3

This recent question asks the meaning of the following clause in a Mutual Non-Disclose Agreement (MNDA):

The Parties agree that the disclosing Party will suffer irreparable injury if its Confidential Information is made public, released to a third party, or otherwise disclosed in breach of this Agreement and that the disclosing Party shall be entitled to obtain injunctive relief against a threatened breach or continuation of any such breach and, in the event of such breach, an award of actual and exemplary damages from any court of competent jurisdiction.

Now, my doubt is what would happen to the MNDA if that clause (and any other else to the same effect) were not in the agreement. It seems to me that "if you breach the contract we may sue you" is pretty much a given for any contract1.

Does this clause have any actual legal effect?

Here I use the "legal" term in a narrow meaning (if the matter goes to court, will it make it a difference the presence of absence of the clause?); I guess that there could be some practical reasons for the clause, like:

  • if the opposing party is not legally savvy, it serves to remind it that breaching the contract can have penalties.

  • if the customer notices the absence (for example comparing the agreement with some other agreement), s/he may think that his/her lawyer "forgot" to include it.

  • it does no harm, so there is no actual reason to make an effort to remove it.

  • (feel free to tell me of other non-legal motives for the clause).

If jurisdiction is relevant, let's go with that of the original question (Ohio), although it would be nice to know if I could expect a similar situation elsewhere or if it is dependant on the jurisdiction.


1I know that there may be arbitration clauses forcing the parts to submit to a different conflict resolution mechanism; let's just assume the contract does not not have any.

6

This is not a "if you breach the contract we may sue you" clause. This is a clause which says "if we find you trying to breach the contract, we can ask a court to stop you from doing so (even though you may not have actually breached the contract at that point in time)".

The provision entitles the aggrieved party to specific relief - in this case, by the way of an injunction. Specific relief means relief of certain determined nature or of a specific kind, rather than a general relief or damages or compensation.

Essentially, the clause that provides that if the receiving party of the confidential information threatens to disclose such information, the disclosing party shall be entitled to ask the court to specifically order the receiving party not to disclose the confidential information (as opposed to post-facto asking for damages for the harm caused by reason of such disclosure). In the absence of this provision, a court may rule that the disclosing party has no locus to take pre-emptive legal action, as no damage has been caused yet by the other party.

  • I think that's a better explanation of the clause, but it seems like it just raises the same question. A party's entitlement to an injunction is based on their ability to meet statutory or other critera; it's not based on their assertion of entitlement in the agreement itself. Depending on the circumstances, the party may or may not be entitled to an injunction. I think the OP's question asks whether there are any circumstances where the answer changes because that clause is or is not included. – bdb484 Sep 8 '18 at 20:11
  • Thank you for your answer. As @bdb484 explains, my main doubt is that it is not clear to me what would be the effect of having (or not) that clause in the contract. Would a court require the existence of this clause to be able to issue an injuction? Or would at least require less evidence to issue it? – SJuan76 Sep 8 '18 at 22:31
  • I don't think either would be true. The only circumstance I could imagine where that language would be relevant would be if there were some sort of question as to the breaching party's notice of possible liability, maybe because of questions about unconscionability for instance. – bdb484 Sep 9 '18 at 1:36
  • 2
    @bdb484: A party is not entitled to an injunction; an injunction is an equitable remedy and hence discretionary. Under common law, if a breach can be compensated by money, then a claimant's rights are limited to an award of damages. But under an MNDA, you want to stop an unauthorized disclosure through an injunction. By citing "irreparable injury", the parties inform the court that "such harm cannot be compensated; please grant an injunction now, rather monetary damages later." This may influence the court's discretion to grant an injunction. The affirmation is thus important. – manish_acharya Sep 9 '18 at 10:18
  • That makes more sense. Good edit. – bdb484 Sep 9 '18 at 12:39

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.