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Wisconsin Supreme Court - 26 Wis. 2d 683
Tags: Contracts, Promissory estoppel
tl;dr:
A man entered into franchising negotiations with a grocery chain. But after asking the man to spend money on equipment and the operation of an experimental store, the grocery chain broke off negotiations.Video Summary
Case Summary
In the significant 1965 case, Hoffman v. Red Owl Stores, the Wisconsin Supreme Court used the legal principle of promissory estoppel to find a grocery store chain responsible for a potential franchisee's losses due to their reliance on the chain's promises. The case questioned whether a promise that led to someone taking or refraining from action could be enforced even if it didn't create a formal contract.
Joseph Hoffman, a bakery owner, planned to open a Red Owl grocery franchise. Red Owl representatives told him he could open the store with $18,000. Trusting their words, Hoffman sold his businesses, purchased land chosen by Red Owl, and relocated his family. However, Red Owl kept increasing the required investment and changing the deal's conditions. The negotiations fell through, and Hoffman sued for breach of contract and promissory estoppel.
Although no contract was found, the trial court awarded Hoffman damages based on promissory estoppel, a decision upheld by higher courts. They applied the Restatement (First) of Contracts § 90 and confirmed that promissory estoppel could help prevent injustice in situations like Hoffman's, where substantial losses occurred due to reliance on unfulfilled promises.
This case demonstrates how promissory estoppel can be an alternative for enforcing non-contractual promises and highlights the court's discretion in deciding what constitutes injustice and appropriate remedies. It remains a prominent example of promissory estoppel in contract law education.
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The court endorses and adopts promissory estoppel as a necessary tool to prevent injustice, despite criticism of the term "estoppel" as inaccurate. The court found sufficient evidence to support the jury's verdict that Red Owl made promises and assurances to Hoffman, upon which he relied and acted to his detriment. The court believes that promissory estoppel is distinct from a breach-of-contract action and should be applied flexibly. The defendants challenge all the damages awarded by the jury, but the court finds their arguments without merit. The jury's award of damages for the loss incurred by both plaintiffs in the sale of the bakery building is approved. Additionally, it was reasonable for Hoffman to pay rent after defendants assured him that everything would be set when he sold the bakery building.
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