Insights Court of Appeal considers the meaning of “goodwill” in SPA (Primus v Triumph)

‘Goodwill’ in passing off law has long been understood to be a form of business reputation: “the attractive force that brings in custom”. [1]  In contrast, for accounting purposes ‘goodwill’ is a calculation of the portion of a purchase price that is higher than the net value of assets minus liabilities assumed.

In the recent case of Primus v Triumph, [2]  the Court of Appeal considered which meaning should be read into an exclusion clause in a share purchase agreement (SPA).  Here, law prevailed over accounting.

This case serves as useful reminder that the term ‘goodwill’ has a different meaning depending on the context in which it is used and that commercial agreements need to be drafted with this distinction in mind if adverse consequences following a subsequent dispute over contractual construction are to be avoided.


This case involved a fairly straightforward contractual dispute.  The Buyer had purchased shares in a company sold by the seller for $76.5 million in 2013 basing the purchase price in part on a Long Range Plan (LRP) which the seller had warranted in the a SPA to have been “honestly and carefully prepared.”.  After the sale,  the buyer discovered “significant operational and business problems” at their new acquisition.  The Court at first instance held that the warranty relating to the LRP had been breached.   There was no appeal from that decision.

The first instance court also held that the loss arising from that breach was not “in respect of lost goodwill”, so was not excluded from recovery by virtue of a clause excluding liability “to the extent that… the matter to which the claim relates… is in respect of lost goodwill”.  It  robustly rejected the seller’s reliance on the goodwill exclusion clause by finding that the correct construction of ‘goodwill’ in the contract was the ordinary legal meaning of goodwill, and that the loss arising from the LRP was not loss of goodwill in that sense.

The seller obtained leave to appeal the decision in relation to the exclusion clause only.


The Court of Appeal agreed with the trial judge and found that the correct construction of ‘loss of goodwill’ in the relevant exclusion clause related to loss of business reputation.  The claim here was not excluded:  it was

“not a claim for loss of share value: it was a claim for overpayment as a result of the careless LRP. The loss was the difference between the price actually paid, and the lower price which Triumph would have paid if they had known the true position. A businessman or a lawyer would consider that such a claim was an entirely different sort of claim to one for loss of goodwill.”

The Court of Appeal made several useful statements of principle. Unusually, neither side sought to identify or rely upon any the factual background to assist its submissions, and so construction of the (undefined) term ‘lost goodwill’ hinged on the words actually used in the context of the contract as a whole.

First, the Court of Appeal confirmed that the ordinary legal meaning of goodwill is not the same as the accounting definition, and that the ordinary legal meaning is not synonymous with ‘value’.

Second, the Court of Appeal found authorities that supported its conclusion that ‘goodwill’ in contracts for sale of a business refers to “a type of proprietary right representing the reputation, good name and connections of a business”.

Third, the Court of Appeal confirmed that language should be assumed to have consistent meaning throughout an agreement. In this SPA, other agreement terms clearly used ‘goodwill’ in its ordinary legal meaning and not its accounting meaning.

The appeal was consequently dismissed.

[1] IRC v Muller and Co’s Margarine Limited [1901] AC 217 at 223 (Lord MacNaghten)

[2] Primus International Holding Company & Ors v Triumph Controls – UK Ltd & Anor [2020] EWCA Civ 1228 (22 September 2020)