In Primus International Holding Co and others v Triumph Controls – UK Ltd and another1, the English Court of Appeal has upheld a first instance judgment, in which it was held that an exclusion clause in a Share Purchase Agreement ("SPA") did not prevent the purchaser from pursuing a breach of warranty claim.  The case concerned the contractual meaning of the term "goodwill" in the context of an exclusion clause which purported to exclude claims for damage to goodwill.

The Court of Appeal's judgment highlights the English court's general reluctance to depart from the ordinary meaning of words used in contracts when interpreting contractual provisions, absent a good reason to do so.


The Appellants ("Primus") were the owners of two aerospace manufacturing companies (the "Targets").  In 2012, Primus entered into discussions with the Respondents ("Triumph") about the sale of the Targets.

As part of those discussions, Primus provided Triumph with a set of financial forecasts for the companies extending to 2017 – referred to as the "Long Range Plan" or "LRP".  Although the Targets were not profitable at the time of the discussions, the LRP predicted that the Targets would be profitable in the future.  Following the discussions, the SPA was signed in March 2013 and the sale of the Targets completed in May 2013.  The original purchase price was $63,530,145, which later increased by $13 million to reflect changes in the book value of the Targets' assets.

Following the sale, significant operational and business problems were discovered within the Targets, and their financial performance fell well short of the forecasted earnings, as set out in the LRP.  In fact, Triumph was required to inject a further $85 million in order to keep the Targets afloat.

In August 2015, Triumph commenced proceedings against Primus, alleging breach of the warranties given by Primus in the SPA.  One of the claims alleged was that contrary to the warranty at paragraph 19.5 of Schedule 3 to the SPA, the LRP had not been "honestly and carefully prepared" by Primus. 

In defence of that claim, Primus asserted that liability for such claims was excluded pursuant to the terms of the SPA – specifically paragraph 3.1(f)(i) of Schedule 8, which excluded liability "to the extent that…the matter to which the claim relates…is in respect of lost goodwill" (the "Goodwill Exclusion"). 

At first instance, the judge (Mrs Justice O'Farrell) found that Primus had breached the warranty in paragraph 19.5 of Schedule 3 because the LRP had failed to take into account various factors that would have an impact upon the future financial performance of the Targets.2  Consequently, the LRP had overstated the Targets' future profitability.  The judge also rejected Primus' argument that the claim was excluded by the operation of the Goodwill Exclusion and held that "the plain and natural meaning of goodwill in a commercial contract is business reputation" and that "the exclusion relied on by Primus does not affect the claims for breaches of warranty".3  Consequently, the High Court held that the Goodwill Exclusion was not engaged.

Primus was granted permission to appeal in respect of the true meaning and effect of the Goodwill Exclusion.

The Appeal

On appeal, Primus submitted that loss of goodwill was "a loss of share value, where that value represents the difference between the costs of acquisition and the fair value of its identifiable net assets and/or where that loss of share value is caused by the impairment of the value of non-identifiable assets".  It was agreed that this was essentially an accounting definition.

In response, Triumph submitted that "goodwill" meant the good name, business reputation and connections of a business.  Consequently, since the claim related to an overpayment caused by the inaccurate LRP, it was not caught by the Goodwill Exclusion.

Court of Appeal's decision

The Court of Appeal unanimously dismissed Primus' appeal and upheld the first instance judgment.

The Court of Appeal held that the ordinary legal meaning of "goodwill" is "the good name and public recognition of the business concerned" and rejected Primus' definition which Lord Justice Coulson (delivering the judgment) described as "somewhat convoluted".  Furthermore, having considered the relevant authorities where the meaning of "goodwill" had been considered, Coulson LJ stated that he was:

"satisfied that the authorities point overwhelmingly to the conclusion that 'goodwill' in a contract for the sale of a business refers to a type of proprietary right representing the reputation, good name and connections of a business, and is different to the particular or specific meaning attributed to the term by accountants".

The Court of Appeal also considered how "goodwill" had been addressed in other parts of the SPA, on the basis that "it should ordinarily be presumed that language is used consistently within the four corners of an agreement".4  Accordingly, the Court of Appeal held that the judge's conclusions as regards the true meaning of "goodwill" were consistent with how the term had been used in other parts of the SPA.

Finally, the Court of Appeal considered the nature of Triumph's own claims.  The purpose of the Goodwill Exclusion was to exclude any claim by Triumph for damages to Triumph's own reputation, good name or business connection arising from the breach of the SPA – which could arise if (for example) the Targets had previously been convicted of money laundering or corruption, but Primus had failed to disclose that information to Triumph. 

However, the Court of Appeal found that Triumph's claims were "of a completely different character" and the Goodwill Exclusion did not engage with the breach of warranty claim relating to the LRP at all.  Coulson LJ noted that if Primus' construction of the Goodwill Exclusion was correct, "there was a very real risk that claims for breach of the 19.5 warranty might never succeed".


This judgment provides helpful clarification regarding the legal meaning of the term "goodwill", and the factors that will be taken into account by the Courts when determining whether or not to depart from that meaning.

More broadly, this decision illustrates the general reluctance of the English courts to depart from the ordinary meaning of words used in contracts, when interpreting contractual provisions.  In the present context, there was a clear disconnect between the meaning of term used in the contract ("goodwill") and what Primus asserted was the true meaning of the term.  The Court of Appeal was, therefore, unwilling to accept Primus' broad interpretation of the term – which was described by the Court of Appeal as "convoluted".

Parties involved in contractual negotiations should therefore never assume that their interpretation of a particular term will necessarily be the preferred interpretation – particularly where it differs from (or materially expands upon) the commonly accepted definition.  It is therefore always advisable, when drafting contracts, to consider carefully the words used and their possible competing meanings and, where suitable, provide guidance within the contract to the parties (and ultimately to a judge) if the true meaning of the contractual term ever becomes the subject of a commercial dispute.

1 [2020] EWCA Civ 1228

2Triumph Controls – UK Limited and another v Primus International Holding Company and others [2019] EWHC 565 (TCC)

3 At paragraph 496.

Investor Trading Limited v City Index Limited [2011] EWCA Civ 837