Non Disparagement Clause Sample: Everything You Need to Know
A non disparagement clause sample is often used in lawsuits to prevent both parties involved from saying negative things about the other in public after making an agreement. When an agreement is made, a defendant will often pay a significant settlement to bring the case to a close and will not want to risk a bad reputation after paying out.3 min read
A non disparagement clause sample is often used in lawsuits to prevent both parties involved from saying negative things about the other in public after making an agreement. When an agreement is made, a defendant will often pay a significant settlement to bring the case to a close and will not want to risk a bad reputation after paying out.
Signing the Agreement
When you sign a settlement agreement, you will often see a paragraph toward the end of it that says "no disparagement." This means both parties signing the document agree never to disparage the other. This is a common provision included in most settlement contracts. While your attorney might say it is nothing to worry about or you might think there is no way to enforce it, you could be mistaken.
Nondisparagement agreements have been enforced in court settings at both the state and federal levels. This agreement often gets violated because its wording is vague. Further, many people don't understand what constitutes as disparagement.
This is usually an essential section of an agreement for many businesses, due to the importance of a company's reputation. Things like negative publicity can drive potential customers away and lead to a drop in profit. Therefore, many businesses will readily seek to enforce breaches of these clauses.
You might have heard a nondisparagement agreement under the term gag clause in a contract. While these clauses can be and are used in settlement cases, recent federal laws forbid their use when entered into agreements with consumers.
These agreements were created to not only protect businesses but also all parties involved in a contract from soured relationships that can result in reputation smear campaigns. When a nondisparagement agreement is in place, both parties will be unable to:
- Say negative things about the other in public.
- Post negative reviews or comments about each other on public forums such as Yelp or TripAdvisor.
- Create negative publicity about each other.
- Perform any public action aimed at damaging the other's reputation.
Many attorneys will try to get these agreements in place before, during, and after the settlement process to help limit possible damage to their clients and prevent their clients from disparaging the other party. These agreements are even more critical in today's society where social media and online interactions are extremely common and can spread information quickly. Getting these agreements in process before proceedings is also an important way to keep each party from discrediting each other in the public eye if the case goes to trial.
Sample Cases Involving Nondisparagement Agreements
Recently, in Dallas, Texas, a business attorney sued a couple after they posted a poor review on Yelp of a pet-sitting company. They were sued for violating a nondisparagement clause. The business was seeking $1 million in damages to its reputation and loss of business due to the poor review.
When it comes to enforcing a nondisparagement agreement with your customers, there are conflicting opinions in different jurisdictions on whether the clause can be enforced. Therefore, you're more likely to be able to enforce a nondisparagement clause between two businesses than between a business and a customer.
If the court does rule against the plaintiff and decides to strike down a nondisparagement agreement, the judge will form his or her opinion based on the First Amendment rights of individuals or the vagueness in determining what constitutes disparaging language.
There have been no state-reported court decisions to this point. The federal Arizona District Court addressed it, however, in the case of FreeLife Intl Inc. vs Am. Educ. Music Publications Inc. The online sales distributorship FreeLife sued Am. Educ. Music Publication for breach of contract it had "accepted" when it pushed the "I Accept" button on FreeLife's website. This effectively made the defendant a marketing executive for the company.
When the defendant later criticized Freelife's policies and products on its own website, it was sued in part for violating the nondisparagement agreement that was part of the acceptance. The court deemed the agreement to be understandable and ruled against the defendant.
As you can see, agreeing to a nondisparagement clause in a contract can backfire if you say anything that could disparage the other party involved.
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