Legal Definitions - nondisparagement clause

A nondisparagement clause is a specific section within a legal agreement that prohibits the parties involved from making negative, critical, or derogatory statements about each other, their products, services, or business practices. The primary goal of such a clause is to protect reputations and prevent potential harm that could arise from public criticism or negative commentary.

• Example 1: Business Acquisition

  Imagine a scenario where a large technology company acquires a smaller startup. As part of the acquisition agreement, the founders of the startup sign a nondisparagement clause. This clause stipulates that for a specified period after the acquisition, they will not publicly criticize the acquiring company's management, products, or business strategy.

  This illustrates a nondisparagement clause because it contractually prevents the startup founders, who have insider knowledge, from making negative public statements that could undermine the value of the acquisition or damage the reputation of the larger company.

• Example 2: Partnership Dissolution

  Consider two individuals who decide to dissolve their joint venture, a successful graphic design agency. In their formal dissolution agreement, they include a nondisparagement clause. This provision states that neither partner will make negative remarks about the other's professional competence, integrity, or future business endeavors to clients, competitors, or the general public.

  Here, the nondisparagement clause serves to protect the individual professional reputations of both former partners, allowing them to pursue new opportunities without fear of reputational damage or sabotage from the other.

• Example 3: Settlement of a Consumer Dispute

  A customer experiences a significant issue with a newly purchased luxury vehicle and reaches a settlement with the car manufacturer. As part of the confidential settlement agreement, the customer agrees to a nondisparagement clause. This clause prevents them from posting negative reviews, comments, or statements about the company or its vehicles on social media, automotive forums, or other public platforms, in exchange for a substantial refund and additional compensation.

  This example demonstrates a nondisparagement clause being used to resolve a dispute while simultaneously protecting the company's brand image and mitigating potential widespread negative publicity from a dissatisfied customer.