Hoffman v. Red Owl Stores, Inc. – Case Brief
Hoffman v. Red Owl Stores, Inc., 26 Wis.2d 683, 133 N.W.2d 267 (1965).
Facts: Hoffman (P) owned and operated a bakery and sought to obtain a supermarket franchise with Red Owl Stores (D). Red Owl Stores assured Hoffman that his $18,000 was sufficient and advised him to acquire and operate a small store to gain experience. Three months later Red Owl Stores advised him to sell that store with the assurance that he would be given a larger store. Hoffman was reluctant to miss the summer tourist season but sold the store on Red Owl’s assurances.
A few months later Red Owl told Hoffman “everything is ready to go. Get your money together and we are set.” D told P to raise the rest of his financial contribution by selling his bakery. P sold the bakery for $10,000 and took a job on the night shift at a local bakery.
Red Owl informed Hoffman that he would have to contribute a greater amount of money. Red Owl agreed to permit Hoffman’s father in law to contribute $13,000 and become a partner in the store. Hoffman was then told that he would have to sign an agreement that the $13,000 was either a gift or a loan subordinate to all general creditors. Negotiations terminated and Hoffman sued Red Owl for reliance damages, lost profits, and expenses.
Red Owl’s defense was that the parties had never reached agreement on essential factors necessary to create a valid contract. The jury awarded Hoffman $16,735 for the sale of the store, $2000 for the sale of the bakery, and $1250 for other expenses. The trial court ordered a new trial regarding the $16,735 for the sale of the store. Red Owl appealed.
Issues: 1) Does promissory estoppel require that, aside from the lack of consideration, the promise sued upon must be able to sustain a cause of action under a breach of contract? 2) Once promissory estoppel is applied, to what remedy is the plaintiff entitled?
Holding and Rule: 1) No. Promissory estoppel does not require that the promise sued upon, aside from the lack of consideration, must be able to sustain a cause of action under a breach of contract. 2) Once promissory estoppel is applied damages should be those designed to prevent injustice, not to enforce the promises made.
The court then considered the significance of the parties’ never having reached agreement on essential factors necessary to establish a binding contract. The court held that the doctrine of promissory estoppel was invoked as a substitute for consideration rendering a gratuitous promise enforceable. Restatement Section 90 does not impose the requirement that the promise must be so comprehensive in scope as to meet the requirements of an offer that would create a binding contract if accepted by the promisee.
Rule for Promissory Estoppel: For a finding of promissory estoppel, the requirements are: a promise which the promissor should reasonably expect to induce action or forbearance of a definite and substantial character, that the promise did induce such action or forbearance, and whether injustice can be avoided only by enforcement of the promise.
The court held that under these facts, injustice would result if P were not allowed relief because P relied to his detriment on promises which D failed to keep. The court held that all damages as awarded were sustained except that the damages regarding the sale of the grocery store should be limited to the difference between the sale price received and the fair market value of the assets sold, giving consideration to any goodwill. When damages are awarded in promissory estoppel, they should be only such as are necessary to prevent injustice. Justice does not require that the damages awarded should exceed any actual loss sustained.
Disposition: For P.