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Most small business owners know that negative online reviews can have a significant effect on business. But some have come up with a novel, if slightly controversial, way of trying to eliminate these negative online reviews: They're adding social media "non-disparagement" clauses to their customer contracts and terms of service agreements.
Should you consider adding a non-disparagement clause to your own customer contracts or TOS? Here are a few points to ponder:
What Is a Non-Disparagement Clause?
According to MarketWatch, an increasing number of businesses "from wedding photographers to dentists" are adding non-disparagement clauses -- typically found in severance agreements and other employment contracts -- to their agreements with customers.
These clauses forbid the disparagement of the business; in other words, a negative review on Yelp or other online review site, even if the review is true.
By agreeing to the clause when they sign the contract or click accept on the terms of service (often without reading the fine print or pages of boilerplate contract language), customers are agreeing to abide by the terms of the contract, including the non-disparagement clause. This means that a customer who posts a negative review on Yelp can be sued for breach of contract.
- Need legal advice on how your small business should operate? Consult with an experienced business attorney about your options.
Are These Clauses Enforceable?
Although businesses have begun adding these clauses to their contracts, their ability to actually enforce them is still questionable. There are many reasons a court may find a contract unenforceable, such as unconscionability, public policy concerns, or misrepresentation.
According to law professor and blogger Eugene Volokh, the surprising nature of these clauses on the consumers who agree to them -- the so-called "gotcha factor" -- may make them unenforceable. "You could see some of these invalidated," Volokh told MarketWatch. "This will be decided on a state-by-state level."
Supposing such a clause would be enforceable, should you add one to your customer contracts? Maybe the more important question is: what's a worse reflection on your business, suing unhappy customers (possibly unsuccessfully) or living with a smattering of bad reviews?
On the other hand, adding this clause to your existing agreements may come in handy if you are ever the victim of a purposely disparaging and untrue online review (although that's why they have libel laws).
If you do decide to retool your customer contract, having it drafted by a lawyer will help ensure that it's done right.
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