Goodwill is an intangible asset which consists of the goodwill in the custom and connection of the seller in relation to the business, together with the exclusive right for the buyer and its successors to carry on the business under the business name, and to represent themselves as carrying on the business in succession to the seller, including the benefit of all pending contracts orders and engagements and the right to all lists of customers and suppliers of the business.
Any goodwill in the business being purchased should be assigned to the buyer.
In order to protect this valuable asset, the buyer should require the seller to undertake that, pending completion, it will not do anything to prejudice or diminish the goodwill of the business.
Generally, the buyer will want the right to use any distinctive name under which the business trades. It should, therefore, seek to prohibit the seller from holding itself out as being connected with the business or from using the business name after completion. In addition, the buyer should require the seller to change its corporate name to a name that cannot be confused with the business name on, or as soon as possible after, completion. The buyer should also seek restrictive covenants from the seller to protect the goodwill of the business.goodwill-in-a-business.