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Frequently Asked Questions

What is the role of a Disclaimer of Consequential Damages in an NDA?

The role of a Disclaimer of Consequential Damages in a Non-Disclosure Agreement (NDA) is a significant one. This clause includes language that disclaims consequential damages if a breach of the NDA occurs. Consequential damages refer to the indirect impact of a breach, such as loss of profits or damage to reputation. However, 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. The inclusion of this disclaimer can leave the disclosing party with little recourse if a breach happens. This is because, in the event of a breach, the most common defense is obtaining an injunction from the court, which temporarily prohibits the receiving party from disclosing any of the confidential information. However, filing a suit for monetary damages is often not enough, and an injunctive relief becomes the primary protection. Some NDAs also come with a limitations of liability clause, which states that the disclosing party cannot seek indirect, consequential, special, exemplary, or punitive damages. If such limitations are agreed to, it becomes more difficult for the disclosing party to recover damages for a breach of confidentiality.
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