Remedies & Liability (Risk Allocation)

Remedies & Liability (Risk Allocation)

This module focuses on the commercial downside if something goes wrong.

Contents

• Equitable relief / injunctive relief
• Attorneys’ fees / fee shifting
• Damages categories
• Liability caps
• Indemnities
• Non-reliance / disclaimer of warranties
• Liquidated damages / penalties
• Dispute resolution

1) Equitable relief / injunctive relief

What to check

• Does NDA state that breach causes irreparable harm and entitles Discloser to injunctive relief?
• Is it one-way or mutual?
• Does it waive bond requirements or create automatic entitlement?

Recipient red flags

• Automatic injunctive relief + fee shifting + broad confidentiality definition.

Balanced redline

The parties acknowledge that unauthorized disclosure may cause harm for which monetary damages may be inadequate and that equitable relief may be appropriate, subject to applicable law and equitable principles.

2) Attorneys’ fees / fee shifting

What to check

• One-way fees (“Recipient pays Discloser’s fees”).
• Trigger is too broad (“any dispute” vs “prevailing party”).

Recipient position

• Prefer each party bears its own fees.
• If unavoidable, use “prevailing party” and limit scope.

Suggested language

Each party will bear its own attorneys’ fees and costs, except as a court of competent jurisdiction may award under applicable law.

3) Damages categories (direct / indirect)

What to check

• Exclusion of consequential, incidental, special damages.
• Whether lost profits are excluded.

Recipient red flags

• Unlimited consequential damages for any breach.

Balanced approach

• Exclude indirect categories while preserving direct damages.

Suggested language

Neither party will be liable for any indirect, incidental, consequential, special, or punitive damages arising out of this Agreement.

4) Liability caps

What to check

• Is there a cap? If yes, what is it tied to (fees paid, fixed amount)?
• Does the NDA carve out confidentiality breaches from the cap (common discloser ask)?

Recipient position

• Avoid unlimited exposure.
• If Discloser insists on carve-out, narrow it (e.g., intentional breach only).

Suggested language

Each party’s aggregate liability arising out of this Agreement will not exceed [X]. This limitation does not apply to a party’s willful misconduct or intentional breach.

5) Indemnities

What to check

• Any obligation for Recipient to indemnify Discloser for breach.
• Third-party claim indemnities.

Recipient red flags

• Broad indemnity for “any losses” resulting from breach.

Typical negotiation stance

• Remove indemnity; rely on direct damages.
• If must keep: narrow to third-party claims caused by Recipient’s willful misconduct.

6) Non-reliance / disclaimer of warranties

What to check

• Discloser disclaims accuracy/completeness.
• Recipient agrees it will not rely on information.

Practical guidance

• In early-stage discussions this may be acceptable.
• If Recipient must rely (e.g., diligence), ensure alignment with later transaction documents.

M&A / Due diligence: NDA non-reliance clauses often sit alongside separate reliance/representation terms later.

7) Liquidated damages / penalties

What to check

• Fixed penalties for breach.

Recipient red flags

• Penalties disconnected from harm.

Suggested approach

• Prefer actual damages + equitable relief rather than preset penalties.

8) Dispute resolution (arbitration, venue)

Even jurisdiction-agnostic playbooks should flag business impact:

• Travel / language burdens.
• Confidentiality of proceedings.
• Interim relief availability.

Checklist

• Is the forum practical?
• Are interim measures allowed?
• Are proceedings confidential?