Remedies - NDA Provision
You may be asked to acknowledge that the potential consequences of breach of contract are so severe that ordinary contractual damages might not be adequate and equitable relief might be the only means of protecting your counterparty’s position.
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NDA Anatomy™
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Now the law of equity is the cuddly yin to the the common law’s nasty, brutish and short yang. The common law trucks only in money. Equity offers injunctions, dawn raids, Anton Piller orders and so on. Whatever — ah — floats your boat.[1]
So why does this fellow want your acknowledgement that contractual damages “might not be enough”? Notionally, this is by way of excuse pre-loading so when this poor, sainted victim throws herself at the whim of the courts of chancery, seeking orders for a dawn raid, she can point to M’lud (or at the defendant) and say, “You see, your honour? That rascal knew perfectly well I might need an injunction here. He even admitted it.”
It is a legal eagle “gotcha”, in other words.
It falls to us to consider when the situation might arise that damages are not an adequate remedy. Not all that often, in this old buzzard’s opinion. Contractual damages generally compensate for actual loss, not to account for profits. If you can say you’ve suffered any loss from, say, disclosure of client lists, it will be consequential in nature, sufficiently speculative that courts are traditionally reluctant to award it, also presenting as it does uncomfortable questions as to causation: Was the reason you lost all that business to a competitor because your client list was disclosed, or because your client liked your competitor’s product a bit better? “Wantonly exposing the crapitude of a product offering” is not, last I heard, a recognised head of damages under law of contract.
Proof of loss
We have seen this magnificent formulation in, of course, a non-disclosure agreement:
No proof of special damages shall be necessary for the enforcement by either Party of the rights under this Agreement
This is quite the eagley exercise in stating the bleeding obvious: proof of special damages is never required to enforce a contract: generally special damages are not even available for breach of contract. We think this comes from the confusion and nervousness all shutter-uppers have about the basic lack of value of an NDA. It is generally the case under an NDA that it is hard to prove loss for which any kind of damages, special or otherwise, would be payable, and what the aggrieved party is really after is anb equitable remedy such as an order of specific performance of the contract (i.e., a general direction from the court to shut up would you) or an injunction (a specific order from the court not to blab to an identified person or in an identified way. The best we can offer is that this contract means, therefore:
No proof of loss shall be necessary for the enforcement by either Party of the rights under this Agreement.
Injunctions
The argument runs that it might be hard to prove that you’ve lost any money as a result of a confidentiality breach, so you want to be sure that equitable remedies like injunctions ordering the other guy to keep his mouth shut – those, under English law, that do not technically arise under the law of contract – are available to you.
In theory, this makes sense: one enters a confidentiality agreement to buy another man’s silence, whether or not there are gains or losses to be had from his doing so — but in practice, it is largely nonsense — who ever sought an injunction on a confi? The better question to ask, we think, is why contractual damages are often an “inadequate” remedy. Why? Because it is quite hard to prove loss through simple disclosure of confidential information. And why is it hard to prove that loss? Because, often, there won’t have been any.
See also
References
- ↑ See what I did there? No? => Anton Piller KG v Manufacturing Processes Limited.