Clark Advertising Agency, Inc. v. Avco Broadcasting Corp., 2-177A26

• Decision Date: 06 December 1978
• Docket Number: No. 2-177A26,2-177A26
• Parties: CLARK ADVERTISING AGENCY, INC., Appellant (Defendant below), v. AVCO BROADCASTING CORP., Appellee (Plaintiff below).
• Court: Indiana Appellate Court

Page 353

383 N.E.2d 353

178 Ind.App. 451

CLARK ADVERTISING AGENCY, INC., Appellant (Defendant below), v. AVCO BROADCASTING CORP., Appellee (Plaintiff below).

No. 2-177A26.

Court of Appeals of Indiana, Second District.

Dec. 6, 1978.

William H. Williamson, Indianapolis, for appellant.

Gene R. Leeuw, Klineman, Rose & Wolf, Indianapolis, for appellee.

SULLIVAN, Judge.

The Clark Advertising Agency, Inc. (Clark) produced certain advertisements for its disclosed principal (a now defunct organization) and placed an order with the Avco Broadcasting Corporation (Avco) to broadcast the commercials over its Indianapolis television station. No formal written contract was executed by the parties in this instance. Neither Clark nor its principal remitted payments for Avco's services, prompting Avco to bring this suit on account. After trial to the court, Avco was awarded damages and interest totalling $6,785.32. Clark's appeal contends that the judgment is "contrary to the law of the well-known doctrine of Principal and Agent." ¹

The evidence most favorable to the judgment clearly reveals that Clark's principal was disclosed and known to the parties. However, Avco introduced evidence of usage in the advertising industry as well as evidence of Avco's prior course of dealings with Clark, all of which indicated that the advertising agency had been responsible for the cost of advertising supplied by the broadcaster.

Robert Bens, the corporate credit manager of Avco, testified that standard "spot television" contracts uniformly used in the industry incorporated by reference certain provisions of the American Association of Advertising Agencies' (AAAA) "Conditions," which provide in pertinent part:

"1. PAYMENT AND BILLING

(a) STATION will bill AGENCY monthly, using the Final Sunday Fiscal Month, unless otherwise provided on the face of this contract.

(b) Payment by AGENCY is due within 15 days after receipt of invoice and affidavit of performance by AGENCY.

(e) STATION agrees to hold AGENCY solely liable for payments to be made under this contract, except that where AGENCY is not an advertising agency, the person, firm or corporation which authorizes AGENCY to contract for television time hereunder shall be liable in the event of default by AGENCY."

Six prior spot contracts between the parties and signed by Clark were introduced in evidence, each of which declared: " 'The conditions of the contract copyrighted November, 1970 by the AAAA, with the exceptions as printed on the reverse side hereof, are a part of this contract . . . .' ". There were no exceptions regarding payment and billing on two of the contracts. However, on the reverse side of the four other contracts is the following "exception":

"1(e) Payment and Billing. Except where this contract is made directly with the Advertiser described on the face of this contract, it is understood that AGENCY makes this contract both for itself and as agent for the Advertiser and that AGENCY agrees, on behalf of the Advertiser and itself, that AGENCY and Advertiser are and shall be jointly and severally liable for all payments to be made by AGENCY to STATION and for all obligations undertaken and to be performed by AGENCY."

Bens testified that the uniform practice throughout the nation was to broadcast the advertisements before payment is received, relying solely on the credit of the advertising agency. This was also the method employed by Avco in its prior dealings with Clark. The testimony of Robert Shive, Avco's sales manager, was substantially to the same effect as Bens'.

Clark, however, testified that he sometimes signed the agreement to assume his principal's obligations, but "many times I did not." He did not, however, dispute Bens' testimony that in every case, invoices were sent directly to Clark and that in each instance, Clark remitted payment to Avco. In the present case, Clark did not sign the invoice and return it to Avco and, therefore, it contends that there is no express agreement, written or oral, by which it agreed to assume the principal's obligations. It does not appear that Clark disputes the existence of the contract only the terms which were incorporated therein.

Clark argues that where a person is known to be contracting as agent of a disclosed principal, such contract, if within the agent's authority, binds the principal only. Hawkins v. Dorst (1917) 186 Ind. 430, 116 N.E. 577; Sell on Agency § 190 (1975); Restatement, Second, Agency § 328 (1958). Proof of these facts, however, does not necessarily establish, as a matter of law, that the agent is not a party to the contract. Rather, it merely permits an inference to that effect, which may be overcome not only by express language, but by custom, usage and the prior course of dealings between the parties. Restatement, Second, Agency § 320; ² Seavy, Law of Agency § 70D (1964).

It is urged that the trial court erroneously admitted into evidence the AAAA-approved "Conditions" because they were irrelevant to the transaction between the parties. Yet the law is well-settled that while usage cannot control the express provisions of a contract, such is admissible to show the intention of the parties as to those matters which have not been clearly expressed. Van Camp Packing Co. v. Hartman (1890) 126 Ind. 177, 25 N.E. 901, 902. Of course, "he who would avail himself of a custom or usage has the burden to establish its existence." Western State Bank of South Bend v. First Union Bank & Trust Co. of Winamac (3d Dist. 1977) Ind.App., 360 N.E.2d 254, 258, for in order that usage may be "binding" it must be shown that it is known, uniform, reasonable, certain and not contrary to law or opposed to public policy. City Dairy Co. v. Uservo, Inc. (1936) 101 Ind.App. 375, 199 N.E. 457, 459.

The evidence of record indicates that the AAAA-approved "Conditions" were uniformly employed in contracts between broadcasters and advertising agencies. Further, Clark was aware of the "Conditions" and through a prior course of dealings had manifested an assent to those terms. Certainly the practice of holding the agency as a party to the contract is not unreasonable, especially in light of the fact that the commercials were broadcast in reliance on the agency's credit. Thus, evidence of usage was properly admitted by the trial court.

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