The conditions imposed for promissory estoppel are: (1) Was the promise one which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee? (2) Did the promise induce such action or forbearance? (3) Can injustice be avoided only by enforcement of the promise?
Red Owl promised a couple that if they invested a total sum of $ 18,000, Red Owl would establish a new grocery store for them. Upon reliance to the agreement and representations, the couple sold their bakery building and business and their grocery store and business, as well as bought a new lot, only to find Red Owl continuously increased the price the parties had originally agreed upon. Consequently, the couple were induced to sell the store's fixtures and inventory on the promise that they would be in their new store in a few months. The deal never went through and couple sued Red Owl. The circuit court ruled in favour of the couple. The case was appealed to the Supreme Court of Wisconsin.
Did the couple have a cause of action based on promissory estoppel?
The Courts held that the development of the law of promissory estoppel is an attempt by the courts to keep remedies abreast of increased moral consciousness of honesty and fair representations in all business dealings. A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.