Also known as: goodwill · good-will
Written by attorneys — see sources below.
An intangible asset consisting of the established reputation, customer relationships, and expected future patronage of a business. The asset can be transferred separately from other property in a sale or disposition and can serve as a basis for damages when lost through breach or tortious conduct. Its value is often difficult to quantify with precision.
Gateway Bank, a limited partnership, received an offer to buy its entire branch network and customer base. General partner Gabriella Gomez wanted to exclude goodwill from the sale to retain the customer relationships for a new venture, but the other partners insisted on including it. Because the transaction involved substantially all partnership property, unanimous consent of all partners was required before the deal could proceed.
Gregory Gates sold his clothing line to Greenleaf Farms and transferred the registered mark along with the associated customer loyalty and brand reputation. The buyer paid a premium specifically for the goodwill built through years of consistent quality and marketing. Without the transfer of goodwill, the mark alone would have carried far less value in the marketplace.
Simon Tam serves as the lead singer of the rock group The Slants, whose members are Asian-Americans. He chose the name in an effort to reclaim the term and drain its denigrating force as a derogatory reference to Asian persons. The group has incorporated childhood slurs into its lyrics and titled albums including The Yellow Album and Slanted Eyes, Slanted Hearts. Tam filed an application with the Patent and Trademark Office seeking registration of THE SLANTS as a trademark. The PTO examining attorney rejected the application after applying a two-part analysis and concluding that a substantial composite of persons of Asian descent would find the mark offensive. The attorney cited dictionary definitions labeling the term as derogatory and evidence that the band's name had prompted cancellation of a performance along with negative comments from online readers. Tam appealed the denial first to the examining attorney and then to the Trademark Trial and Appeal Board, which upheld the refusal. Tam then brought the case before the Federal Circuit. Sitting en banc, that court reversed the Board. The Government petitioned for certiorari, and the Supreme Court granted review.
View caseGareth Glover, a longtime member of a youth organization, objected when the group admitted individuals whose views conflicted with its traditional values. The resulting shift in public perception reduced the organization's ability to attract families and donors who had previously supported its programs. The loss of that accumulated goodwill threatened the group's continued viability and distinct identity.
James Dale entered scouting in 1978 at the age of eight by joining Monmouth Council’s Cub Scout Pack 142. He became a Boy Scout in 1981. Dale achieved the rank of Eagle Scout in 1988 after earning 25 merit badges and being inducted into the Order of the Arrow. In 1989, Dale applied for and received approval for adult membership in the Boy Scouts. He served as an assistant scoutmaster for Troop 73 in Matawan, New Jersey. Around the same time, Dale’s position as co-president of the Lesbian/Gay Alliance at Rutgers University was publicized in a July 1990 newspaper interview. Later that month, the Boy Scouts sent Dale a letter revoking his adult membership. The letter stated that his membership was inconsistent with the values and standards of the Boy Scouts of America. It explained that the organization specifically forbids membership to homosexuals. Dale responded by filing a complaint in New Jersey Superior Court against the Boy Scouts and the Monmouth Council. He alleged that the revocation violated the New Jersey public accommodations statute prohibiting discrimination on the basis of sexual orientation. The Superior Court granted summary judgment in favor of the Boy Scouts. The New Jersey Supreme Court ultimately held that the Boy Scouts is a place of public accommodation subject to the law and that Dale’s expulsion violated the statute. The Boy Scouts petitioned for a writ of certiorari. The United States Supreme Court granted the petition to determine whether the application of New Jersey’s public accommodations law in this case violates the Boy Scouts’ First Amendment right of expressive association.
View caseGeorge Garcia purchased a new vehicle from Gulfstream Aviation after seeing advertisements emphasizing safety and reliability. When hidden defects surfaced shortly after delivery, the manufacturer's refusal to honor its promises damaged the dealer's standing with repeat customers. The resulting erosion of goodwill reduced future sales even though the immediate repair costs were covered.
In May 1955, Claus H. Henningsen purchased a new 1955 Plymouth Plaza Club Sedan from Bloomfield Motors, Inc., an authorized De Soto and Plymouth dealer for Chrysler Corporation. Mr. Henningsen intended the car as a Mother's Day gift for his wife, Helen Henningsen, and communicated that intention to the dealer. He alone signed a one-page printed purchase-order form. The reverse side contained, in fine six-point script type, a warranty clause limiting the manufacturer's obligation to replacement of defective parts within ninety days or four thousand miles and disclaiming all other warranties, express or implied. The front of the form contained two even smaller paragraphs directing attention to the back-side conditions. The form was a standardized document prepared by the manufacturer and used by all its dealers. No one called the fine-print provisions to Mr. Henningsen's attention, and he did not read them. The car was delivered on May 9, 1955, after the dealer performed the items listed in Chrysler's New Car Preparation Service Guide. On May 19, 1955, while Mrs. Henningsen was driving north on Route 36 in Highlands, New Jersey, at twenty to twenty-two miles per hour on a smooth, paved highway, she heard a loud noise from the front of the car. The steering wheel spun in her hands and the vehicle veered sharply into a highway sign and brick wall. The car had been driven only 468 miles, had required no servicing, and had exhibited no unusual behavior before the accident. An insurance appraiser with eleven years of experience examined the wrecked vehicle and concluded that something in the steering mechanism from the wheel down to the front wheels had broken or dropped off. Plaintiffs also presented expert testimony that the steering failure resulted from a latent manufacturing defect that could not have been discovered by reasonable inspection. The negligence counts against both defendants were dismissed at trial. The case was submitted to the jury solely on the implied-warranty claims. The jury returned verdicts for both plaintiffs against Chrysler Corporation and Bloomfield Motors, Inc. Defendants appealed and plaintiffs cross-appealed from the dismissal of the negligence claim. The Supreme Court of New Jersey certified the matter directly before consideration by the Appellate Division.
View caseGolden Gate Logistics owned coastal property used for a profitable warehousing operation. New state regulations barred all commercial development, eliminating the company's ability to serve its established client base. The destruction of the business's goodwill constituted a total loss of the intangible value built through years of reliable service.
In 1986, petitioner David H. Lucas purchased two residential lots on the Isle of Palms in Charleston County, South Carolina, for $975,000. He intended to construct single-family homes on the parcels, which at the time were zoned for such use and required no building permit for development. No portion of the lots qualified as a critical area under then-existing coastal zone legislation. Subsequently, in 1988, the South Carolina Legislature enacted the Beachfront Management Act. The legislation established a baseline and prohibited construction of occupable improvements seaward of a line drawn 20 feet landward of that baseline, directly affecting Lucas's parcels by barring any permanent habitable structures. Lucas filed an action in the Court of Common Pleas alleging that the Act's restrictions effected a taking of his property without just compensation. Following a bench trial, the court determined that the prohibition rendered the lots valueless and ordered the state to pay just compensation in the amount of $1,232,387.50. The Supreme Court of South Carolina reversed the trial court's judgment. It accepted the legislature's findings that new construction threatened public resources and concluded that a regulation designed to prevent serious public harm could not constitute a taking. The United States Supreme Court granted certiorari to review the South Carolina Supreme Court's decision.
View caseGretchen Graham operated a retail store inside a large shopping center owned by Lloyd Corp. When the owner banned all handbilling on the premises, Graham lost the ability to reach shoppers who had previously visited her store because of its reputation for quality goods. The restriction diminished the goodwill she had developed with the center's regular customers.
Lloyd Corp., Ltd. owns and operates Lloyd Center, a large retail shopping center in Portland, Oregon, spanning about 50 acres with more than 60 commercial tenants, interior malls, parking facilities, and other amenities. The Center maintains a strictly enforced policy prohibiting the distribution of handbills within its building complex and malls, with no exceptions made for such activity. On November 14, 1968, five individuals including Donald Tanner, Betsy Wheeler, and Susan Roberts entered the Center's malls and began distributing handbills inviting the public to a meeting protesting the draft and the Vietnam war. The distribution was quiet, orderly, and produced no litter, though one customer complained. Security guards employed by Lloyd Center, who possess full police authority, informed the distributors that they were trespassing and would be arrested if they did not cease handbilling inside the Center, suggesting instead that they use the adjacent public streets and sidewalks. The five individuals left the premises to avoid arrest and continued their handbilling outside the Center. They subsequently filed suit in the United States District Court for the District of Oregon seeking declaratory and injunctive relief against Lloyd Corp. on the ground that the prohibition violated their constitutional rights. The District Court found that Lloyd Center was the functional equivalent of a public business district and held that the prohibition on handbilling violated the distributors' rights, issuing a permanent injunction. The Court of Appeals for the Ninth Circuit affirmed this determination in a per curiam opinion. The Supreme Court granted certiorari to review the case.
View caseThe sale of substantially all partnership property requires the affirmative vote or consent of all partners whether or not goodwill is included in the transaction. This unanimous-consent rule prevents a majority from forcing a disposition that strips the partnership of its intangible value.
Supporting sources
A lawyer or law firm may sell a practice or area of practice, including goodwill, provided client notice and consent requirements are met. If a client cannot be notified, court approval is required before the representation may be transferred to the purchaser.
Supporting sources
Courts require reasonable certainty in proving damages. Loss of goodwill is an item for which great precision cannot be expected, so recovery is permitted only to the extent the evidence permits the loss to be established with reasonable certainty.
Supporting sources
Goodwill of a business is recognized as a species of intangible personal property that can be possessed, assigned, and protected like other property interests.