Non-disparagement clauses are frequent entries in settlement agreements, triggered when disputes of varying nature tend towards resolution. Under these agreements, parties are prevented from passing public comments that might adversely impact each other, particularly valuable in instances where heated relationship breakdowns lead into disputes, and later, settlement agreements. This mechanism ultimately shields the reputations of the involved parties from further deterioration post-settlement. An interesting conundrum surfaces when such a clause faces violation.
The functionality of these clauses lies in their ability to limit the potential for ongoing harm following a dispute. A party who feels belittled or undermined during the dispute process is less likely to engage in defamatory actions if bound by a non-disparagement clause in a settlement agreement. These clauses prohibit both parties involved in a dispute from making damaging public comments about the other after the dispute has been resolved.
Particularly where the breakdown of a relationship is at the heart of a dispute, the inclusion of a non-disparagement clause can help to prevent further harm to either party’s reputation. The clause serves to draw a line under the dispute, allowing both parties to move forward without fear of ongoing public criticism from the other.
However, breaches of non-disparagement clauses do occur, and the implications can be significant. The breaching party may face legal recourse, with potential penalties ranging from fines to more substantial actions, depending on the extent of the disparagement and the jurisdiction involved.
Non-disparagement clauses are an effective tool in maintaining the sanctity of reputations in otherwise tumultuous circumstances of disputes. They not only provide a buffer against potential defamation but also contribute to smoother resolution processes by promising no subsequent public fall out.
For further reading, the report on this topic can be obtained from here by K&L Gates LLP.