Center for Contract and Economic Organization
According to the overwhelming majority view, promissory estoppel is not an appropriate ground for legally enforcing statements made during preliminary negotiations unless there is a “clear and unambiguous promise” on which the counterparty reasonably and foreseeably relies. Bill Whitford and Stewart Macaulay were among the first scholars to note the apparent absence of such a promise in the case of Hoffman v. Red Owl Stores. Several years ago, after studying the trial record, I concluded that the best explanation for the breakdown in negotiations was the fundamental misunderstanding between the parties as to the amount and nature of Hoffmann’s equity contribution to the franchise. After locating and interviewing Hoffmann, Whitford and Macaulay tell a different story. They view as insignificant the misunderstanding about the nature of Hoffmann’s equity contribution. Rather, they focus attention on additional statements urging Hoffmann to sell his bakery business and store. In these later statements, ignored by the Wisconsin Supreme Court, they find the “missing promise” that they challenged all of us to look for years ago. While I credit their account, I remain as unconvinced by their story as they are of mine. Thus, the important question is how scholars could draw such different inferences from the same basic facts. In this Essay, I speculate that the different stories are a product of our respective methodological commitments: their commitment to a law and society approach to legal issues and mine to law and economics modes of analysis. Those diverse approaches illustrate the tension between “context” and “theory” and the inherent paradox of legal analysis: without context no legal rule can be applied, but with nothing but context no legal rule can be found. For this reason, I conclude, it is important for legal academics of every stripe to appreciate the biases inherent in their methodology of choice and work to correct for them.
Robert E. Scott,
Hoffman v. Red Owl Stores and the Limits of the Legal Method,
Columbia Law and Economics Working Paper No. 357
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/1605