Loss of Goodwill as an Element of Damages in Commercial Litigation Cases

If your business has to sue someone, you may look at only countable monetary losses, as a measure of your damages. But in some cases, the damages to your business go beyond hard financial losses. In some cases, someone may have done something to harm or damage your business’ goodwill.

Why So Difficult?

Goodwill is hard to quantify—that is, there is no calculator or receipts or contract that says, this is how much goodwill you have lost because of a breach or because of some tort or wrongdoing. Goodwill is just your business’ reputation and standing in the public eye.

Goodwill thus is contradictory—on the one hand, it can’t be readily counted, but on the other hand, it can be the most severe loss a business can sustain—your image to the public and to your customers and clients, is the vital lifeblood to keeping your business’ doors open-and may never be fully regained.

How Does it Happen?

Loss of goodwill can happen very quickly, and very easily. Take a simple breach of contract case—imagine a supplier sells your business products that you resell to the public—but those products are dangerous, defective, or faulty. Your business’ reputation is going to take a big hit, because of your suppliers having given you these substandard goods to sell.

Infringement, misappropriation of your business;’ name, or defamation cases, also carry loss of goodwill, as possible elements of damage.

Proving Loss of Goodwill

In certain kinds of cases, you can still get compensation for loss of, or damage to your business’ goodwill, but it takes a little work to prove the losses.

The first thing you’ll have to show is that your business did, in fact, have a good name or reputation or image, in the eyes of your customers, clients and the public. More established businesses often have an easier time showing this. Sometimes it can be shown by testimony or positive news media, but it can also be shown by demonstrating a consistent long standing customer or client base, many of whom return to your business over time for more services or products.

You then have to show that if your business did in fact have goodwill, that it was lost because of the actions of the Defendant. Lowered sales or clients or customers, compared to before and after the wrongdoing, can be used to show this, as can testimony of people who may have stopped using your business because of the Defendant’s wrongdoing.

Then, the loss of goodwill must be valued—how much has this loss actually cost you? Often, experts are needed to testify, but again, pre and post-wrongdoing financial information may as suffice.

As you can see, much of showing goodwill, may require expert accounting services—someone to look at your business’ books and records to testify what has been lost as the result of the loss of goodwill.

Fight back if someone has done something to damage your business’ good name and reputation. Call our Fort Lauderdale business and commercial litigation lawyers at Sweeney Law P.A. at 954-440-3993 for help.

Source:

investopedia.com/terms/g/goodwill.asp#:~:text=Goodwill%20is%20an%20intangible%20asset,valuable%20but%20not%20easily%20quantifiable.