[DE] [DE] How do I add financial penalties to an NDA?

Lexi, Chatbot

I understand that you want to strengthen your NDA with financial penalties. What specific financial penalties are you looking to include in the agreement?

Lexi, Chatbot

Is there anything else the Lawyer should know before I connect you? Rest assured they’ll be able to help with your request.

Blake

Hello, my name is Blake and I am a licensed attorney - I will be happy to help you today! All I ask is that you please keep in mind that this conversation is for informational purposes only and does not establish an attorney client relationship or constitute legal advice. THIS ENTIRE DISCUSSION SHOULD BE CONSIDERED GENERAL LEGAL INFORMATION ONLY AND MAY NOT BE RELIED UPON AS ADVICE. You must hire an attorney if you need legal advice for your specific situation.

Your question is important, and I'll provide a helpful response as soon as possible. Feel free to reach out with any additional concerns or questions. Your satisfaction is my priority, and I'll make sure to communicate effectively and use a tone that you can understand. Together, we'll find the best solutions for your needs.

Let’s get started! First of all, how long ago did this happen, and where was it located?

Blake

I understand why you’d want to address this clearly up front — especially before sharing intellectual property that could have significant value — and I also understand your desire to keep the tone non-confrontational while still protecting yourself.

Under Delaware law, you can include specific financial remedies in an NDA, but the way you phrase them is important for enforceability. Courts generally disfavor “punitive” clauses unless they are tied to a reasonable estimate of actual damages that would result from a breach. If you simply state that the breaching party will “lose all financial gain” or “return all past gain,” a court may view that as an unenforceable penalty unless you justify it as liquidated damages that are a fair approximation of your anticipated losses.

Here are a few key points for your situation:

• Governing Law & Venue – You can state that the NDA is governed by Delaware law and that any disputes must be brought in Delaware courts (or a mutually agreed venue). This helps you avoid being pulled into litigation in Washington or Florida.
• Liquidated Damages Language – If you want historical and future remuneration clawbacks, phrase them as a reasonable pre-estimate of damages caused by misuse of your IP. For example:
  “In the event of a breach, the breaching party shall pay to the Disclosing Party an amount equal to all profits, revenues, and other financial benefits derived from the unauthorized use or disclosure of the Confidential Information, whether received before or after the breach, as a reasonable estimation of damages agreed upon by the parties at the time of contracting.”
  This avoids sounding purely punitive and frames it as an agreed damages calculation.
• Return & Destruction of Materials – Include a clause requiring the return or destruction of all materials containing your IP immediately upon breach or upon request.
• Injunctive Relief – Add language stating that a breach would cause irreparable harm for which monetary damages alone would be inadequate, and that you may seek an injunction to stop further use.
• Tone & Framing – Keep the language professional and neutral — focus on the shared interest in protecting sensitive information. Avoid phrases like “penalty” or “punishment” and instead use “remedies,” “compensation,” or “damages.”

Because Delaware courts closely examine liquidated damages provisions, I would strongly recommend having a Delaware-licensed attorney review your NDA before you send it — you can find qualified attorneys at www.avvo.com. This will ensure that your financial clawback provisions are enforceable and not struck down as penalties.

Does this answer your question and do you understand the answer completely? Please let me know if you have any follow-up questions or if anything in this answer was unclear, and I will be happy to help.

Blake

Yes — you can absolutely add these as new, numbered sections in your NDA template, but you’ll want to place them logically so the document flows and avoids redundancy.

Here’s how I’d suggest organizing it:

• If “Governing Law” is already #14 in your template, you don’t need to add it again — instead, edit that existing section so it matches your intended choice of Delaware law and venue.

• Place “Liquidated Damages” immediately before your “Enforcement” section — typically, the damages provision is set out first, then the enforcement tools (like injunctions) are described.

• Return & Destruction of Materials can be placed after your confidentiality obligations but before enforcement and remedies. That way, it reads naturally:
  What’s protected → What happens if the relationship ends or a breach occurs (return/destruction) → What you’re entitled to if they breach (damages) → How you can enforce it (injunctive relief, governing law, venue).

• Injunctive Relief can either be its own numbered section before or within “Enforcement.” If “Enforcement” is currently #9, you could break it into sub-sections:
  9(a) Injunctive Relief
  9(b) Other Remedies / Damages

A clean reordering could look like this:

• #8 – Return & Destruction of Materials

• #9 – Liquidated Damages

• #10 – Enforcement & Injunctive Relief (could be combined if you prefer)

• #11 – Governing Law & Venue (edit existing)

That will keep it tight and professional while avoiding duplication.

If you’d like, I can also draft those exact clauses so they’re ready to drop into your template without altering its tone.

Does this answer your question and do you understand the answer completely? Please let me know if you have any follow-up questions or if anything in this answer was unclear, and I will be happy to help.

Blake

Please keep in mind that this information is for general purposes only. You rely on any information in our discussion at your own peril. I am in no way responsible for anything that happens to you if you take anything we discuss here as legal advice or use any information in this discussion in any way.

Blake

I hope I was able to answer your question. If you would like to ask me another question in the future, you can add me as a favorite Expert. You'll have the option to do that on your "My Questions" page if you choose to rate our interaction or you can request me by name if you wish, again my name is Blake.

Blake

I hope I was able to answer your question.