Hoffman v. Red Owl Stores

Precontractual Liability, Reliance and Promissory Estoppel

Facts in case

Red Owl promised Hoffman that for $18,000 it would establish Hoffman in a store. Hoffman sold his grocery store and paid $1,000 for a lot. The 18,000 was changed to 24,000, Later the cost increased to 26,100. Hoffman was induced to sell the fixtures and inventory in 1961 on the pormise that he would be in his new store by the fall. In November they sold the building on the assurance that is was the last necessary step to secure the deal.

Issue

Does it meet the criteria of promissory estoppel? AND Does the promise necessary to sustain a cause of action for promissory estoppel need to include all essential details of a proposed transaction so as to be the equivalent of an offer that would result in a binding contract between the parties if the promisee were to accept the same

Rule

[S]ec. 90 of Restatement, 1 Contracts, does not impose the requirement that the promise giving rise to the cause of action must be so comprehensive in scope as to meet the requirements of an offer that would ripen into a contract if accepted by the promisee.

Section 90 of the Restatement of the Law of Contract (Detrimental Reliance

• Section 90 of the Restatement of the Law of Contracts (1932) states that: 

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 if injustice can be avoided only by enforcement of the promise.

Section 90 Second Restatement

• Sec. 90 of the Restatement (Second) of the Law of Contracts (1982) states that: 

A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

Elements of Promissory Estoppel

• The promisor made a promise.

• The promisor should have reasonably expected that promisee would rely on the promise.

• The promisee actually relied on the promise and engaged in an action or forbearance of a right.

• Injustice would result if the promise were not enforced.

Promissory Estoppel

An equitable doctrine that prevents the withdrawal of a promise by a promisor if it will adversely affect a promisee who has adjusted his or her position in justifiable reliance on the promise.

Essential Factors

There remains for consideration the question of law raised by defendants that agreement was never reached on essential factors necessary to establish a contract between Hoffman and Red Owl. Among these were the size, cost, design, and layout of the store building; and the terms of the lease with respect to rent, maintenance, renewal, and purchase options. This poses the question of whether the promise necessary to sustain a cause of action for promissory estoppel must embrace all essential details of a proposed transaction between promisor and promisee so as to be the equivalent of an offer that would result in a binding contract between the parties if the promisee were to accept the same.

Holding

Injustice would result if plaintiffs were not granted some relief because of the failure of the defendants to keep their promises which induced plaintffs to act to their detriment.

Damages

Awarded to Hoffman and his wife. (Section 90 Second Restatement) $2000 to each, Hoffman received payment for one month’s rent, moving expenses. Trial court ordered a new trial regarding the sale of the business. Appeals court affirmed this order.