## Facts

- Midwest Energy, Inc., a Missouri convenience-store operator, built a new service-station store in Fruitland, Missouri, projected to cost about $800,000.
- Midwest’s president sought a fast-food franchise from Orion Food Systems, Inc., a franchisor of branded food concepts; Ted Ries served as Orion’s district sales manager.
- On March 27, 1996, Ries provided an FTC-required offering circular and an uncompleted specimen franchise agreement; the circular warned Midwest not to take further action until written notice that its application had been approved.
- Ries stated he needed to check whether nearby Orion franchisees had contractual territorial protection.
- On April 13, 1996, after consulting existing franchisees, Ries told Midwest’s president that there was no obstacle and that “we can go forward with the franchise.”
- Midwest alleged it relied on Orion’s assurances by making specific construction changes to accommodate Orion’s system, including installing a costly hood and exhaust system and other layout-related modifications.
- No final franchise agreement was executed, and Orion ultimately declined to grant Midwest the franchise, allegedly due to concerns about diverting sales from existing franchisees.
- Midwest sued Orion and Ries for breach of contract, promissory estoppel, and fraud; the trial court entered summary judgment for defendants on all counts.

## Issues

1. Whether Midwest and Orion formed an enforceable franchise contract (or enforceable agreement to contract) such that Orion’s refusal could constitute breach.
2. Whether Orion, through Ries, made a clear promise on which Midwest reasonably and foreseeably relied, supporting promissory estoppel despite the absence of a signed franchise agreement.
3. Whether defendants made an actionable fraudulent misrepresentation of present or past fact, rather than a nonactionable statement of future intent or opinion.

## Decision

- The appellate court affirmed summary judgment for defendants on the breach of contract claim.
- The appellate court reversed summary judgment on the promissory estoppel claim and remanded for further proceedings.
- The appellate court affirmed summary judgment for defendants on the fraud claim.
- In reviewing summary judgment, the court accepted Midwest’s properly supported facts as true and drew reasonable inferences in Midwest’s favor, disregarding defendants’ contrary proffers unless uncontradicted and unequivocal.

## Legal Principles

- An enforceable contract requires mutual assent to essential terms; incomplete draft forms and preliminary negotiations, without required written approval or execution, do not create a binding agreement.
- Where written materials state that approval must be given in writing and reserve discretion to approve or deny, oral assurances during negotiations are generally insufficient to establish contract formation.
- Promissory estoppel may apply absent a contract if (1) a promise is made, (2) the promisor should reasonably expect reliance, (3) the promisee in fact relies to its detriment, and (4) enforcement is necessary to avoid injustice; whether a statement is a “clear and definite” promise and whether reliance was reasonable are often fact questions.
- Fraud requires a knowingly false representation of present or past fact; statements about future approval or future conduct, or contingent expressions of intent, ordinarily do not satisfy that element.
- Explicit written warnings that no approval exists until communicated in writing may defeat the reasonableness of reliance required for a fraud theory based on alleged present entitlement.

## Conclusion

The court held that the parties’ franchise negotiations and incomplete documents did not create an enforceable contract, and that alleged assurances of future franchising did not amount to fraud; however, Midwest presented triable issues that Orion’s representative made a promise on which Midwest incurred substantial, foreseeable construction-related reliance, allowing the promissory estoppel claim to proceed on remand.


Midwest Energy, Inc. v. Orion Food Sys., Inc., 14 S.W.3d 154 (Mo. Ct. App. E.D. 2000)