Contracts II, Pages 1145–1146

Goodman v. Dicker

United States Court of Appeals for the District of Columbia, 1948

Facts:

Plaintiffs applied for a dealer franchise to sell Emerson's products. Defendants, local distributors for Emerson Radio, induced plaintiffs to incur expenses in preparing to do business under the franchise, representing that the application had been accepted and would be granted and that plaintiffs would receive an initial delivery of 30–40 radios. Yet no radios were delivered and notice was given that the franchise would not be granted.

Procedural History:

Trial court held that the contract had not been proven but that defendants were estopped from denying it because plaintiffs relied on their statements and conduct to their detriment. Judgment was entered for $1,500 for cash outlays and loss of profits.

Defendant's Argument:

Even if the franchise license was granted, it would have been terminable at will and not impose a duty to sell any fixed number of radios to plaintiffs.

Issue:

Can plaintiffs recover even though the contract plaintiffs relied on the formation of would not have required plaintiffs gaining profit?

Rules:

  • Google Scholar LogoPage 1136

    Justice and fair dealing require that one who acts to his detriment on the faith of conduct of the kind revealed here should be protected by estopping the party who has brought about the situation from alleging anything in opposition to the natural consequences of his own course of conduct.

  • LexisNexis IconWestLaw LogoGoogle Scholar LogoPage 1146

    [H]e who by his language or conduct leads another to do what he would not otherwise have done, shall not subject such person to loss or injury by disappointing the expectations upon which he acted. Such a change of position is sternly forbidden.

  • See Also:

    R2C § 349

Reasoning:

Defendants promised that a franchise would be granted and that radios would be delivered and plaintiffs relied on this. Justice requires estopping one opposing this promise's consequences. However, plaintiffs cannot recover their loss of profits, only expenditures made in reliance upon defendants' promise.

Holding:

Yes, plaintiffs can recover the $1,150 spent in reliance upon the promise. Affirmed as modified.

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