Gayle had signed to play for Somerset in this season's FLt20 competition but, after resolving his differences with the West Indies team management, has made himself available for the limited-overs section of their tour of England.
"We have taken legal advice and we have decided that it is not in the best interests of Somerset or cricket to take legal action," Somerset's chief executive, Guy Lavender, told ESPNcricinfo.
"We wish Chris well and hope to see him back playing for the West Indies this summer."
While Somerset felt they did have strong grounds for action, they also felt the cost of proceedings - both financially and to the reputation of cricket - would outweigh any benefits. They have also acknowledged Gayle's honesty and communication throughout.
Somerset have already agreed a deal to bring in South Africa allrounder Faf du Plessis as a replacement for Gayle.