Frequently Asked Questions

What are the limitations of liability in an NDA and how do they affect the recovery of damages for a breach of confidentiality?

The limitations of liability in a Non-Disclosure Agreement (NDA) can significantly impact the recovery of damages for a breach of confidentiality. These limitations often state that the disclosing party cannot seek indirect, consequential, special, exemplary, or punitive damages. If such limitations are agreed upon, it becomes more challenging to recover damages for a breach of confidentiality. In addition to these limitations, the NDA may also include a disclaimer of consequential damages. This clause includes language that disclaims consequential damages if a breach of the NDA occurs. This disclaimer is often not accepted by the disclosing party, as the damages they are most likely to seek in a breach of NDA are consequential damages. This leaves the disclosing party with little recourse if a breach occurs. Another factor that can affect the recovery of damages is the residuals clause. This clause makes an exception for information that would be considered retained in a person's memory. This can be viewed as an aggressive position for the receiving party and is often scrutinized by the disclosing party.