GOODWILL OF A BUSINESS

Press, Volume LXXII, Issue 21975, 26 December 1936, Page 9

GOODWILL OF A BUSINESS

VENDORS’ RIGHTS AFTER SALE MUST NOT CANVASS OLD CUSTOMERS Interesting remarks about rights on sale of goodwill are made in an editorial article of the “Incorporated Accountants’ Journal” (London). The purchaser of the goodwill of a business, it is stated, often protects himself against unfair competition by obtaining from the seller a covenant not to be concerned in a similar business within a certain area. Where no such covenant is entered into, the question arises as to what are the rights of the purchaser. In Trego v. Hunt (1896), the leading case on this subject, it was held that where the goodwill of a business is sold (without further provision) the vendor may set up a rival business, but he is not entitled to canvass the customers of the old firm, and may be restrained by injunction from soliciting any person who was a customer of the old firm before the sale to continue to deal with the vendor, or not to deal with the purchaser. The same principle is applicable to the case where a person has been taken into partnership on the terms that on the expiration of the partnership the goodwill of the business shall belong solely to the otheb partner. A person who sells the goodwill of his business is under no obligation to retire from the field. Trade he undoubtedly may, and the very same line of business. If he has not bound himself by special stipulation, and if there is no evidence of the understanding of the parties beyond that which is to be found in all cases, he is free to carry on business wherever he chooses. He may do everything that a stranger to the business, in ordinary course, would be in a position to do. He may set up where he will. He may push his wares as much as he pleases. He may thus interfere with the custom of his neighbour as a stranger and as an outsider might do; but he must not avail himself of his special knowledge of the old customers to regain, without consideration, that which he has parted with for value. He may not sell the fcuStom and steal away the customers in that fashion. That is opposed to the common understanding of mankind and the rudiments of commercial morality, and is not to be excused by any maxim of public policy. A vendor is not at liberty to destroy or depreciate the thing which he has sold; there is an implied covenant, on the sale of goodwill, that the vendor does not solicit the custom which he has parted with; it would be a fraud on the contract to do so. It is not right to profess and to purport to sell that which you do not mean the purchaser to have; it is not an honest thing to pocket the price and then to recapture the subject of sale. I