ProfessorMelissa A. Hale
CaseCast™ – "What you need to know"
Brief Fact Summary. The Plaintiff, Hoffman (Plaintiff), entered into negotiations with the Defendant, Red Owl Stores, Inc., (Defendant) to enter into a franchise agreement. In anticipation of opening a new Red Owl Store, Plaintiff sold his business, moved his family and underwent several ventures to “familiarize himself” with the grocery business. Defendant changed the terms of the deal on several occasions, eventually expressing to Plaintiff that more consideration and additional terms were needed, outside of the scope of their original agreement. When Plaintiff could not meet Defendants terms, the deal was broken and Plaintiff brought suit for its reliance damages.
Synopsis of Rule of Law. While promissory estoppel is the appropriate remedy in reliance cases, an injured party will only be awarded damages to the extent they have been displaced.
Where damages are awarded in promissory estoppel instead of specifically enforcing the promisor's promise, they should be only such as in the opinion of the court are necessary to prevent injustice.View Full Point of Law
Issue. The issue in this case is whether the facts support a finding that promissory estoppel should be used to allow Plaintiff to recover his reliance damages.
The Court concluded that an injustice would result if Plaintiff was not allowed some relief because of the Defendant’s failure to honor the original agreement.
The Court also opined that when damages are awarded in a promissory estoppel action, a promise need not be enforced (to the degree that Plaintiff could have recovered lost profits from the loss of the Wautoma store), but the party should be placed back into the position he or she would have been in, had there not been a contract.
Finally, the court found that Plaintiff’s acquisition of the Wautoma grocery store and his work there was something he had done as more or less an experiment and that Defendant should not be liable for damages resulting in the loss of that operation.
Discussion. The contract remedy used in this case is generally limited to the measure of reliance. Reliance, again, is only the amount a party has displaced itself, in anticipation of an agreement. Thus, reliance damages only serve to put the party back into the position they would have formerly been in.