Who Is Liable to the Station or Publisher, the Ad Agency or the Client?

Almost 40 years ago, the courts tried to settle the vexing issue of who was liable when an advertising medium was not paid, the agency placing the ad, or the advertiser for whom the ad was placed? (Columbia Broadcasting System, Inc. v. Stokely-Van Camp, Inc.). At that time, the courts found an absence of guiding law, and suggested expert testimony of the industry custom and usage, especially in view of the 4-A standard contract.

Today, the courts are resolute in their approach. Any party acting as an agent will not be held liable, whether the agent is an advertising agency, an architectural firm engaged to furnish offices, or a lawyer. The courts refuse to hold the advertising agency liable and immediately pin the liability on the client. The result is no different even when the advertising agency submits an insertion order acknowledging that it is the party to be invoiced. (American Diabetes Assn. v Abbey, Mecca & Co.). The advertiser for whom the ad agency acted is primarily liable, even if the advertiser previously paid the agency. (Tobron Off. Furniture Corp. v. King World Prods.). The only exception to this rule is if the agency signs a contract clearly and explicitly agreeing to be primarily liable for the client’s advertising or other items purchased for the client.

The last thing any publisher wants is not to be paid for the advertising. Therefore, any New York publisher or vendor dealing with advertising agencies is cautioned to state in the insertion contract that the advertising agency and advertiser are both primarily liable and that any suit can be brought in New York.

The last thing that an agency wants is to be embarrassed by a nonpaying client. The agency is similarly cautioned to get a contract signed by the advertiser permitting any suit to be brought in New York.

Please see the prior articles of this web site, dated 11/29/2011, 12/02/2011, 01/04/2012 and 01/11/2012 on the language to put in contracts!