- 15 min read
- Nia Balbo
Introduction
Businesses put non-disclosure agreements (NDAs) in place for a specific reason – they have information to protect. Once that contract is signed, you’re legally bound to keep the information it covers secret.
But what happens if you violate your agreement? Are you looking at jail time or a heavy fine? The consequences of breaking a non-disclosure agreement are not something to dismiss.Keep reading to learn what happens if you break an NDA and how to improve your contract management to avoid heavy penalties.
Understanding Force Majeure
Force majeure is a clause that relieves a party from fulfilling its contract obligations when unforeseen events beyond either party’s control happen. To be able to enforce this clause, the event must check a few boxes.
What are the 3 Elements of a Force Majeure Event?
Generally speaking, a force majeure event must be:
- Unforeseeable
- External to the contract parties
- Serious enough that it makes it impossible for a party to fulfill contract obligations
While some events may be excluded from force majeure, the contract clause language often covers:
- Natural disasters, such as fire, floods, or storms
- Governmental or societal actions, such as war, invasion, civil unrest, and labor strikes
- Infrastructure failures related to energy or transportation
Cases When You Can Break an NDA
Usually, there is no reason to break an NDA — but these contracts don’t provide blanket protection for every scenario.
For example, organizations cannot use NDAs to protect information that relates to public interest or breaks the law. If either case applies, courts won’t hold you liable for breaking an NDA and sharing the data.
If neither of these conditions applies, you should ensure you abide by the contract obligations and protect the outlined information to avoid penalties.
The Consequences of Breaking an NDA
When a business enacts an NDA, it’s typically because it has confidential data that would negatively impact the enterprise if shared. You’ll face some heavy consequences for breach of contract. The gravity of these consequences will depend on what steps your business takes.
Remedies for breaking an NDA can include:
Civil Lawsuits
If a party finds you in breach of the NDA, they can sue you for damages. Since breaking an NDA is not a crime, a judge will hear these cases in civil court.
You’ll need to employ your counsel as you enter the court proceedings. That means in-house legal teams will have their hands full and be away from other business tasks for the duration of the case.
Financial Compensation
Damages are the most common remedy for breach of contract cases. Especially if the affected party can prove they financially suffered because you violated the NDA, courts will order you to pay for those losses.
Employment Termination
Many enterprises require you to sign an NDA as a condition of employment. If you violate the agreement, they often have the right to terminate you. Not only could this be paired with additional penalties, but it can also make finding a new role more difficult.
Injunctions
Often used when defendants cannot afford to pay damages, injunctions prevent you from continuing to share protected information moving forward and can limit your overall access to the data.
Even though NDA violations are handled in civil court, violating an injunction is a criminal offense—you can face criminal fines or jail time if you don’t follow the court order.
With such heavy consequences on the line, you’ll want to improve your risk management strategies and avoid breaking an NDA in the first place.
How to Avoid Breaking an NDA
No business wants to face the fallout of violating a non-disclosure agreement. You can keep yourself safe by improving a few contract management processes.
1. Store Contracts in a Central Repository
Use AI to transform paper contracts, PDFs, and other physical documents into digital records. Then, store your entire portfolio in a central contract repository that increases visibility and connects data across agreements.
2. Leverage AI for Clause Drafting
AI-trained CLM software can leverage historical contract data, pre-approved templates, and contract clause libraries to steamline contract creation.
Not only does this save you time drafting your agreements, but the technology also ensures you include contract clauses and language that align with your enterprise positions.
3. Carefully Monitor Contract Language
Reduce contract risk by leveraging AI-assisted review to identify missing clauses, deviations, and remediation requirements. Use this data to support renegotiation strategies that position your business for the best possible outcomes.
4. Track Contract Obligations
Establish role-based dashboards to track expirations, renewals, obligations, and milestones. The more visibility you have into these key contract details, the less likely you are to break NDAs or other agreements within your portfolio.
5. Set Reminders for Key Dates
Once you set up reporting dashboards, configure threshold-based alerts and notifications to respond to opportunities and monitor NDA expiration dates.
Align Your Contracting Processes to Avoid Contract Breach
NDAs, like any other business agreement, require attentive contract management to maintain compliance and avoid penalties.
Sirion’s contract AI lets you leverage generative AI to create, execute, and better manage your entire contract portfolio. And you can do it all in a single end-to-end CLM platform.
Get in touch with our team to learn more and start reducing contract risk across your enterprise.
Additional Resources
Defining Post-Negotiation in Contract Management
What is Force Majeure Clause? Using AI for Effective Response
Essentials of Contract Obligation Compliance Management
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