Hoffman v. Red Owl Stores, Inc.
26 Wis.2d 683, 133 N.W.2d 267 (Wis. 1965)

  • Hoffman owned a bakery. He hoped to open a Red Owl franchise grocery store in Wisconsin.
    • Relying on Red Owl’s assurances, he bought a small grocery store in order to gain experience in the grocery business. Again, on Red Owl’s assurance, he sold the grocery store, rented a new space in preparation for a Red Owl store, and sold his bakery. Then, Red Owl repeatedly raised the price of their franchise until it was out of Hoffman’s price range.
  • Eventually Red Owl pulled out of the deal, and Hoffman sued for breach of contract.
    • Red Owl argued they never had a formal contract, so how could they be liable for damages?
  • The Trial Court found for Hoffman. Red Owl appealed.
    • The Trial Court found that Hoffman had acted to his detriment in reasonable reliance on Red Owl’s promises, and awarded him reliance damages. Red Owl appealed. (promissory estoppel).
    • The Court asked the jury to render a special verdict, which means that in addition to asking who wins and loses, the jury is asked to answer a series of specific questions. These help the jury focus the damages, and can be useful for the Appellate Court.
      • These are only used for civil cases.
    • The Court found that there was never a contract between the parties.
      • Red Owl never made an offer. There were not enough details to be considered an offer.
      • However, the lack of a contract doesn’t matter for promissory estoppel purposes.
  • The Appellate Court mostly affirmed. Red Owl appealed.
    • The Appellate Court upheld everything except for the damages for the sale of the small grocery store. Red Owl appealed again.
  • The Wisconsin Supreme Court affirmed.
    • The Wisconsin Supreme Court found that there was reliance and that the promise must be enforced in order to prevent injustice.
    • The Court also found all the damages reasonable except for the damages related to selling the small grocery store.
  • Basically, this case said that insofar as it is necessary to prevent injustice, a promisor will be held to their promise if they reasonably expected that promise to induce reliance on the part of the promisee and they actually did so.
  • This case led to Wisconsin’s adoption of the Restatement of Contracts §90 rule (doctrine of promissory estoppel).