Contracts–Expanded Application of Promissory Estoppel in Restatement of Contracts Section 90–Hoffman v. Red Owl Stores, Inc.

Plaintiff sought a franchise for a Red Owl supermarket and was told by an agent of the defendant that $18,000 would be sufficient to finance such a venture. Acting on the advice of the agent, plaintiff purchased a small grocery store so that he could gain experience in food store management. Having been assured that “there would be no problems in establishing him in a bigger operation,” plaintiff sold this store after three months of doing business and realized a net profit of approximately $500 on the purchase and sale. In further preparing for the franchise, plaintiff sold a bakery which he and his wife had operated for five years, secured an option to purchase land for the proposed supermarket and rented a home close to the proposed site. Subsequently the defendant insisted that plaintiff make an initial investment of $34,000-a substantial increase from the $18,000 figure originally quoted. The plaintiff terminated negotiations and brought suit to recover the damages he had sustained in reliance on the defendant’s representations. The trial court awarded the plaintiff damages for the loss on the sale of his bakery, his rental and moving expenses, and the cost of the land option. Plaintiff’s claims for losses resulting from the sale of the grocery store were allowed in part, for the court permitted recovery of the difference between the sales price and the market value of the store, but refused to award future profits. The Supreme Court of Wisconsin, endorsing for the first time the principle of promissory estoppel incorporated in section 90 of the Restatement of Contracts, held, affirmed. Notwithstanding its conclusion that the defendant had acted in good faith, that is, defendant’s original representations had not been made with an intent not to perform, the court found the plaintiff’s reasonable and foreseeable reliance on defendant’s representations was of such a nature that injustice could be avoided only by protecting that reliance interest.