GOOD WILL
The favorable reputation and clientele of an established and well-run business.
The value of good will is ordinarily deter-
mined as the amount a purchaser will pay for a
business beyond the monetary value of its tangi-
ble property and money owed to it.
Good will is regarded as a property interest
in and of itself, although it exists only in con-
nection with other property, such as the name or
location of the operation. Good will exists even
in a situation where the business is not operat-
ing at a profit. Certain courts refuse to recognize
good will that arises out of the personal qualities
of the owner. For example, a physician cannot
sell good will when selling the office building
and other physical assets of his or her practice,
since the physician’s reputation is based solely
upon personal professional abilities.
A transfer of good will from one individual
to another can take place as a bequest in a will or
through a sale. Ordinarily, when an individual
sells the property to which good will is con-
nected, it is automatically transferred to the
buyer.However, the buyer and seller can alter this
arrangement or specify details in their sale agree-
ment. A former owner of a business has no right
to interfere with the subsequent owner’s enjoy-
ment of good will following a sale transferring
good will, even in the event that the sales con-
tract does not specifically so indicate. In the
event that the purchaser wants to prevent the
seller from establishing a competing business in
the same vicinity, the purchaser must bargain for
such a provision in the contract. An agreement
not to compete, sometimes called RESTRICTIVE
COVENANT, differs from good will. However, an
individual who sells the good will of his or her
business is not permitted to solicit former clients
or customers or lead them to believe that he or
