Under Michigan law, the sale of a business along with its accompanying good will gives rise to an implied covenant precluding the seller from soliciting his old customers.  The argument is that once the seller pocketed the purchase price, he cannot attempt to reacquire from the buyer that which was bargained for and sold.

This does not mean, however, that the implied covenant prohibits the seller from conducting a like business in the same place.  Absent an express covenant not to compete, the seller is free to reenter the market, so long as he does not lead the public to believe he is continuing the old business.  The seller can even service his old customers, so long as he did not solicit them; that is, the customers come to the seller by their own volition.

One more interesting feature of this doctrine is that even if buyer and seller negotiated and entered into an express covenant not to compete, this has no bearing on the existence of the implied covenant not to solicit the customers of the business.

When buying and selling a business, before reentering the marketplace, sellers need to understand not only their express obligations under the parties’ agreement but also their implied obligations under Michigan law.

–Matt