant informed plaintiff of that fact, but did not give notice that his powers were limited.

The Court held that if defendant had a private agreement with its agent by which his authority was limited, such agreement was not binding upon plaintiff, which knew nothing of it. The Court also found that the specifications were furnished to the purchaser's agent and that it was his duty to forward them. The Court concluded that the damages due the seller for the purchaser's breach of contract were in the amount of the loss plaintiff sustained and the profit of which it had been deprived.

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