It is perfectly natural that you want to protect your business’s reputation. A single negative review can have a huge impact on your business’s sales. So it is natural that you may seek to protect yourself through a non-disparagement clause. These clauses can potentially be void, so it is important that you know about them.

What are Non-Disparagement Clauses?

A non-disparagement clause refers to a clause within a contract that restricts your customers’ ability to give negative feedback. They usually only refer to criticism in a public forum such as a review website rather than private conversations.

What is wrong with them?

Apart from the moral issue, there is potential that non-disparagement clauses would be viewed as ‘unfair’ by the ACCC. The Australian Consumer Law defines a clause as unfair ‘unfair’ if they would create an imbalance between the parties, are not necessary and be damaging if used. Clauses will not apply if they are ‘unfair’ and are part of a standard form contract.

The ACCC has the power to review the operations of businesses, and has taken action on non-disparagement clauses in the past. Last year the ACCC investigated Wisdom Homes who admitted that their non-disparagement clauses in their standard form contract were ‘unfair’ and unenforceable. The ACCC’s stance was about protecting potential customers who wouldn’t have the chance to view legitimately negative feedback on Wisdom Homes.

Can I use them at all?

Firstly, the ACCC has not undertaken a court case against a business for a non-disparagement clause. Possibly a non-disparagement clause isn’t void and you could still use them in your standard form contracts. However you should consult with a lawyer first before incorporating one in your next contract. We recommend that you stay away from them in standard form contracts for greater legal certainty. Alternatively if you are not using a standard form contract and highlight the clause to your customer, you may be able to use non-disparagement clauses.

But how do I protect myself from negative reviews?

Remember that it is not necessarily a bad thing to have negative reviews about your business. Negative reviews can help you improve your business by highlighting potential issues in your business. Moreover, a business with purely positive reviews will not be seen as legitimate by potential customers as no one is perfect all the time. Use negative reviews as a source of motivation, and keep working on your business and the rewards will come. Furthermore, if it becomes known that you use non-disparagement clauses, that can have a substantial negative impact on your reputation.

Need further advice? Contact a LawPath Consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.

Lachlan Ward

Lachlan is an intern at LawPath as part of the content team. He is currently studying a Juris Doctor at the University of Sydney. Lachlan has a keen interest in corporate law and commercial litigation.