A non-disclosure agreement (NDA) is used when a party is seeking to protect confidential information. Although, even with such contracts in place, you should be aware of the consequences if a party fails to perform its obligations under the agreement. Listed below are the three typical claims that arise for breach of an NDA.
1. Injunction
If an NDA is breached, the suffering party may be entitled to enforce an injunction against the breaching party. An injunction is a court order that prevents a party from beginning or continuing an action that threatens or invades the legal right of another party based on the NDA. The purpose of this is to prevent the breaching party from further acting on your information. However, the granting of an injunction is determined by its necessity through the judgement of the Court. If a Court concludes that monetary compensation is sufficient it will not grant an injunction. Moreover, an injunction is an equitable remedy that is desirable when there is an anticipatory breach. This means that if a party suspects there will be a breach of an NDA it may seek an injunction to prevent any negative action of the other party.
2. Damages
If there is an actual breach of the NDA, the suffering party may seek damages. Damages are measured by the harm done to the non-breaching party. The purpose of damages is to reflect the loss sustained by the non-breaching party. Damages are viewed as a substitute for performance, whereby they intend to put the innocent party in a position as if the contract had been adhered to. Accordingly, the injured party will have to demonstrate the harm it has suffered as a result of the breach; for example, the cost of re-securing the lost confidential information. Consequently, this will convey the monetary value of your confidential information to determine how damages are awarded. This will also signify the significance of the breach by looking at the profits lost due to someone else using your confidential information.
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Damages Can Be Awarded in Four Ways:
Expectation damages:
An innocent party may seek these damages for any future loss of income that may occur due to the breach of NDA.
Restitutionary damages:
An innocent party may seek these damages for the consideration they have already given. As a result, that party will be put back in a state before the contract was breached. You should note that there does not need to be a loss for this form of damages to be awarded.
Recovery damages:
An innocent party may seek these Court determined damages for loss caused by the breach.
Disgorgement damages:
An innocent party may seek these damages to relinquish the profits made by the breaching party based on their confidential information.
3. Specific Performance
An uncommon claim that may arise is the equitable remedy of specific performance. As this is an equitable remedy the Court has a discretionary power to award this but can only consider offering it if the innocent party has explicitly asked for this remedy. This remedy forces the breaching party to continue to adhere to the NDA, ie. not disclose the information. But if an actual breach has already occurred it is unlikely that an innocent party will want to claim specific performance over damages or an injunction. The Court considers specific performance where damages are insufficient to remedy the innocent party. Although, specific performance is seldom considered as an adequate remedy for breach of an NDA. Depending on the circumstances, it would be advisable to consult a lawyer and assess the value of attaining damages or an injunction over specific performance in an NDA context.
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