Non-Disclosure Agreements, Liquidated Damages and Arbitration in Context: Contracts Drawn for Good or Evil

Abstract

Why are NonDisclosure Agreements not simply a matter of providing for the liberty interests of the parties to enter into contracts that they choose to make with each other? As a start, we want to offer an analysis of a cornerstone of such contracts, the prescription of agreed damages commonly referred to as liquidated damages. We will use the law and economics lens to sharpen our understanding of the economic tradeoffs involved in NDAs. We will then turn to a discussion about injunctions and their enforceability in equity, and then make some observations on the enforceability of arbitration agreements that oust the courts’ jurisdiction. In the process, we hope to draw a line between those cases where NDA’s should continue to viable, and those where at least some of their provisions should be found unenforceable.