In recent weeks there’s been much controversy over whether Donald Trump can enforce a Non-Disclosure Agreement (“NDA”) concerning an alleged historical dalliance. The putative paramour, a Ms Daniels, has been reported as arguing that even though she signed the NDA and accepted a payment under it, she is not bound because the now President of the United States did not sign (possibly his lawyer did instead).
The reported squabble and attendant prurient details may obscure the reality that NDAs or Confidentiality Agreements are a powerful commercial tool. They retain many benefits and often save businesses (not to mention public figures) from reputationally damaging disputes.
What are NDAs? In essence they are legal documents which identify certain information that has been, or will be, provided by one person to another, and set out how that information can and cannot be used. So, should you expend time, cost and effort in putting one in place?
On balance, NDAs do work. At their simplest, they create a contractual right for the information provider to seek a judicial remedy against the information recipient should the latter breach the terms of their agreement. An information provider should, under its NDA, have the right to financial compensation and/or a court order preventing disclosure of the confidential information.
If there is a breach of the NDA by the information recipient, the information provider will have to go to court and prove that there was an agreement, that it was breached and that it suffered financial damage. The last-mentioned requirement is easier said than done in most legal proceedings, not least in the case of an NDA. And of course it may well be the case of shutting the stable door after the horse has bolted, so damages may be the injured party’s only course of redress.
By way of example, if you’re a creative professional pitching to a large goods supplier for a marketing engagement, how much of your idea do you disclose to win the business? Too little and you risk not making a sufficiently good impression. Too much and you risk having your idea surreptitiously utilised by the would-be client after you depart the meeting.
In such circumstances, if as the pitcher for business you proffer your NDA at the outset your counterparty is put on notice that you’re both professional and serious about how the negotiations should proceed. Rather than rely on vague legal principles of fairness and equitable confidences, you have something in writing, and that is better than nothing.
As for the POTUS, from what we can tell he’s got legal principle on his side - she signed, she took the money – but doing a political deal may be trickier.