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Do You Need a Nondisparagement Clause?

On Behalf of | Aug 21, 2018 | Business Law, Contract Law

Nondisparagement clauses have gained popularity due to the many outlets consumers have available to leave reviews about businesses. The internet has made it much easier for customers and consumers to voice their opinions about businesses, both positive and negative. As much as these reviews have helped the everyday consumer’s purchase decisions, it’s also mired and hurt the bottom line for many businesses – large or small. So, what is a nondisparagement clause? It is language inserted in a contract or agreement that attempts to prevent the receiver of a good or service from posting negative reviews about the seller or service provider. They are also known as a “gag clause.” If you are considering adding this clause into your contract or terms of service, you might want to consider seeking legal counsel before doing so.

Today, a nondisparagement clause won’t allow a business to silence its worst critics. For most businesses, this is an unhappy customer. Some businesses tried to take matters into their own hands by putting provisions that allowed them to penalize or sue a customer for posting a negative review. The Federal Trade Commission took notice of these cases and, in December of 2016, Congress passed the Consumer Review Fairness Act. The law was passed in response to reports of businesses trying to prevent people from leaving an honest review about a product or service they received. The law makes it illegal for companies to use a contract provision that restricts customers from leaving reviews, enforce a penalty fee for a review, or require people to relinquish their intellectual property rights for their review. The law also protects businesses from people leaving inappropriate or irrelevant content.

So, why would a business need a nondisparagement clause? Well, there are some things that these clauses can protect a business from. The Consumer Review Fairness Act doesn’t apply to employment contracts or agreements with independent contractors. These clauses are also very useful when enforcing a settlement agreement due to a dispute. If you are considering adding a nondisparagement clause to your contract, consult with a local Nevada business lawyer today to discuss your options. Find out if your business needs this provision and how it can protect your business’ interest in the future.

H.R.5111 – Consumer Review Fairness Act of 2016

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