Citation. 22 Ill.43 F.3d 396 (8th Cir. 1994)
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A car dealer was mistakenly told that he was approved to be a Lexus dealer and in reliance on this promise, his father bought property for the new dealership.
Synopsis of Rule of Law.
Damages from a promissory estoppel claim may properly be limited to out-of-pocket expenses.
Facts.
The Defendant, Toyota Motor Sales (Defendant), was looking for prospective automobile dealers for its new line of Lexus automobiles. The Defendant contacted the Plaintiff, Walser (Plaintiff), to discuss the possibility of the Plaintiff becoming a Lexus dealer. The Defendant instituted a three-step process to establish its dealerships. First, the prospective dealer had to fill out an application and propose a dealership plan. Then the Defendant would issue a letter of intent containing the final conditions that had to be satisfied before the deal would become final. Finally, when all conditions were satisfied, the Defendant would approve the agreement. After the Plaintiff applied for the dealership, an agent of the Defendant told Plaintiff that its letter of intent had been approved and that “you’re our dealer.” A few days later, the Plaintiff was notified that this was a mistake and that additional financial information was necessary. Ultimately, the Plaintiff was not granted
the dealership. However, the Plaintiff’s father had purchased property to be used for the new dealership. The Plaintiff brought suit on a promissory estoppel claim, among others. The jury found for the Plaintiff on the promissory estoppel claim, but limited damages to out-of-pocket expenses. The Plaintiff appealed seeking lost profits from loss of the Lexus dealership.
Issue.
Is it proper to limit the damages in a promissory estoppel claim to out-of-pocket expenses?
Held.
Yes. Judgment affirmed. The court held that relief may be limited to the party’s out-of-pocket expenses made in reliance on the promise.
Discussion.
The court noted that Minnesota adopted the doctrine of promissory estoppel found in the Restatement (Second) of Contracts, which provides that “the remedy granted for breach may be limited as justice requires.” The Minnesota courts have interpreted this to permit limiting relief to out-of-pocket expenses. The court relies on the permissive language of the Restatement and the court opinions to reason that it is within the discretion of the courts to limit relief in the manner. The court then examined whether the court abused its discretion by limiting the relief to out of pocket expenses. It found that it did not as the evidence showed that the deal was “far from a certainty,” the negotiations were still in the preliminary stage and the Defendant tried to rectify the situation as soon as possible by informing the Plaintiff of the mistake only a couple days after it was made. Furthermore, the Plaintiff failed to demonstrate that they lost an opportunity by relying on the De
fendant’s promise.
