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EXPLANATION FOR BASIC NONDISCLOSURE AgreementMISCELLANEOUS PROVISIONSSometimes attorneys use boilerplate language, also
known as miscellaneous provisions. Since lawyers are familiar with them,
you should be too. The sample NDA includes four miscellaneous
provisions. These standard provisions are included at the end of most
contracts. They actually have little in common with one another except
for the fact that they don't fit anywhere else in the agreement. They're
contract orphans. Still, these provisions are very important and can
affect how disputes are resolved and how a court enforces the contract.
Your relationship with
the receiving party is usually defined by the agreement that you are
signing-for example an employment, licensing or investment agreement. To an
outsider, it may appear that you have a different relationship, such as a
partnership or joint venture. It's possible that an unscrupulous business
will try to capitalize on this appearance and make a third-party deal. That
is, the receiving party may claim to be your partner to obtain a benefit
from a distributor or sublicensee. To avoid liability for such a situation,
most agreements include a provision like this one, disclaiming any
relationship other than that defined in the agreement. We recommend that you
include such a provision and take care to tailor it to the agreement. For
example, if you are using it in an employment agreement, you would delete
the reference to employees. If you are using it in a partnership agreement,
take out the reference to partners, and so forth. EXAMPLE: Relationships Nothing contained in this Agreement shall be deemed to
constitute either party a partner, joint venturer or employee of the other
party for any purpose. The severability clause
provides that if you wind up in a lawsuit over the agreement and a court
rules that one part of the agreement is invalid, that part can be cut out
and the rest of the agreement will remain valid. If you don't include a
severability clause and some portion of your agreement is deemed invalid,
then the whole agreement may be canceled. EXAMPLE: Severability. If a court finds any provision of this Agreement invalid
or unenforceable, the remainder of this Agreement shall be interpreted so as
best to effect the intent of the parties. In the process of
negotiation and contract drafting, you and the other party may make many
oral or written statements. Some of these statements make it into the final
agreement. Others don't. The integration provision verifies that the version
you are signing is the final version, and that neither of you can rely on
statements made in the past. This is it! Without an integration provision,
it's possible that either party could claim rights based upon promises made
before the deal was signed. A second function of the integration provision is to
establish that if any party makes promises after the agreement is signed,
those promises will be binding only if they are made in a signed amendment
(addendum) to the agreement. EXAMPLE: Integration This Agreement expresses the complete understanding of
the parties with respect to the subject matter and supersedes all prior
proposals, agreements, representations and understandings. This Agreement
may not be amended except in a writing signed by both parties.
This provision states that even
if you don't promptly complain about a violation of the NDA, you still have
the right to complain about it later. Without this kind of clause, if you
know the other party has breached the agreement but you let it pass, you
give up (waive) your right to sue over it. For example, imagine that the
receiving party is supposed to use the secret information in two products
but not in a third. You're aware that the receiving party is violating the
agreement, but you are willing to permit it because you are being paid more
money and don't have a competing product. After several years, however, you
no longer want to permit the use of the secret in the third product. A
waiver provision makes it possible for you to sue. The receiving party
cannot defend itself by claiming it relied on your past practice of
accepting its breaches. Of course, the provision swings both ways. If you
breach the agreement, you cannot rely on the other party's past acceptance
of your behavior. EXAMPLE: Waiver The failure to exercise any right provided in this
Agreement shall not be a waiver of prior or subsequent rights. The parties don't have to be in the same room when they
sign the agreement. It's even fine if the dates are a few days apart. Each
party should sign two copies, and keep one. This way, both parties have an
original signed agreement. Who is authorized to sign Someone with the necessary authority must sign the
agreement on behalf of each party. To reinforce this, you will note that the
sample agreement states that: "Each party has signed this Agreement through
its authorized representative." Use the following rules to determine the proper
signature line: Sole Proprietorship. If you are a sole proprietorship,
simply sign your own name. If the receiving party is a married couple doing
business as a sole proprietorship, both should sign the NDA. On the other
hand, if the disclosing party is a married couple doing business as a sole
proprietorship, only the party under whom the sole proprietorship is
registered (with the state or county clerk) needs to sign. If the sole
proprietorship has a fictitious business name (sometimes known as a dba),
insert it above the signature line. For example, if Tom Stein is a sole
proprietor doing business as Lukie Boy Inventions, Tom would sign an NDA as
follows: Lukie Boy Inventions By: _____________________
Tom Stein, sole proprietor Partnership. When a general or limited partnership
enters into an agreement, the only person authorized to sign the agreement
is a general partner or someone who has written authority (usually in the
form of a partnership resolution) from a general partner. The name of the
partnership must be mentioned above the signature line or the partnership
will not be bound (only the person signing the agreement will be bound). For
example, say Cindy Barrett were a general partner in Reality Manufacturing
Partnership. She would sign as follows: Reality Manufacturing By: _____________________
Cindy Barrett, general partner Corporation or LLC. To bind a corporation or limited
liability company (LLC), only a person authorized by the business can sign
the agreement. The president or chief executive officer (CEO) usually has
such power but not every executive of a corporation or every member of an
LLC has this authority. If in doubt, ask for written proof of the authority.
This proof is usually in the form of a corporate resolution or the operating
agreement of an LLC. Put the name of the corporation or LLC above the
signature line; otherwise, the corporation may not be bound (only the person
signing the agreement will be bound). For example, Karen Foley, CEO of
Insincere Marketing, would sign as follows: Insincere Marketing, Inc., By: _____________________
Karen Foley, CEO If you have doubts about the person's credibility, don't
proceed until you are satisfied that the person has full authority to
represent the company. Faxed or electronic
signatures Although "electronic signatures" are now valid under
federal law, we recommend relying on paper agreements and traditional
signatures for the time being. Under this law (the Electronic Signatures in
Global and International Commerce Act), an electronic contract is an
agreement created and "signed" in electronic form-in other words, no paper
copies are used. For example, you could write a nondisclosure agreement on
your computer and email it to a business associate, who emails it back with
an electronic signature indicating acceptance. But secure methods of
electronic signatures have not yet been popularized, so stick with paper for
now.
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