This decision makes it helpful to clarify that the term “goodwill” is generally considered to be a company`s good reputation, business reputation and relationships. Please note that we do not provide legal advice on individual cases that may relate to this content, unless formally instructed by a member of Gatehouse Chambers. However, if you have any further questions about this content, please contact: The High Court rejected Primus` argument, stating that “the clear and natural meaning of goodwill in a commercial contract is the reputation of the business”, the losses suffered by Triumph are lost revenue and increased costs, and therefore the exclusion of goodwill does not exclude claims. As Primus breached the relevant warranty and could not rely on the customer exclusion, it was ultimately ordered to pay damages in the amount of USD 4,201,570 (to reflect, inter alia, the lower purchase price that Triumph would have paid if the LRP had been properly prepared). In Primus International Holding Company & Ors v Triumph Controls – UK Limited & Ors1, the Court of Appeal confirmed that the ordinary legal meaning of a particular term (in this case, “goodwill”) is preferred to an unusual or non-legal meaning, unless otherwise specified in a contract. In Primus International Holding Company & Ors v Triumph Controls – UK Ltd & Anor [2020] EWCA Civ 1228, the Court of Appeal considered the correct interpretation of the term “goodwill” in a commercial contract, taking into account the natural meaning of the term “goodwill” in the commercial context and the dominant definition in accounting practice. The case is a useful reminder of the courts` approach to contract interpretation and highlights the need for parties to clearly articulate the intended meaning of a clause in their contractual agreement if they wish to depart from its ordinary and natural meaning. On appeal, Triumph upheld its argument that the term “goodwill” meant a company`s reputation, reputation and relationships, and that the goodwill exclusion did not apply because its overpayment claims were based on negligent LRP and not on loss of business reputation. On the other hand, Primus argued that the term “goodwill” should be interpreted by reference to the accounting definition in the broadest sense: “an impairment loss of the share if that value represents the difference between the cost of acquisition and the fair value of its identifiable net assets and/or if that loss in value of the share is caused by the impairment of the value of non-identifiable assets”. This content is provided free of charge for informational purposes only. It does not constitute legal advice and should not be relied upon as such. No member of the Chambers or Chambers as a whole accepts or accepts responsibility for the accuracy and/or accuracy of the information and comments contained in this article or for the consequences of relying on them.

Given that Coulson C.J. therefore considered that this was essentially a claim for overpayment due to negligently prepared financial forecasts and not a claim for loss of value of the share, Coulson C.J. concluded that liability was not excluded by the clause. In its defence to this claim, Primus argued that liability for such claims was excluded under the provisions of the SPA – in particular under paragraph 3.1(f)(i) of Appendix 8, which excludes liability “to the extent that.. the matter to which the appeal relates. refers to loss of goodwill” (the “goodwill exclusion”). Coulson C.J. (with whom Henderson and Carr agreed) began to consider the ordinary legal significance of goodwill by referring to Foaminol Laboratories Ltd v British Artid Plastics Ltd [1941] 2 All ER 393. In this case, exceptionally, it was not “goodwill” in the ordinary legal sense, but what “goodwill” was not, namely a “feeling of kindness and desire to help”.

In 399C-E, Hallett J. stated that the case was as follows: Coulson J. therefore concluded that Hallett J. had held that, in a commercial context, the ordinary legal meaning of goodwill was the good and public reputation of the company concerned. Coulson LJ went on to say that “goodwill” in the legal sense has been similarly defined by the Oxford English Dictionary as “the established reputation of a company which is regarded as a quantifiable asset and calculated as part of its value when sold” and in volume 80 (2013) of Halsbury`s Laws of England at 807: The main “goodwill” in contracts for the sale of a business should have its ordinary legal meaning of “a type of property right, which represents the reputation, good reputation and bond of a business”. The ordinary legal meaning of the term “goodwill” is not the same as that of the accounting definition (which takes into account “goodwill” in relation to the value of the shares).