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Contracts with gagging clauses

A hotel has a policy of charging guests an extra £100 if they leave a bad review of the hotel on any website. Should the state permit individuals to enter into such a contract?

When a couple was so charged, they went and talked to the press. “What happened to freedom of speech?”, they asked.

John Greenbank, north trading standards area manager, said it was a “novel” way to prevent bad reviews.

He said: “I have worked for trading standards for many years and have never seen anything like this. The hotel management clearly thinks they have come up with a novel way to prevent bad reviews, however we believe this could be deemed an unfair trading practice.”

The beautiful thing is that the state turns out to be completely redundant in this case. Things did not work out so well for the hotel, and it now serves as a terrible warning for anyone else with similar ideas. Now its reputation is trashed on Trip Advisor because of freedom of speech. And because The Internet. Though I do wonder about libel…

26 comments to Contracts with gagging clauses

  • Fraser Orr

    I think the solution to this is simple. If a hotel told me this, I’d go to a different hotel and leave a yelp review indicating that this is what they did. Would you go to a hotel that “fined” you $100 for leaving a bad review? Exactly how bad is the hotel if they have to do that?

    Needless to say, it isn’t a free speech thing at all. If you enter into a contract like that then you have traded your right for something else, much like any other such contractual obligation. I mean who can seriously want the government involved in something like that? (OK, stupid question, I know…)

    BTW, this is just another instance of The Striesand Effect. It reminds me a lot of price controls. It seems like a good idea at the time until you are utterly overwhelmed by the second order consequences of your mendacity.

  • PersonFromPorlock

    Yup, it’s a contract, pure and simple. Stupidly written, stupidly signed and stupidly publicized, but a contract nonetheless.

    However, I still say that any EULA that isn’t presented to the buyer prior to purchase ought to be invalid.

  • Charles Pooter

    It worries me that some people have such a simplistic view of what a valid contract is. Courts routinely strike down invalid “contracts” such as this and rightly so. If you know full well that the counter-party has not seen the unusual and unreasonable terms buried away in the small print, you’re attempting fraud. Would the contract be valid if buried in the small print it said all guests were signing over all their property to the hotel management?

  • Mr Ed

    The clause is likely to be void at common law for uncertainty, what is a ‘bad’ review, and who decides?

    ‘”For every bad review left on any website, the group organiser will be charged a maximum £100 per review.”‘

    Is an honest review ‘bad”?

    If the owner took money when objectively the review was not bad, give him 14 years jail for fraud.

  • GC

    How would they know for certain who was responsible for the bad review?

  • jamess

    It’s quite simple. Sign the contract, then ask for $200 to not mention the contents of your contract…

  • Mr Ed

    A penalty clause has to be a genuine pre-estimate of loss in common law, so that’s another reason why the clause would be invalid. What is the loss? The hotel owner will hopefully find out the hard way and lose custom, and perhaps credit card facilities too, as the credit card company is jointly liable if there is a breach of contract if the guest spent over £100.

  • Jeff Evans

    I would suspect that this comes under UK Unfair Contract Terms legislation. Hopefully somebody will take it to court.

    Immediately, the solution is for people to go onto all the review sites and post up a warning about this.

  • Lee Moore

    As Mr Ed suggests, I suspect this would not be enforceable, because it’s probably a penalty clause. Which leads us on to the fourth term of the next Libertarian government – which is going to have to introduce a Bill enabling contracting parties to opt out of particular contract law rules, if they choose.

  • Mr Ed

    going to have to introduce a Bill enabling contracting parties to opt out of particular contract law rules,

    Indeed Lee, but such a government would probably have to do some major surgery to the Common Law and Equity to stop judges sticking their oars in and restoring the current state of affairs by application of precedent.

    Many fretted about standing armies, but few fret about a standing judiciary.

  • Lee Moore

    There’s nothing wrong with precedent – if followed honestly it binds the judges to the law as previously stated rather than allowing them to invent new stuff as they please. And English law generally allows a later statute to trump past common law or equity precedent. But you’re right on the standing judiciary thing. I think the problem was that the Americans didn’t go far enough with this separation of powers thing. You don’t want an Executive monolith v a Legislative monolith v a Judicial monolith. You want each branch itself to be divided. I think with the legislature, that message has been absorbed. But with the judiciary, you need other judges to watch the judges who decide cases. As a start I favour reinstalling the Judicial Committee of the House of Lords, with a slightly different role to its past one. The current Supreme Court should be the final court of appeal to decide any particular case. But it should be possible then to appeal to the JCHoL to try to get the precedent set by the Supreme Court reversed. You’d have to decide who could appeal, and it’d probably have to be something like “not fewer than 50 MPs” or something like that. But the JCHoL could, if it thought the Supreme Court was just making things up to achieve its political will, at least make sure that the Supreme Court couldn’t then set the wrong binding precedent.

    You might say – but that just allows politicking in the JCHoL – which is true. But it does at least divide the judicial power between the guys who decide a particular case, and the guys who can ultimately decide the precedent.

  • Rob

    Even Basil Fawlty didn’t stoop to this.

  • Snorri Godhi

    Apparently, there was something like a precedent in the Republic of Genoa: a Genoese friend told me that Genoese sailors who gave up their right to grumble, would get on a higher pay scale.
    (My Genoese friend cited himself as an example of why it’s worth paying the Genoese to give up their right to grumble.)

  • Mr Ed

    I’ve read on Tripadvisor a review of a hotel, the name of which I have redacted, which gave the owner a chance to respond, and he did so in fairly forthright style, the paragraph of the riposte being:

    Maybe, ( I can only presume ) the time lapse between your stay at E and your review today has resulted in some confusion; possibly aggravated by you consuming several bottles of cheap Pinot Grigio before ( and during ) your time at the keyboard.

    Surely this is the way forward.

  • Lincolnshire Pocher

    Mr Ed, fully agree with that. Right to reply is fundamental…and so much more fun.

  • Paul Marks

    If a hotel says “we will charge you 100 hundred Dollars more if you say bad things about your stay” then DO NOT GO TO THAT HOTEL.

    They are telling you that they are no good.

  • Courts routinely strike down invalid “contracts” such as this and rightly so. If you know full well that the counter-party has not seen the unusual and unreasonable terms buried away in the small print, you’re attempting fraud.

    Quite, it’s little different in intent from a clip joint. This wouldn’t last five minutes in court, and rightly so.

  • Tedd

    Genoese sailors who gave up their right to grumble, would get on a higher pay scale.

    Kind of like being an officer in a modern army!

  • Laird

    I agree with the commenters who have averred that the provision is likely unenforceable. In addition to the reasons they cited, I would also add that it is a “contract of adhesion” and therefore subject to a high degree of judicial scrutiny. Such unusual and inadequately disclosed terms are routinely voided by courts.

    It would seem that, as usual, the market is working its wonders and the hotel is getting its just desserts.

  • Andrew Pearson

    I wouldn’t say it was a bad review. A negative review, perhaps, but it certainly achieved its intended aim.

  • Nicholas (natural Genius) Gray

    If they are losing money, then the gag is on them, surely?
    And the only reason Basil Fawlty didn’t try it is because he didn’t think of it! Basil would have paid the right sort of people to stay in the hotel, if he could have afforded to pay them!

  • John Mann

    In a free society, the state has no right to strike down any clause in a contract, as long as the contract has been freely and knowingly entered into by both sides.

    If the hotel was up front about the clause, then they should be permitted to enforce it.

    I have a feeling that the free market would take care of such hotels fairly rapidly.

  • Laird

    “In a free society, the state has no right to strike down any clause in a contract, as long as the contract has been freely and knowingly entered into by both sides.”

    Correct, but the words “freely and knowingly” are the key. When an unusual provision such as this is buried in the fine print, without the patron either having it brought specifically to his attention or having any ability to negotiate it away, neither condition is met. That’s what makes this a “contract of adhesion,” subject to close judicial scrutiny and likely rejection. Remember, the court doesn’t say that the clause is illegal, it merely declines to enforce it on public policy grounds. In other words, the state declines to use its power to enforce a clause it finds offensive. If the hotel could find some other means of enforcement that would be within its rights.

  • John Mann

    Indeed, Laird.

    Though I still suspect that such a clause, even if buried in small print, would become rather well known in due course, and the free market would deal with it even if the state didn’t.

  • Mr Ed

    In around 2001, there was a ‘fuel crisis’ in the UK following a petrol tanker drivers strike. Garages ran out of petrol (gasoline) in a few days. One garage, iirc in Nottingham, reacted by jacking up its prices to stratospheric levels (i.e. way above around £1 a litre we saw then) in a response to perceived supply and demand. Within a few months it has closed, as customers regarded it as a ‘profiteer’ and went elsewhere. A salutary tale that you should keep the customer sweet, even if they prefer dry pumps and gas tanks, and money in their pockets.

  • Rich Rostrom

    Ken White at Popehat has noted several similar cases in the U.S.: Roca Labs, Suburban Express, KlearGear, and others.

    Though there has been some annoyance and expense to their critics, none of them have ended well for the would-be censors. The Streisand Effect has been in play.