Quick Summary
The manager of Red Owl Stores (defendant) changed the investment amount from $34,000 for a franchise instead of $18,000, as promised. Promissory estoppel allows for flexibility when it is necessary to avoid an injustice to achieve justice. In such a case, a court will examine facts to determine whether any promises made should be enforced.
Court ruled in favor of Hoffman (plaintiff) because the defendants promised Hoffman a new store, but never delivered. The Court awarded damages to reflect the loss Hoffman experienced due to this broken promise.
Rule of Law
Incomplete promises may be enforced to prevent unfairness, even when the promisor believes the promisee will not rely on them.
Facts of the Case
Hoffman (plaintiff) and his wife, who ran a bakery in Wisconsin, were looking to expand their business. Defendant Red Owl Stores controlled a supermarket chain, granting franchises to independent businessmen. On the advice of the company’s business manager, Hoffman purchased the stock and equipment of a small neighborhood grocery store and converted it into a Red Owl franchise.
Despite Hoffman’s success, the manager eventually closed down the shop after just three months at his urging and promised that Red Owl would locate him in a bigger location in another city.
The manager then suggested that Hoffman invest $10,000 on option rights to land on a $6,000 plot in Chilton; he’d build his shop there. In addition to supporting this investment with $1,000 of his own money, Hoffman followed the manager’s suggestion and sold his current store.
After selling his store, the manager changed the investment amount from $34,000 for a franchise instead of $18,000, as promised. Hoffman sued Red Owl to recover his financial damages. At trial, the jury found for Hoffman and assessed damages. The trial court ordered a new trial on the issue of damages related to the sale of Hoffman’s independent store, fixtures, and inventory. Both parties appealed to the Wisconsin Supreme Court.
Issue
Is promissory estoppel applicable in a situation where there was no contract, and only pre-contract negotiations?
Holding and Conclusion
Yes.
According to the precedent set by the courts, it is the responsibility of the law to ensure that contracts are fair and up to date with social norms. If the only way to avoid injustice is for the promisor to be held to a promise, then the contract must be enforced if it is one that the promisor could reasonably expect to induce the promisee to take or refrain from taking some definite and material action or refrain from taking some material action.
Reasoning and Analysis
Promissory estoppel allows for flexibility when it is necessary to avoid an injustice. In such a case, a court will not strictly adhere to the formal requisites of contract formation. Still, it will examine facts to determine whether any promises made should be enforced to achieve justice.
The defendants promised Hoffman a new store but never delivered. If justice is to be served, the court must award damages that reflect the loss he experienced due to this broken promise.
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