923 F.2d 566 (7th Cir. 1991)

Plaintiff, a liquor distributor, had lost several of its suppliers and, as a result, was in the process of selling its business.  While in negotiations with a prospective buyer, Plaintiff was repeatedly assured by Defendant (a major supplier) that it would continue using Plaintiff as its distributor if it did not sell the company.  Relying on Defendant’s promise, Plaintiff declined the offer of a prospective buyer.  That same afternoon, Defendant decided to withdraw its line from Plaintiff.

The news of Defendant’s decision spread quickly through the industry, which caused Plaintiff to sell its business to the same prospective buyer for a much lower price than previously offered.

Plaintiff sued Defendant seeking to recover the decline in the selling price under the theory of promissory estoppel.

The district court entered a summary judgment in favor of the Defendant, but the court of appeals reversed and remanded.

The court of appeals reasoned that Plaintiff could have reasonably relied on Defendant’s assurances that it would not end their relationship when Plaintiff turned down the prospective buyer’s offer to purchase its business.  Thus, under the promissory estoppel doctrine, Plaintiff could recover reliance damages from Defendant, but not expectation damages.

Since Plaintiff was seeking the difference between the offer that it had rejected relying on Defendant’s promise and the sale price after Defendant broke that promise, Plaintiff was entitled to recover those reliance damages.  However, had Plaintiff been seeking to recover the profits it would have earned had Defendant kept its promise, those would constitute expectation damages and not recoverable under the promissory estoppel doctrine.

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