KSupreme Court of Wisconsin, 1965draftborradorunverifiedsin verificar

Hoffman v. Red Owl Stores, Inc.

26 Wis. 2d 683, 133 N.W.2d 267 (1965)

A would-be franchisee who sold his bakery for a deal that kept changing

In one lineEn una línea: Promises made during negotiations that induce substantial reliance are enforceable under promissory estoppel even if no contract was ever formed, with damages measured by the reliance.Las promesas hechas durante negociaciones que inducen una confianza sustancial son exigibles por promissory estoppel aunque nunca se haya formado un contrato, con daños medidos por la confianza.
RuleRegla: Promissory estoppel under § 90 does not require that the promise be definite enough to be an offer or that a contract would have resulted; it requires a promise the promisor should expect to induce substantial reliance, actual reliance, and injustice absent enforcement, and the remedy may be limited to the reliance loss.
Why this case is herePor qué está aquí este caso: Assigned Oct. 5 with the professor's follow-up handout: promissory estoppel can apply even when no contract was ever definite enough to enforce, because the claim rests on reliance, not on a bargain; and the remedy is measured by the reliance, not by the profits of a store that never opened.
Procedural posturePostura procesal: The prospective franchisee sued the grocery chain after negotiations collapsed; the jury found for him on promissory estoppel; the Supreme Court of Wisconsin affirmed liability and remanded on part of the damages.

Facts

Hoffman, a bakery owner, negotiated with Red Owl for a franchised grocery store. Over two years its representatives assured him that $18,000 would suffice and that the deal would go through if he took certain steps: he bought and ran a small grocery to gain experience and sold it at their urging, sold his bakery, paid for an option on a lot, moved his family, and rented a house. Red Owl kept raising the capital requirement and adding terms until negotiations collapsed.

Procedural posture

The jury found the elements of promissory estoppel and awarded damages; the court affirmed liability, affirmed most of the damages and remanded to determine the loss on the grocery store.

Issue

Whether promissory estoppel applies to promises made in negotiations that never produced an agreement definite enough to be a contract, and how damages are measured.

Holding

Yes. The promises were made to induce Hoffman’s reliance, he relied, and injustice could be avoided only by compensation; damages were measured by his reliance expenditures, not by lost profits.

Reasoning

Section 90 does not require all the elements of a contract; its function is to protect reliance. The court declined to limit it to promises that would otherwise be offers, and held that the remedy should be what justice requires, here the money Hoffman lost acting on Red Owl’s word, since the store’s profits were speculative and the franchise terms never fixed.

Rule (own words)

You can be liable for what you led someone to spend even if you never agreed to anything definite; the measure is what they lost, not what they hoped to gain.

What-ifs

Red Owl’s assurances were vague encouragements (we think it will work out): probably no promise sufficient for § 90.
Hoffman had signed a letter of intent stating that neither side was bound until a franchise agreement was signed: strong defense; reliance unreasonable.
Mexican comparison: culpa in contrahendo and liability for breaking off negotiations in bad faith reach similar reliance damages.

Likely follow-upsRepreguntas probables

Why was there no contract?

The parties never agreed on the essential terms of the franchise (size, cost, lease, financing); what Hoffman had were assurances that a deal would go through if he did what Red Owl asked.

What did Hoffman get?

His out-of-pocket losses: the loss on selling the grocery store he had bought to gain experience, moving expenses, the lot option, and rent, but not the profits of the franchise, which was never defined.

What did the professor's follow-up handout ask?

Whether Hoffman is the high-water mark of § 90 and how later courts have cabined it, treating preliminary negotiations as at the parties' risk unless specific promises were made.

promissory estoppel reliance damages (R.2d § 349)reliance (detrimental)preliminary negotiations and agreements to agree

Compare withComparar con: Drennan v. Star Paving Co. (companion), Feinberg v. Pfeiffer Co. (extends)

AssignedAsignado: 2026-10-05

Read the public opinionLeer la opinión (texto público). SourceFuente: Own brief from the public opinion as excerpted in the casebook and the professor's follow-up handout; verify quotations against the opinion..