16

This question is purely theoretical, I promise.

Let's say a person signed a Non-Disclosure agreement under certain terms, and then, somehow, they witnessed an illegal act but were forbidden to report it to the police by the agreement. If they reported the act, could the other party of the NDA take legal action?

The general question is, when, if ever, is a person legally protected to reveal information directly violating an NDA?

  • Most NDAs I have read provide explicit exemptions for disclosure required by law, although such explicit exemption may not be required, as I'm sure answers will explain. – feetwet Oct 9 '15 at 16:24
10

There are many reasons that a contract can be void or voidable. Wikipedia will give you a good rundown. The reasons which apply to contracts generally will apply to NDAs specifically. This answer focuses on non-disclosure agreements.

Various legal authorities and courts have found contracts to be void in the following circumstances:
1. Crime
2. Torts
3. Public safety
4. Public Health
5. Matters of substantial public concern

The Model Penal Code prohibits what it calls compounding. The crime involves accepting payment in exchange for not reporting a crime.

Section 242.5. Compounding

A person commits a misdemeanor if he accepts or agrees to accept any pecuniary benefit in consideration of refraining from reporting to law enforcement authorities the commission or suspected commission of any offense or information relating to an offense. It is an affirmative defense to prosecution under this Section that the pecuniary benefit did not exceed an amount which the actor believed to be due as restitution or indemnification for harm caused by the offense.

The Restatement (Third) of Unfair Competition recognizes a privilege to disclose trade secrets in certain circumstances like public health/safety and commission of a crime or tort.

Section 40, comment c:

The existence of a privilege to disclose another's trade secret depends upon the circumstances of the particular case, including the nature of the information, the purpose of the disclosure, and the means by which the actor acquired the information. A privilege is likely to be recognized, for example, in connection with the disclosure of information that is relevant to public health or safety, or to the commission of a crime or tort, or to other matters of substantial public concern.

In Lachman v. Sperry-Sun Well Surveying Company, 457 F.2d 850 (10th Cir., 1972) the court cites the Restatement of Contracts, § 577

A bargain, performance of which would tend to harm third persons by deceiving them as to material facts, or by defrauding them, or without justification by other means is illegal.

A more recent case cited Lachman as authority to find "nondisclosure agreement not binding in respect to criminal activity."
Bartnicki v Vopper, 532 U.S. 514 (2001)

Fomby-Denson v. Dept of the Army, 247 F.3d 1366 (Fed. Cir., 2001) Is a case you could look at to see a review of some state courts which have "declined to enforce private agreements that barred the reporting or prosecution of possible crimes."

  • Excellent work! This is exactly what I was looking for. – Sam Weaver Oct 9 '15 at 19:41

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.