The primary purpose of a non-disclosure agreement (NDA) is to protect a party disclosing confidential information against unauthorized disclosure or misuse of the information by the receiving party. Any ambiguities in the NDA could result in the disclosing party having little recourse if a breach occurs. Because of this potential consequence, reviewing NDAs is important to identify the key elements of the NDA for negotiation, including remedies for breach.
Remedies When Breaches Occur
The remedies for breach of an NDA may consist of monetary relief and/or injunctive relief. When negotiating remedies for breach, also consider how consequential breaches will be treated.
- Monetary relief. Monetary penalties serve to deter the receiving party from breaching the agreement, and to compensate the disclosing party financially should a breach occur.
- Injunctive relief. The disclosing party may consider including a provision that would allow it to obtain a court order for injunctive relief. This would stop the receiving party, and any of the parties to whom the confidential information has been shared, from continuing to breach the agreement. This provision may be of limited use for one-time breaches that have already occurred in the past. But it can be invaluable for ongoing breaches, helping limit damage to the harmed party.
- Consequential damages. Receiving parties sometimes try to negotiate “consequential damages” provisions in NDAs. This provision seeks to limit the breaching party’s responsibility for other damages that occur as a result of the initial breach. In other words, the consequential damage would not have occurred but for the initial breach.
Remedies may vary, depending on whether a breach was intentional, negligent, or occurred despite the receiving party’s best efforts to avoid such a breach. The extent of the liability and who exactly shall be liable for the breach should be considered in advance when reviewing NDAs.
“Remedies” provisions should be reasonable and should be tailored to meet the parties’ needs. Baer Reed provides comprehensive NDA review and negotiation services to support corporate legal departments. Contact us to learn more about our cost-effective services.
- On April 30, 2019
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