Hoffman v. Red Owl Stores

Supreme Court of Wisconsin · 1965 · Contracts

Contractspromissory estoppelprecontractual liabilityreliancefranchisepromissory estoppelRestatement § 90reliance

Facts

Red Owl's agent, Lukowitz, made a series of promises and assurances to Hoffman that Red Owl would establish him in a store if he met stated financial conditions, initially represented as $18,000 and later increased. In reliance, Hoffman sold his grocery store, paid $1,000 on a Chilton lot, sold his bakery building, rented housing, and moved. The parties never reached agreement on all details of the proposed store and lease, but the jury found that Red Owl made promissory representations, Hoffman relied on them in the exercise of ordinary care, and he fulfilled the conditions required of him during the negotiations. Defendants challenged both liability and all awarded damages.

Issue

Should Wisconsin recognize a cause of action grounded on promissory estoppel under Restatement § 90, and if so, can Hoffman recover where the parties never reached a final contract on all essential terms? A further issue was what damages are proper in such a promissory estoppel action.

Rule

A promise is binding under promissory estoppel if the promisor should reasonably expect it to induce action or forbearance of a definite and substantial character on the part of the promisee, the promise does induce such action or forbearance, and injustice can be avoided only by enforcement of the promise. The promise need not be so definite as to constitute an offer that would ripen into a contract upon acceptance. Injustice is a policy determination for the court, and damages in promissory estoppel should be only those necessary to prevent injustice rather than automatically full contract damages.

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In Madison, Dana Keller spent months negotiating with North Prairie Markets, a fictional regional grocer, about opening one of its stores. Its expansion manager repeatedly told Dana that if she contributed $60,000 and left her current lease, the company would place her in a new location, but the parties never settled the final rent formula or renewal options before the company walked away after Dana had already sold equipment and relocated.

Dana sues on promissory estoppel. North Prairie Markets argues there can be no liability because the parties never agreed on all essential terms of the future store arrangement. What is the strongest response?

Explanation. The majority adopted Restatement § 90 and rejected the argument that the promise must include all essential details necessary for a contract offer. Promissory estoppel is not the equivalent of a breach-of-contract action. Liability turns on reasonable expectation of definite and substantial reliance, actual reliance, and whether injustice can be avoided only by enforcement.