People like to throw NDAs around like they’re mints at a diner. As often as not, I think they do it because of the process ceremony, not for legal protection.
I don’t sign NDAs without a very good reason, and you shouldn’t either. Here’s why.
Opaque
The protection language is almost always too broad, vague, ambiguous, and otherwise nebulous. This puts you at a massive disadvantage and creates an open-ended risk profile that, in many cases, is years long.
Abusive Litigation
Even if you’ve done nothing wrong, allowing an NDA to be put into place opens you up to the possibility of abusive or frivolous litigation. Even if you’re “right,” you must shell out a fortune in attorney’s fees to prove it.
Transient
Organizations change hands (often). While you may love, respect, and trust each other to the ends of the earth, if their organization ever changes hands, so does the agreement. You may not love the acquiring entity quite as much. Worse, they may not love you.
Remediation
The remediation language is almost always too open-ended and requires that we agree to eventualities that are nearly impossible to define fully. You’ll often see language like “irreparable harm” and “cannot adequately be compensated with damages,” etc.
This point is critical and really worthy of consideration. It is what Nassim Taleb would define as “negative optionality,” which means the potential negative outcomes are near limitless. I can think of very few business opportunities worth agreeing to that risk profile.
Cost to Benefit
The risk-reward ratio is strongly stacked against you. Your best-case scenario is (usually) earning one new client. The worst-case scenario of potential frivolous litigation is complete and total devastation (often, both professionally and personally). No thanks.
Coincidence
Between our client list and the customers we serve on behalf of strategic partners, we work with thousands of organizations annually. The likelihood that a few of these organizations are somehow thematically related is very high. I’m sure you may be in a similar boat.
Consider: So many NDAs include vague non-compete language, which puts you at the disadvantage of possibly being in immediate (and unknown) breach of contract—all for a client you don’t even have yet.
I understand there is a need for legitimate legal protection in certain instances. If I am going to sign anything, it needs to be very clearly, specifically, and intentionally written with a clear goal regarding what’s being protected and why. Not the NDA template you got on LegalZoom.
This isn’t just true for NDAs.
I have learned (the very hard way) that signing agreements is far more than a formality. Those things have teeth that cut deep, especially if you aren’t paying attention. Don’t sign anything you aren’t 100% prepared to be held accountable for later.
Do you have any horror stories about signing agreements that come back to bite you? I’d love to hear them! I think we’d all benefit from the lesson.