Negotiation Guide

How to Negotiate Remedies Clauses

Practical strategies for limiting exposure, removing presumptions, and protecting against aggressive enforcement provisions in NDA remedies clauses.

← Back to Clause Overview

🎯 Understanding Your Negotiating Position

Your leverage in negotiating remedies clauses depends on several factors:

  • Information Flow: If information flows both ways (mutual NDA), you have more leverage since aggressive remedies cut both ways.
  • Deal Dynamics: Who wants the deal more? The party more eager to proceed often has less leverage on these provisions.
  • Relative Size: Smaller companies may be more vulnerable to aggressive litigation tactics and should push harder to limit remedies.
  • Industry Norms: Some industries (tech, pharma) have established norms for remedies clauses that create baseline expectations.
  • Prior Relationship: Existing business relationships may support more trust-based, less aggressive provisions.

⚠ Red Flags to Watch For

⚠ High-Risk Provisions

These provisions significantly increase your exposure and should be challenged or removed:

Problematic Language Why It's Dangerous Risk Level
"Shall be entitled to injunctive relief" Creates automatic entitlement, removing court discretion High
"Waives any requirement to post bond" Enables frivolous injunction attempts with no financial risk High
"Without proving actual damages" Eliminates normal burden of proof requirements Medium
"Punitive damages" Punishment-based damages rarely available for contract breach High
"Liquidated damages of $X per breach" May be an unenforceable penalty if amount is unreasonable High
"Consequential damages" Unlimited exposure for indirect losses like lost profits High
"All attorneys' fees and costs" One-sided fee shifting creates litigation risk Medium

💰 Negotiation Tactics

1

Remove Automatic Irreparable Harm Presumptions

The most aggressive remedies clauses state that breaches "will" cause irreparable harm, creating an automatic presumption. Push to make this rebuttable or require actual proof.

Each party acknowledges that a breach of this Agreement will may cause irreparable harm and agrees that the determination of irreparable harm shall be made by the court based on the circumstances at the time relief is sought.

What to Say

"We're comfortable acknowledging that breaches may cause serious harm, but we can't agree to a blanket waiver of standard legal requirements. Courts should retain discretion to evaluate actual circumstances. This is a mutual protection - it applies equally when you're the receiving party."

2

Preserve Bond Requirements

Complete bond waivers allow the other party to seek injunctions without financial risk. If the injunction turns out to be wrongful, you have no protection. Push for at least a "reasonable" or "nominal" bond requirement.

The Receiving Party waives any requirement that the Disclosing Party post a bond or other security. Any bond or other security required in connection with injunctive relief shall be set by the court at a reasonable amount, which the parties agree shall be no less than $[10,000].

What to Say

"Bond requirements exist for good reason - they protect against wrongful injunctions. We can't waive this entirely, but we're willing to agree to a reasonable floor amount that won't be burdensome for legitimate claims while providing some protection against frivolous actions."

3

Exclude or Cap Consequential Damages

Consequential damages (lost profits, lost business opportunities) can be enormous and unpredictable. Push to exclude them entirely or cap them at a reasonable amount.

The Disclosing Party shall be entitled to recover all consequential, incidental, and special damages. Neither party shall be liable for any indirect, incidental, consequential, special, or punitive damages, including lost profits or lost business opportunities, regardless of whether such damages were foreseeable.

What to Say

"We're absolutely willing to be liable for direct damages caused by any breach on our part. However, consequential damages are inherently speculative and could expose either party to unlimited liability. A mutual exclusion protects us both and is standard practice in sophisticated commercial agreements."

4

Make Fee-Shifting Mutual or Remove It

One-sided attorneys' fee provisions mean you pay their legal costs if you lose, but they don't pay yours. Either make it mutual (prevailing party) or have each side bear its own costs.

The Receiving Party shall reimburse the Disclosing Party for all attorneys' fees, costs, and expenses incurred in connection with any breach. In any action to enforce this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys' fees and costs from the non-prevailing party.

What to Say

"We can agree to fee-shifting, but it needs to be mutual. A prevailing party standard incentivizes both sides to litigate responsibly and settle reasonable claims. One-sided fee provisions create asymmetric litigation risk that we can't accept."

5

Challenge Liquidated Damages

Pre-set liquidated damages must be a reasonable estimate of anticipated harm at the time of contracting. If they're not, they may be unenforceable as a penalty. Either remove them or ensure they're reasonable.

The Receiving Party shall pay liquidated damages of $100,000 per occurrence of breach. Actual damages shall be determined based on provable losses. If liquidated damages are required, they shall be in an amount that both parties agree is a reasonable estimate of anticipated harm, documented in writing.

What to Say

"Liquidated damages provisions are only enforceable if they represent a reasonable pre-estimate of actual damages. The proposed amount bears no relation to anticipated harm and could be challenged as an unenforceable penalty. We should either rely on actual damages or work together to determine a reasonable liquidated amount."

6

Preserve Procedural Rights

Some aggressive clauses try to waive your right to contest injunction applications or shift the burden of proof. These rights are fundamental and should be preserved.

Upon application by the Disclosing Party, the Receiving Party shall bear the burden of proving that no breach has occurred. Nothing in this Agreement shall waive or limit either party's right to contest any application for injunctive relief in accordance with applicable procedural rules, and the party seeking relief shall bear the burden of establishing entitlement thereto.

What to Say

"Due process rights exist for good reason. We cannot agree to burden-shifting provisions that would require us to prove a negative. The party alleging breach should bear the burden of proof as in any normal legal proceeding."

📝 Negotiation Checklist

  • Is the remedies clause mutual (applies equally to both parties)?
  • Is the irreparable harm acknowledgment rebuttable, not automatic?
  • Is there a bond requirement for injunctive relief?
  • Are consequential damages excluded or capped?
  • Is attorneys' fee shifting mutual (prevailing party) or eliminated?
  • Are punitive damages excluded?
  • If there are liquidated damages, are they reasonable?
  • Is the right to contest injunction applications preserved?
  • Does the party seeking relief bear the burden of proof?
  • Are remedies cumulative (injunctions don't replace damages)?

✅ Acceptable Compromise Positions

✓ Fair Middle Ground

These compromise positions are generally acceptable and demonstrate good faith negotiation:

  • Acknowledgment of potential harm: "May cause irreparable harm" instead of "will cause"
  • Nominal bond: "Bond in a reasonable amount not to exceed $[10,000-25,000]"
  • Mutual fee-shifting: "Prevailing party entitled to reasonable attorneys' fees"
  • Damage exclusions: Mutual exclusion of consequential, punitive, and special damages
  • Preserved discretion: "Court shall retain discretion to determine appropriate relief"
  • Cumulative remedies: "In addition to, not in lieu of, other remedies at law or equity"

🔗 Related Resources