Detrimental Reliance. Red Owl Stores, Inc, induced the Hoffmans to give up their current business and run a Red Owl franchise. Although no contract was ever signed, the Hoffmans incurred numerous expenses in reliance on Red Owl's representations. When

Question

the deal ultimately fell through because of Red Owl's failure to keep its promise concerning the operation of the franchise agency store, the Hoffmans brought suit to recover their losses. Will the Hoffmans succeed?

Answer 1

Detrimental reliance
Yes. Even though no contract was ever signed, Red Owl was liable to the Hoffmans for the damages they suffered. Red Owl made a number of promises and assurances, which the Hoffmans relied and acted upon to their detriment. Since they acted reasonably in relying on Red Owl, the law granted them some measure of relief. Under the doctrine of promissory estoppel, Red Owl was bound by the representations it made to the Hoffmans since these representations were such that a reasonable person would have relied on them. The court concluded that the following three requirements for promissory estoppel had been met: (1) the promise was one that the promisor should reasonably have expected to induce action or forbearance of a definite and substantial character on the part of the promisee, (2) the promise did induce such action or forbearance, and (3) injustice could only be avoided by enforcement of the promise.