Hoffman v. Red Owl Stores and the myth of precontractual reliance

Abstract

The conventional wisdom among contemporary scholars is that courts will impose promissory estoppel liability for reliance investments undertaken prior to any agreement between commercial parties.1 Evidence of promises made and relied upon during the negotiation process together with a “general obligation arising out of the negotiations themselves” are the supposed grounds for imposing liability even for preliminary negotiations that ultimately break down.2 But even a casual survey of contemporary case law casts significant doubt on the accuracy of the conventional view. Courts actually make some form of agreement a necessary pre-condition to a promisee’s recovery. The real issues are: When will a preliminary agreement be found? And how does the nature of such agreement determine when and how a promisee can recover? These questions have generated a literal flood of litigation that has been virtually ignored in contemporary contract law courses. One reason that this question is ignored is because of the misplaced attention given to the decision of the Wisconsin Supreme Court in Hoffman v.