[DE] How do I add enforceable financial clawback and liquidated damages provisions 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

Have you already discussed these changes with the other party involved in the NDA?

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.

Blake

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 and 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 and 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 and framing – Keep the language professional and neutral. Focus on the shared interest in protecting sensitive information. Avoid words like “penalty” or “punishment” and instead use “remedies,” “compensation,” or “damages.”

Because Delaware courts closely examine liquidated damages provisions (6 DE Code § 2-718) , I would strongly recommend having a Delaware-licensed attorney review your NDA before you send it.

Blake

Does this answer your question, and do you understand the answer completely? Please let me know if you have any follow-up questions.

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.

If governing law is already listed, you don’t need to add it again. Instead, edit that existing section so it reflects Delaware law and venue.

Place liquidated damages before your enforcement section.
Place return and destruction of materials after confidentiality obligations but before enforcement and remedies.
Injunctive relief can be its own section or part of enforcement.

A clean structure could look like:

• Return and destruction of materials
• Liquidated damages
• Enforcement and injunctive relief
• Governing law and venue

This keeps things clear and professional.