Does a promisee have a cause of action for promissory estoppel under Section 90 of the Restatement of Contracts when the promisor's assurances, though not definite enough to form a binding contract, reasonably induced the promisee to act to his detriment?

Joseph Hoffman and his wife (plaintiffs) negotiated with Red Owl Stores, Inc. (defendant) through its agent Lukowitz to obtain a Red Owl franchise store. Hoffman operated a bakery in Wautoma. Lukowitz assured Hoffman that for roughly $18,000 Red Owl would establish him in a store. In reliance, Hoffman bought a small grocery in Wautoma to gain experience, paid $1,000 on a Chilton lot, sold his grocery fixtures and inventory in June 1961 on the promise that he would be in his new store by fall, and, at defendants' urging, sold the Wautoma bakery building at a $2,000 loss. Mrs. Hoffman held joint title to the bakery building. The required investment rose from $18,000 to $24,100 and then to $26,100, with assurance that the deal would then go through. Hoffman also paid a month's rent on a home in Chilton and incurred moving expenses when defendants suggested he work in a Red Owl store in the Fox River Valley. The negotiations ultimately fell through in January 1962, and the franchise was never granted. Essential terms such as the size, cost, design, and layout of the store and the lease terms were never agreed upon.

Plaintiffs sued Red Owl Stores, Inc. and its agent Lukowitz. The trial court framed the special verdict on the theory of promissory estoppel under Section 90 of the Restatement of Contracts, and the jury found for plaintiffs on the promissory representations, reliance, and fulfillment of conditions, and awarded damages for several items, including $16,735 for the sale of the Wautoma grocery fixtures and inventory. The trial court granted a new trial limited to the damages arising from the sale of the grocery business. Defendants appealed, and plaintiffs cross-appealed, to the Wisconsin Supreme Court. The Wisconsin Supreme Court affirmed the order.

(Currie, J.)

Yes. A cause of action for promissory estoppel exists under Section 90 of the Restatement of Contracts, which provides that a promise the promisor should reasonably expect to induce action or forbearance of a definite and substantial character, and which does induce it, is binding if injustice can be avoided only by enforcement of the promise. The court expressly adopts this doctrine as a needed tool to prevent injustice.

Fraud and deceit offered no alternative remedy, because a fraud claim based on unfulfilled promises requires a present intent not to perform, and no evidence showed Lukowitz acted in bad faith. Suskey v. Davidoff, 2 Wis. (2d) 503 (1958). Other jurisdictions have increasingly recognized promissory estoppel, and the court follows that trend.

The promise need not be so comprehensive that it would constitute an offer ripening into a binding contract if accepted. Section 90 imposes three conditions: (1) the promisor should reasonably expect the promise to induce definite and substantial action or forbearance; (2) the promise did induce such action; and (3) injustice can be avoided only by enforcement. The first two are fact questions for the jury, which found them satisfied. The third is a policy decision for the court involving discretion, and injustice would result if plaintiffs received no relief given defendants' repeated assurances that induced them to sell their businesses and change position.

On damages, promissory estoppel is not a breach-of-contract action, so lost profits are not recoverable; damages should be only what is necessary to prevent injustice, and mechanical approaches should be avoided. The $2,000 bakery loss was properly awarded to both plaintiffs because defendants foresaw and requested Mrs. Hoffman's joint sale. The $1,000 lot payment, $125 rent, and $140 moving expense were proper. The $16,735 grocery-sale award was unsupported because recovery is limited to the difference between sale price and fair market value, so the new trial on that item was proper.