Exclusion Of Consequential Damages In Confidentiality Agreements

In order to anticipate this problem, the seller should include appropriate language in the contract: “The parties agree that the seller is not liable for consequential damages of any kind, regardless of the failure of the sole and exclusive remedy.” A federal court decision in Jay Jala, LLC v. DDG Constr., Inc. 11 is a warning story about how blurred the lines can be. An owner ressigned a contract for the construction of a motel after a contractor`s delays. The owner completed the project on his own initiative and sued the contractor for infringement. The contractor sought a partial summary judgment, arguing that certain damages were excluded by the exclusion of damages resulting from the contract. Much of the training bar did not understand the message. Too often, our contracts use generic cookie cutter language that excludes consequential, special and indirect damages without further explanation. This practice carries dangers and shows an indifference to case law that exposes our clients to unnecessary risks.

We need to reconsider how we use the wording of these clauses. Knowledge of direct damages due to a breach of confidentiality is essential when you start commercial or commercial discussions with another party.3 Read the minute Although the contract explicitly mentions certain types of consequential damages that were excluded, the court found deficiencies in the language and it was not certain that different categories of damages fell within the exclusion of consequential damages. To answer this question, the court was forced to use more than 3,000 words to find out whether each category of damages was direct or consequential. While it may seem fairly easy to identify all communications as confidential, potential pitfalls can arise if the parties do not actually implement procedures to meet the confidentiality requirements of the current NDA. Since the first disclosures of confidential information between the parties, after the signing of an NDA, often take place orally during a meeting or discussion, a party could disclose confidential information that it believes is covered by the NDA, but if it is not properly documented, the disclosing party could inadvertently lose protection, for whom it negotiated. Confidentiality agreements or “NDAs” are often the first contract entered into by parties willing to do business together, but it`s important not to rush to sign an NDA form just to start the conversation. It is an often expressed maxim that contract law seeks to “allow the non-hurtful party in which it would be insant if the treaty had been respected, rather than simply resetting the parties to their original positions.” 4 But the maxim only goes so far – there are restrictions on the damages that a court awards in the event of an infringement, and the most important is based on predictability. . . .