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25,000 Euro penalty for breach of NDA
Thread poster: Vladimir Karoli
Vladimir Karoli  Identity Verified
Slovakia
Local time: 16:16
Member (2007)
English to Slovak
+ ...
Apr 18, 2008

Dear all,

I have recently started communication about potential collaboration with this agency that looks okay and professional. I passed a test translation and now before I start some "real" work, they required me to sign a non-disclosure agreement. The agreement basically safeguards them so that I do not disclose confidential information to third parties and/or steal their clients. I have no problem with signing NDA's as I have no intention to steal someone else's clients or disclose information. However, what surprised me was the penalty amount they require:

25,000 Euro as contract penalty in case disclosure and
up to 50,000 Euro in case I steal their client.

Have you ever encountered / signed such an NDA? To me the amounts seem way too big when compared to how much I'd have to work to earn 25 or 50 thousand from them. What's your opinion on this?

Thank you all in advance for your contributions.

Regards,

Vladimir Karoli


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Rad Graban  Identity Verified
United Kingdom
Local time: 15:16
English to Slovak
+ ...
50/50 Apr 18, 2008

Hi Vlado,

As for NDA, why not? It's just a natural thing in our profession.
As for the "stealing a client" clause, I would refuse it. If they want you to work for them, they should trust you. And if they are going to treat you right, they shouldn't be worried that you gonna "steal" their clients.
My two cents.

Rad

[Edited at 2008-04-18 16:11]


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Astrid Elke Witte  Identity Verified
Germany
Local time: 16:16
Member (2002)
German to English
+ ...
Delete the clause Apr 18, 2008

Hi Vladimir,

You will need to delete the clause. It is not acceptable. They maybe found it somewhere, in a book, or got an example NDA from somewhere. However, NDAs with penalty clauses of this kind are intended for a very different situation from ours, concerning large industries that work in big figures. It is entirely inappropriate to ask a translator to sign this type of penalty clause.

A normal NDA for a translator should consist of a straightforward promise to keep documents confidential. Quite possibly the agency concerned does not know this.

Best regards,

Astrid

P.S. I have translated a lot of these penalty clauses in documents, in their correct context.

[Edited at 2008-04-18 16:43]


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Harry Bornemann  Identity Verified
Mexico
English to German
+ ...
Sign it.. Apr 18, 2008

.. after adding a clause with the same penalty for late payment..

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Natalia Potashnik  Identity Verified
United States
Local time: 08:16
Member (2004)
English to Russian
+ ...
Had a similar situation with NDA Apr 18, 2008

I told the outsourcer which parts of the NDA I did not like including the penalty clause and he removed them. After that I signed the NDA.

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Natalia Elo  Identity Verified
Germany
Local time: 16:16
Member (2004)
English to Russian
+ ...
My experience Apr 18, 2008

Hi Vladimir,

Vladimir Karoli wrote:


Have you ever encountered / signed such an NDA? To me the amounts seem way too big when compared to how much I'd have to work to earn 25 or 50 thousand from them. What's your opinion on this?

Thank you all in advance for your contributions.

Regards,

Vladimir Karoli


I had an NDA with 10,000 euros mentioned. I said to client that I'm not going to sign it, so we have agreed on something else. If you understand written Russian, I'll point you to the thread on Russian forum, where I asked for advice. Most of colleagues said that they would never sign anything like that. There can not be any clear sum of money in an NDA agreement.

Best regards,
Natalia


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Karin Maack  Identity Verified
Germany
Local time: 16:16
English to German
Similar situation - different outcome Apr 18, 2008

I have recently signed such terms with a penalty clause about stealing their client. The sum of money would not be so big. Still I didn't like it and tried to have it removed. It is a big agency and they said they were using the same terms for each of their translators and couldn't make an exception. Hm. I am working with them for the first time and hope there will be no problems.

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RNAtranslator  Identity Verified
Local time: 16:16
English to Spanish
+ ...
You can involuntarily "steal" them a client! Apr 18, 2008

When you translate something for them they shall not tell you neither the name nor the client's e-mail. So, when you translate someting for a direct client , you can not know if he/she is also a client of the agency you work with. You'd better not sign any agreement with a penalty for client stealing!

And... what about if they want to get 50,000 euros or whatever you signed? very simple: The agency's owner asks you to translate a small document from his best friend (or somebody he trust), and then tells him to write you directly to tanslate other documents. You don't know that your new end client is also the agency's client. Then, the agency's owner sues you, he gets the 50,000 euros and gives a part of them to his friend.

Are you sure you can sleep well Karin?

Well... call me paranoid if you want...


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xxxPeter Manda
Local time: 10:16
German to English
+ ...
penalty clause unconscionable and unenforceable Apr 19, 2008

In my many years practicing law internationally and in my years translating I have never come across such a clause in professional agreements. The clause is unconscionable in both civil and common law and would be unenforceable in any case. The confidentiality agreement is to apprise you of your obligations and to provide a remedy for breach that would be equal to any damage caused. A liquidated damages clause in this context would be, imho, quite inappropriate. Frankly, I would think any agency suggesting a clause like this to be close to paranoid and I would caution against working with them. gL.

[Edited at 2008-04-19 00:17]


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Gennady Lapardin  Identity Verified
Russian Federation
Local time: 18:16
Italian to Russian
+ ...
Your NDA precautions will inflate the price of your service Apr 19, 2008

The parties are free to sign or not, but when a job is worth five thousand and a penalty is ten times higher, the question may and will arise what was the true scope of the contract. Also, specifying a definite sum in NDA may (under certain circumstances) make the job contract automatically enforcable for NDA penalty redress ! One day they may call you and ask something about the text in the course of traslation or translated, registering the conversation and subsequently presenting it as an evidence of unauthorised disclosure: a little but sure business.

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gfe
Local time: 16:16
English to Italian
+ ...
Probably the EEC has something to say Apr 19, 2008

This is advice I received a few years ago, so conditions may have changed.

Open-ended "customer stealing" clauses may be illegal in the EEC. What is probably legal is to have a contract that defines ways and means of terminating it, and that can include a clause by which the freelancer commits to not try to get business from a client he approached under the previous contract, for a limited time (one year from formal termination was considered fair).


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Ritu Bhanot  Identity Verified
Member (2006)
French to Hindi
+ ...
Agree with Peter Apr 19, 2008

Peter Manda wrote:

In my many years practicing law internationally and in my years translating I have never come across such a clause in professional agreements. The clause is unconscionable in both civil and common law and would be unenforceable in any case. The confidentiality agreement is to apprise you of your obligations and to provide a remedy for breach that would be equal to any damage caused. A liquidated damages clause in this context would be, imho, quite inappropriate. Frankly, I would think any agency suggesting a clause like this to be close to paranoid and I would caution against working with them. gL.

[Edited at 2008-04-19 00:17]


There are many organizations in India who want their employees (or future employees) to sign similar contracts and often the employees actually never adhere to the terms as legally the company cannot actually enforce it. Of course, the only thing in their favour is that most individuals are scared of going to law and will never try to fight a legal battle against a big organisation. But it has happened with a couple of people and they won the case (and the company lost).

Of course, according to Indian law, any agreement is regarded as null and void if someone is coerced/ forced into signing it and when you have to sign to get a promotion or a job or something similar it is a sort of psychological force/ coercion that is being applied and most lawyers will tell you that such a contract does not stand a chance in a court of law.

[Edited at 2008-04-19 10:48]


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MariusV  Identity Verified
Lithuania
Local time: 17:16
English to Lithuanian
+ ...
"paper" versus "reality" Apr 19, 2008

I think if both sides are fair, a simple verbal agreement is enough. Vice versa - you can put whaveter on "paper", with "force majeure", dozens of pages, billions for contract breaching liabilities, but if one or another party will want to act in an unfair way, no contract will ever help and there will be no business (if you'd want to steal the client from them, you will do it even if you have a liability for 500 000 and no one can ever prove you did that).

I would suggest them to change this line without any amounts just stating that you under obligation to "compensate proven actual damages". This would be fair and logical, at least. + Discuss with them HOW they can prove that as not to get into a trap. Would be a good question to ask - if they show they do not trust you, why should you trust them? If they are that much formal, be formal too.

I'd put "compensation of actual proven damages" and if they do not agree, their problem and "good bye". Who cares if their agreement is "standard to all" - this is not relevant ("our agreement is standard to all" is a simple coined phrase from people who want to make some pressure as if "all other people signed without a problem, and you have no choice as to sign it too - why do you need to discuss it?", esp. used by those, who want to have agreements signed with a lot/unproportionate of benefits for them).

The only thing relevant to you is what you sign. + I do not think this is very professional (at least reasonable) from the side of the agency to have such an amount "from the ceiling". Can they substantiate that amount? Is that amount really proportionate to the actual damage you can (at least theoretically) cause?




[Edited at 2008-04-19 13:26]


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Samuel Murray  Identity Verified
Netherlands
Local time: 16:16
Member (2006)
English to Afrikaans
+ ...
Penalties versus fines Apr 20, 2008

Vladimir Karoli wrote:
Have you ever encountered / signed such an NDA? To me the amounts seem way too big when compared to how much I'd have to work to earn 25 or 50 thousand from them. What's your opinion on this?


A penalty is a reduction in payment. What this NDA is referring to, are not penalties, but fines. This comment of mine is not intended as legal advice, however -- I'm simply trying to ensure that we regard these two things separately.

I don't accept NDAs with fines stipulated in them. The fine mentioned in the NDA almost always favours the other party. I'm confident that the client would not accept a contract in which he is made liable to pay fines for various breaches of contract, so why should you?

I may be willing to sign NDAs that mention the payment of damages, to be awarded by a court of law, after due process. The burden of proof must be with the accusing party, or else I don't sign.

By the way, I bought my house five years ago for the equivalent of EUR 25 000.

It is possible that this fine was included in the contract because some lawyer told the agency to put it in there, and it is possible that the agency has no intention of following through with such a stipulation, but I wouldn't take the risk.


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