## Facts

- Joseph and wife Hoffman owned a bakery in Wautoma, Wisconsin and sought to operate a Red Owl grocery franchise.
- Red Owl’s district representative repeatedly represented that an $18,000 investment would be sufficient for Red Owl to establish the Hoffmans in a store in Chilton, Wisconsin.
- At the representative’s direction and with Red Owl’s approval, Hoffman bought a small independent grocery store to gain experience, then later sold it when told Red Owl was ready to place him in a larger store.
- Hoffman paid $1,000 for an option on a vacant lot in Chilton for the anticipated franchise location.
- After being told that if he would “get your money together” they were “set,” the Hoffmans sold their bakery business and building and rented housing in anticipation of operating the Chilton store.
- Red Owl later suggested Hoffman obtain experience by working in an existing Red Owl store; the Hoffmans moved again, but the promised work did not materialize.
- Red Owl’s proposed terms changed, ultimately requiring substantially more capital (about $34,000) and a restructuring of the father-in-law’s contribution that Hoffman found unacceptable.
- Negotiations ended without a signed franchise agreement; the Hoffmans sued for losses incurred in reliance on Red Owl’s representations.

## Issues

1. Whether promissory estoppel under Restatement (First) of Contracts § 90 is recognized as a cause of action for affirmative relief.
2. Whether the evidence supported liability under § 90 despite incomplete negotiations and unsettled essential terms.
3. Whether the jury’s damage findings were supported by the evidence and what measure of damages is proper under promissory estoppel.

## Decision

- The Wisconsin Supreme Court recognized promissory estoppel as an affirmative claim and adopted Restatement (First) of Contracts § 90.
- The court held the Hoffmans proved § 90 elements: Red Owl’s promises foreseeably induced definite and substantial reliance, reliance occurred, and relief was necessary to avoid injustice.
- The court rejected the argument that the promise must be as definite as a contract offer; promissory estoppel can apply even when no enforceable contract exists.
- The court affirmed recovery of reliance-type items tied to induced actions (including losses on the bakery sale, the lot option cost, and certain moving/rental expenses).
- The court ordered a new trial limited to damages related to the sale of the small grocery’s fixtures and inventory due to insufficient evidentiary support for the jury’s amount.
- The court denied recovery of claimed lost profits from continuing the small grocery business, limiting relief to what was necessary to prevent injustice.

## Legal Principles

- A promise is binding under promissory estoppel when the promisor should reasonably expect it to induce action or forbearance of a definite and substantial character, it does induce such reliance, and enforcement is required to avoid injustice.
- Promissory estoppel may provide affirmative relief even when negotiations do not produce a complete contract and important terms remain unresolved.
- Indefiniteness that would defeat contract formation does not necessarily bar promissory estoppel where reliance is substantial and reasonably foreseeable.
- Remedies for promissory estoppel are not automatically full contract expectation damages; relief may be limited as justice requires.
- Proper recovery commonly focuses on reliance losses caused by induced actions; speculative or expectancy-style items (such as certain lost profits) may be denied.
- When reliance damages depend on valuation evidence (e.g., sale of business assets), damages should reflect the difference between sale price and fair market value, considering goodwill where appropriate.

## Conclusion

The court held Red Owl liable under promissory estoppel for assurances that induced substantial precontract reliance, adopted Restatement § 90 as Wisconsin law, and limited recovery largely to reliance damages necessary to avoid injustice, with a new trial required on one inadequately supported damage component.


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