Law School Case Brief
Texoma Broads., Inc. v. Hosp. Corp. of Am., etc. - 542 So. 2d 780 (La. Ct. App. 1989)
La. Civ. Code Ann. art. 3021 makes the principal responsible for the contracts made for him by his agent. Also La. Civ. Code Ann. arts. 3012 and 3013 provides that the mandatary may also be responsible to a third person with whom he contracts when he has bound himself personally (a personal guarantee), or when he has exceeded his authority without having exhibited his powers.
Under a written contract, an advertising agency placed advertisements with the broadcasters. The hospital paid the agency for the advertising time, and the agency paid the broadcasters. After being paid by the hospital for certain advertising, the agency went out of business without paying the broadcasters, and the broadcasters filed suit to recover payment for advertising services. The agency did not pay the broadcasters because it had spent the money instead for other purposes. The court entered judgment for the broadcasters, and the hospital appealed.
Was the hospital liable for the payment of advertising services?
The court held that because the hospital conceded that a principal-agent relationship existed between it and the agency, and the agency acted entirely within its disclosed authority, the hospital was responsible to the broadcasters. The court rejected the hospital's equitable estoppel defense based on the broadcasters' failure to inform the hospital of the agency's habitual late payments because the hospital did not change its position in reliance on any act by the broadcasters. The court also rejected the hospital's industry custom defense because there was no general industry custom that agencies were solely responsible for advertisements placed for their clients or that broadcasters gave up their right to proceed against the principal as their debtor. An award of attorney's fees to the broadcasters was not error.
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