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Stupid Provision Pops Up in NDAs

Dunce cap on a stool in the corner of a room

Twice during the past week clients have asked me to review (someone else’s) nondisclosure agreements (NDAs) that contain a stupid provision of a type that I had not seen for years. That provision is as follows:

RECIPIENT shall not be liable for inadvertent disclosure or use of CONFIDENTIAL INFORMATION nor for unauthorized disclosure or use by persons who are or who have been in its employ or with whom it has contracted provided that it uses the same degree of care in safeguarding such CONFIDENTIAL INFORMATION as it uses for its own CONFIDENTIAL INFORMATION of like importance.

I consider the provision stupid for the following reasons:

  • A recipient should be obligated to maintain the confidentiality of confidential information. Exercising some degree of care should be necessary, but not sufficient. This is an area where results matter more than process.
  • Even worse, the recipient is not obligated to exercise a reasonable degree of care – just the degree of care that it uses for its own similar information. So if a recipient is careless with its own confidential information, it is entitled to be careless with the other party’s confidential information, too!

Check out all posts about NDAs.

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Dana H. Shultz, Attorney at Law  +1 510-547-0545  dana [at] danashultz [dot] com
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Contracts, Ridiculous