Story Case

James King, "William House, and Sibley Gray were partners in the shoe manufacturing business, operating under the name, The Easy Tread Shoe Makers.

Under this name, a large and well established business was created. After being together for several years, King and House purchased Gray's interest in the firm, becoming thereby a new firm, operating the old business. Shortly after this deal was made, Gray and another man started a new shoe factory, advertising themselves and soliciting business by mail from the customers of the old company, as the Easy Tread Shoe Company, a corporation. King & House, thereupon, brought an action to enjoin this new concern from the use of the name and for soliciting trade through the list of customers acquired from the old partnership. What should the Court do?

Ruling Court Case. Trego Vs. Hunt, Volume 1896 Appeal Cases, Page 7

Prior to 1876, William Henry Trego, the husband of the plaintiff in this case, had carried on the business of a varnish and japan manufacturer in London. In that year, he took the defendant, Hunt, into partnership, but, upon the understanding that the good will of the business should continue the sole property of William Henry Trego. He died in 1888, and the plaintiff, his wife, and the defendant entered into an agreement, similar to the one which had previously existed; by the terms of this agreement, the partnership was to continue seven years. It was then agreed that the good will of the business should continue the sole property of the plaintiff, Anna Trego.

About two years, or less time, before the partnership would expire, the plaintiff discovered that the defendant was having all the names and addresses of the customers of the business copied. When asked the purpose of this, he stated that he was doing this so that, after the partnership had expired, he might make a canvass of the customers for his own purposes, in case he wished to go into the same business.

The plaintiff brought this action and moved for an injunction to forever restrain the defendant from making any copy of or extract from the books of the partnership, for any purpose other than that of carrying on the partnership business.

Decision

The good will of a business consists in the advantages to be derived from an established business, and from the patronage of old customers. This is a valuable right and is the subject of sale and transfer. A retiring partner, unless he has been given the right by purchase or otherwise, cannot solicit or canvass these customers with the view to bringing to a new business, which he has set up, or is about to set up, in competition with the old. He may go into the same business - unless he has agreed not to - and may invite the public generally to deal with him, but he has no right to interfere with the established trade of the old business, nor the right to make special invitations to the old customers.

Ruling Law. Story Case Answer

A partnership engaged in business generally secures a following, and creates a patronage by its location, nature, efficiency, trustworthiness, or fair dealings; and when this following and patronage is once established there is very strong probability that it will continue. This important and valuable right, though a very intangible one, is called the "good will" of the business. Thus, after the dissolution of the partnership, this probability continues, that the customers of the old partnership will resort to a new partnership, engaged in a similar business, under similar circumstances. This, as has been said, is a valuable right, and is generally treated as an asset of the firm, to be sold for the benefit of the partners, upon the dissolution of the relation.

The name of a firm may become known to a trade and so become a valuable asset as a part of the good will of the firm. Others will be denied the right to the use of this name in the same business, covering the same field or any name similar to this name, if the public might be confused thereby.

In the Story Case, the corporation will be enjoined from the use of the name given because of its similarity to the firm name, and will be enjoined from using the list acquired from the old firm because that is a part of the good will acquired by King & House.