GOODWILL IN BUSINESS

• Date: 06 February 2019

(1) "The goodwill a business can claim to have can be said to be the privileges, granted by the seller of the business to the purchaser, of trading as its successor. In other words, the possession of a ready-formed connection of customers, considered as a separate element in the saleable value of a business: See: Words and Phrases Legally Defined 2nd edition Vol. 2, page 329. The question is, has the plaintiff got any saleable value of a business to which a goodwill can be attached? It seems quite appropriate therefore to refer to how Lord Herschell defined goodwill in Trego v. Hunt (1896) A.C. 7 at 17-18. He said: - "It is the connection thus formed, together with the circumstances, whether of habit or otherwise, which tends to make it permanent, that constitutes the goodwill of a business. It is this which constitutes the difference between a business just started, which has no goodwill attached to it, and one which has acquired a goodwill. The former trader has to seek out his customer from among the community as best he can. He knows what members of the community are purchasers of the articles in which he deals, and are not attached by custom to any other establishment." Fletcher Moulton, L.J., in In re Spanish Prospecting Co. Ltd. (1911) 1 Ch. 92 at 105 said: - "The capital value of goodwill is an alternative to profits, not part of them. It is the price at which a person renounces his rights to future profits. Hence, the goodwill of a business can never appear in the calculation of its profits." - Per Uwaifo, J.C.A. in Awoniyi v. Reg. Trustees of AMORC Suit No...