Hoffman and wife v. Red Owl Stores, Inc., and another
26 Wis.2d 683 (1965) (1965)
Rule of Law:
A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee, and which does induce such action or forbearance, is binding under the doctrine of promissory estoppel if injustice can be avoided only by its enforcement, even if the promise is not sufficiently definite to form a binding contract.
Facts:
- Joseph Hoffman sought to acquire a Red Owl grocery store franchise.
- A Red Owl agent, Lukowitz, represented to Hoffman that if he invested $18,000, Red Owl would establish him in a store.
- In reliance on Red Owl's representations, Hoffman sold his bakery at a loss.
- At Red Owl's suggestion, Hoffman purchased a small grocery store to gain experience, and later sold it at Red Owl's urging.
- Hoffman also made a $1,000 down payment on a lot in Chilton for the proposed store and incurred moving and rental expenses.
- Over the course of negotiations, Red Owl repeatedly increased the required capital investment from the original $18,000 figure.
- Negotiations ultimately collapsed without a final agreement on essential terms like store design, lease terms, or financing.
- Hoffman was never granted a Red Owl franchise.
Procedural Posture:
- Joseph Hoffman and his wife sued Red Owl Stores, Inc. in a Wisconsin trial court.
- The case was tried before a jury, which was given a special verdict based on the theory of promissory estoppel.
- The jury found for the Hoffmans and awarded damages for several specific losses.
- Following the verdict, the trial court granted Red Owl's motion for a new trial limited to the issue of damages from the sale of the Wautoma grocery store, but otherwise approved the verdict.
- Red Owl Stores, Inc. (defendant-appellant) appealed the trial court's order, and the Hoffmans (plaintiffs-appellees) filed a cross-appeal to the Wisconsin Supreme Court.
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Issue:
Does the doctrine of promissory estoppel permit a party to recover damages incurred in reliance on a series of promises, even if the promises are too indefinite to form an enforceable contract?
Opinions:
Majority - Currie, C. J.
Yes. The doctrine of promissory estoppel, as articulated in Section 90 of the Restatement of Contracts, permits recovery for reliance damages to prevent injustice, even where a promise is not definite enough to constitute an offer for a binding contract. The court formally adopts promissory estoppel as a cause of action in Wisconsin, viewing it as a necessary tool to keep legal remedies aligned with moral consciousness and fair dealing in business. The court reasoned that an action for promissory estoppel is distinct from a breach of contract claim; its purpose is not to enforce the promise as a contract but to remedy the injustice caused by detrimental reliance. The promise need not contain all the essential elements of a contract. Instead, the focus is on three elements: whether the promise was one the promisor should expect to induce action, whether it did induce such action, and whether injustice can only be avoided by enforcement. The court found ample evidence that Red Owl made promises that induced Hoffman to act to his detriment, and concluded that injustice would result if Hoffman were not granted relief for his reliance losses.
Analysis:
This landmark case formally incorporates the doctrine of promissory estoppel into Wisconsin law, creating a distinct cause of action based on detrimental reliance, separate from traditional contract law. It significantly expands the scope of liability for promises made during pre-contractual negotiations, holding that a party can be liable for reliance damages even if no enforceable contract was ever formed. The decision emphasizes that the goal of promissory estoppel is not to award expectation damages (the benefit of the bargain) but to award reliance damages necessary to prevent injustice. This case establishes that promises made during negotiations can have legal consequences, encouraging parties to be more cautious and fair in their preliminary dealings.
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