The 2023 Annual Litigation Trends Survey revealed that business litigation cost $1.7 million per $1 billion in revenue in 2023. No business is safe from the potential of a lawsuit.
Some owners mistakenly think that having non-disclosure agreements can help protect them in a legal situation. However, while an NDA can safeguard confidential information, it has limitations in legal proceedings.
Not a valid defense
While NDAs do help maintain the confidentiality of sensitive business information, they may not offer an impenetrable defense in certain legal scenarios. It cannot help if a court legally compels a person to testify or share information. The individual’s legal duty to provide truthful and relevant information may take precedence over the contractual obligations outlined in the NDA.
For example, it is not going to work to use an NDA to prevent an employee or former employee from testifying in court. If the judge orders the person to take the stand, this agreement will not stop that from happening.
Geography comes into play
Geographical considerations and jurisdictional differences further impact the enforceability of NDAs. Legal frameworks vary, and an NDA’s efficacy may depend on its alignment with the relevant laws governing the jurisdiction where legal proceedings take place.
An NDA can be a great business tool. However, it is not always effective during a legal situation. Business owners have to understand the limitations. Legal requirements may supersede the agreement. An owner has to be aware of when an NDA may not stand up and adjust their approach accordingly.
