In addition, the confidentiality period should treat trade secrets separately from other types of confidential information so that, despite the expiry of the confidentiality obligations under the NDA, the obligations of the receiving party with respect to trade secrets remain in force as long as the trade secrets remain trade secrets under the applicable law. But I remember that in my research on Koncision, I found an even more immediate reason not to formulate the model of Koncision`s confidentiality agreement in such a way that the author could prevent the disclosing party from claiming indirect damages: if the recipient discloses confidential information that is not provided for in the contract, any damage suffered by the disclosing party would be, probably indirect damages. In an exclusion of liability for consequential damages, the parties will include language that rejects consequential damages in the event of a violation of the NDA. This disclaimer is often not accepted by the disclosing party because the damages they are most likely to claim in the event of a violation of the NDA are consequential damages. This would leave little recourse to the disclosing party when a breach occurs. If such restrictions have been agreed, it is more difficult to obtain compensation for breach of confidentiality. Buyers often focus on the first provision, but do not fall within the second provision, perhaps because it reads like standard language that reasonably confirms that the seller is not liable for speculative claims for damages. But this is a misconception – the waiver of consequential damages has important implications, especially when it comes to breaches of confidentiality. The non-disclosure agreement is a real agreement that carries real obligations for the parties and must be treated as such. Note that non-disclosure agreements generally do not include exclusions of liability for consequential damages, and breaches of confidentiality are generally expressly excluded from consequential exclusions contained in the operational document that the parties may enter into (for example. B a framework supply agreement).
More information on the exclusions of liability for consequential damages and their fallout can be found in my blog post here. Therefore, a breach of a confidentiality agreement can result in significant financial damage. Confidentiality or non-disclosure agreements (NDAs) may limit or exclude the parties` liability for damages in certain circumstances. Clauses such as “in no event shall one party be liable to the other for indirect, special or consequential damages” are common and are often accepted in contractual negotiations, sometimes only on the condition that they are based on reciprocity. A clause like the one mentioned above may seem standard and to the benefit of both parties, but in the context of a confidentiality agreement, this clause can have serious consequences for the business owner who discloses confidential information. A residual clause poses a significant risk to the disclosing party under a confidentiality agreement because the recipient of confidential information with a residual clause has the right to use residue for any purpose – even to compete with the disclosing party – if a person can “remember” the information. The only protection for the disclosing party is if: 1) the confidential information is also protected by copyright or patent law, which is often not the case; or (2) the parties have negotiated some kind of non-compete obligation that, in practice, would prohibit the use of residues. Consequential damages: it is preferable to understand them as including all losses suffered by the non-infringing party due to the particular circumstances of the non-infringing party of which the parties were aware at the time of the conclusion of the contract; in other words, consequential damage includes all contractually recoverable damages that are neither direct nor incidental damages; also known as “special” damage. If you need help with direct damages due to a breach of company privacy, you can publish your legal requirements on the UpCounsel marketplace.
UpCounsel only accepts the top 5% of lawyers on its website. UpCounsel`s lawyers come from law schools such as Harvard Law and Yale Law and have an average of 14 years of legal experience, including working with or on behalf of companies such as Google, Menlo Ventures and Airbnb. Rocket Lawyer`s confidentiality agreement excludes the recipient, not the disclosing party, from claiming consequential damages. Interestingly, it seems that the exclusion in Rocket Lawyer`s confidentiality agreement is intended to exclude any liability. It would have been clearer to say that, although I do not know whether such a provision is enforceable, whether in its clear form or less clear. Before we get into the Eleventh Circuit decision in Silverpop, some general information about consequential damages can be helpful – When awarding contracts for IT services, it`s important that buyers carefully consider the risks of damage caused by the services, and then negotiate terms that properly share those risks between the parties. This forces both parties to reconsider the standard term favorable to the manufacturer without any consequential damage. While it may seem fairly easy to mark all communications as confidential, potential pitfalls can arise if parties do not implement procedures to meet the confidentiality requirements of the applicable NDA. .