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EXPLANATION FOR BASIC NONDISCLOSURE Agreement

MISCELLANEOUS PROVISIONS

Sometimes 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.

NDA lightbulbFor more boilerplate provisions including injunctive relief, indemnity, attorney fees and dispute resolution, click here.

Relationships

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.

Severability

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.

Integration

 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.

NDA lightbulbWatch Out for "We'll Fix It Later" Promises. The integration clause closes the door on any oral or written promises. Don't sign an agreement if something is missing and don't accept an assurance that the other party will correct it later.

Waiver

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.

 Signatures

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
Partnership

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.,
a New York corporation

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. It's okay to use a faxed signature if both parties accept its authenticity. If one party claims a forgery, it may be difficult to prove a signature's authenticity from the fax alone. So if you fax the signed agreement follow up by mailing or overnighting the signed original.

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.

NDA lightbulbFor more boilerplate provisions including injunctive relief, indemnity, attorney fees and dispute resolution, click here

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