Indemnity in an NDA: Difference between revisions
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===[[Indemnities]] in [[confidentiality agreement]]s=== | ===[[Indemnities]] in [[confidentiality agreement]]s=== | ||
You may conclude, based on the above, than [[indemnity]] is not usually justified in a [[confidentiality agreement]]. This would be a sound conclusion | You may conclude, based on the above, than [[indemnity]] is not usually justified in a [[confidentiality agreement]]. This would be a sound conclusion, but it will not stop uppity counterparties insisting on them — fewer things in the legal world are worse understood, by lawyers, than [[indemnities]]. | ||
It is hard enough to establish ''ordinary'' [[contractual damages]] for breach of a financial markets [[confidentiality agreement]] — there is a reason for that mealy mouthed acknowledgment that | It is hard enough to establish ''ordinary'' [[contractual damages]] for breach of a financial markets [[confidentiality agreement]] — there is a reason for that mealy mouthed acknowledgment that “[[damages]] may not be an adequate remedy and the {{confiprov|discloser}} may seek [[equitable relief]]” — and you may like to challenge your counterparty to give an example of the sort of [[loss]] {{sex|she}} thinks should plausibly be covered by an [[indemnity]]. She’ll struggle. | ||
{{sa}} | {{sa}} | ||
Revision as of 09:30, 5 December 2019
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NDA Anatomy™
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Indemnities generally
Under an indemnity, one party (the “indemnifier”) agrees to pay the other the “indemnified”) an agreed amount should a specified event occur during the contract.[1]
The “events” covered by an indemnity are usually unexpected costs and expenses the indemnified party incurs while performing obligations under the contract, the benefits of which accrue exclusively to the indemnifying party: things like tax charges levied on a custodian relating to assets it holds for its clients. Without an indemnity, the party incurring these costs would just have to wear them. This would be a windfall for the benefiting party.
An indemnity thus creates a payment obligation under the contract where one would not otherwise exist. If the indemnified event occurs and the indemnifier doesn’t pay, the indemnifiee has an action in breach of contract.
And that’s about it. An indemnity gives you a right to sue where, without it, you would not have one.
Indemnity for breach of contract? No, sir.
In any case, indemnities should not, ever, cover losses arising from breach of contract. Like, ever. Anyone who tells you anything different — and in this old salt’s long and grim experience, many people who should know far better will — should be directed to the coat check. Here is why: if the other guy has breached the contract, Q.E.D. you have a right of action under the contract. You don’t need an indemnity. This is self-evidently true.
Indemnities in confidentiality agreements
You may conclude, based on the above, than indemnity is not usually justified in a confidentiality agreement. This would be a sound conclusion, but it will not stop uppity counterparties insisting on them — fewer things in the legal world are worse understood, by lawyers, than indemnities.
It is hard enough to establish ordinary contractual damages for breach of a financial markets confidentiality agreement — there is a reason for that mealy mouthed acknowledgment that “damages may not be an adequate remedy and the discloser may seek equitable relief” — and you may like to challenge your counterparty to give an example of the sort of loss she thinks should plausibly be covered by an indemnity. She’ll struggle.
See also
- ↑ When you put it like that it sounds rather like a derivative, doesn’t it?