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NDA with penalty amount and need to prove non-violation
Thread poster: Федор Хатламаджиев

Федор Хатламаджиев
Russian Federation
Local time: 19:21
English to Russian
+ ...
Aug 6, 2016

Dear colleagues,

I got into contact with a very big and serious company from Austria for provision of translation services.
One of their requirements was signing of NDA, which is an obligatory condition and text of which is an absolutely standard for all contractors.

I was to sign the NDA very quickly before signing contract, because I have already worked with this company at a different project (so it is proven and reliable, at least as contractor), but there was a condition which made me ask for your help: "If the receiving party violates the provisions of this agreement, it shall owe the Disclosing Party a contractual penalty irrespective of the damage and/or fault, in the amount of EUR 20 000 – for each violation. It shall rest with the receiving party to submit evidence that no violation of the obligation to confidentiality exists".

Amount of penalty is quite strange, but even stranger is that I will have to prove that I did not violate the terms.
In my understanding this is something impossible, but I may be wrong, so please, I would be very grateful if you could comment on this.

Thanks in advance.


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IrimiConsulting  Identity Verified
Sweden
Local time: 17:21
Member (2006)
English to Swedish
+ ...
Not reasonable Aug 7, 2016

Let's assume that they think the NDA has been violated. If you deny and they say you have to prove innocense, they would have to use legal means to force you. You could always say you have proven it!

Their advantage would be that they could terminate the contract unilaterally.
Федор Хатламаджиев wrote:

Dear colleagues,

I got into contact with a very big and serious company from Austria for provision of translation services.
One of their requirements was signing of NDA, which is an obligatory condition and text of which is an absolutely standard for all contractors.

I was to sign the NDA very quickly before signing contract, because I have already worked with this company at a different project (so it is proven and reliable, at least as contractor), but there was a condition which made me ask for your help: "If the receiving party violates the provisions of this agreement, it shall owe the Disclosing Party a contractual penalty irrespective of the damage and/or fault, in the amount of EUR 20 000 – for each violation. It shall rest with the receiving party to submit evidence that no violation of the obligation to confidentiality exists".

Amount of penalty is quite strange, but even stranger is that I will have to prove that I did not violate the terms.
In my understanding this is something impossible, but I may be wrong, so please, I would be very grateful if you could comment on this.

Thanks in advance.


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Kay-Viktor Stegemann
Germany
Local time: 17:21
Member (2016)
English to German
Negotiate it away Aug 7, 2016

Федор Хатламаджиев wrote:

"If the receiving party violates the provisions of this agreement, it shall owe the Disclosing Party a contractual penalty irrespective of the damage and/or fault, in the amount of EUR 20 000 – for each violation. It shall rest with the receiving party to submit evidence that no violation of the obligation to confidentiality exists".



I am not a lawyer (and not an Austrian ...), but I believe that such a clause would not survive a lawsuit. It sounds contrary to all principles of legality.

If I were you, I would simply ask the outsourcer to delete this clause from the contract, at least the part regarding the burden of proof. You are not required to sign such a thing. I have myself successfully negiotated changes of such contracts with outsourcers. Of course, it always depends on the market; if there are flocks of other translators who are happy to sign this sort of nonsense, you might be in a dilemma here.


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Thomas T. Frost  Identity Verified
Member (2014)
French to Danish
+ ...
Don't sign Aug 7, 2016

I have seen a few such penalty clauses. In every case, I asked the outsourcer concerned to remove the clause. As far as I remember, not one has been willing to remove that clause, so there was no deal in these cases, as I plainly refuse to submit myself to such abusive, one-sided clauses. In my view, an outsourcer with such a mentality is not worth working for anyway.

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Sheila Wilson  Identity Verified
Spain
Local time: 16:21
Member (2007)
English
+ ...
The path to nightmares, IMHO Aug 7, 2016

Thomas T. Frost wrote:
I have seen a few such penalty clauses. In every case, I asked the outsourcer concerned to remove the clause. As far as I remember, not one has been willing to remove that clause, so there was no deal in these cases, as I plainly refuse to submit myself to such abusive, one-sided clauses. In my view, an outsourcer with such a mentality is not worth working for anyway.

Exactly. It's highly unlikely that they'll ever try to push that clause as far as a court case. I'm sure that somewhere along the line they'll be advised that it won't hold water. But that doesn't mean everything will be fine.

I suspect there are two possible scenarios. One is that they don't really know what they're doing, so have just taken boilerplate clauses. They might be OK to work with in the main but they'll be lost whenever anything goes wrong and not know how to sort it out amicably. The other (more likely, IMHO) is that they've got the sort of attitude towards the relationship where they'll try to blame the supplier (you!) for every little thing that goes wrong, regardless of fault or responsibility. They don't want a level playing field. Be a second late with a delivery and they'll scream blue murder, zero payment, claims for damages, etc. But don't expect them to pay your invoices on time.


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Dan Lucas  Identity Verified
United Kingdom
Local time: 16:21
Member (2014)
Japanese to English
Possibly still worthwhile Aug 7, 2016

One of their requirements was signing of NDA, which is an obligatory condition and text of which is an absolutely standard for all contractors.

If it's standard, the chances of you getting it changed are quite low.

What is interesting to me is that does not seem to be an attempt to move all liability to the contractor. Some agencies put unlimited liability causes in their agreements which try to do this with translators. This clause is very different, given that the sum mentioned is tightly defined and not actually that large.

The intent here seems to be to underline that the company takes leaks of confidential information very seriously and that it will seek to punish those suppliers that transgress. While the value of fine is substantial and would certainly sting, it should not (in and of itself) be enough to destroy a supplier, even a small one.

Let's pretend that the customer hears that a supplier employee at an industry exhibition talked unguardedly to a journalist from a trade magazine about the customer's upcoming product. The customer is angry, calls the supplier management in for a meeting and informs them the supplier that it has been "fined" for violating the NDA. The supplier checks and finds that yes, their employee was to blame, although there's no evidence that would hold up in court.

What does the supplier do? If it fights the case against the customer, whch may allot hundreds of thousands (or millions) of euro in revenue every year, the customer will probably never give the supplier another order. If the supplier accepts the fine, it is probably business as usual - but the supplier would be wise to invest in better training for employees so that they do not infringe customer confidentiality in future. The customer has made its point and the supplier has learned a lesson.

Oddly, given that I am normally leery of this kind of thing, it seems to me to be almost... fair? That's not quite the word I'm looking for, but it seems transparent and straightforward. I would probably go ahead if the other terms were good (rates, flow, professionalism) but then I have professional liability insurance. If you don't have any insurance and you want to deal with this client, you should take out a policy.

EDIT: the above is predicated on the assumption that the company is an end client in another industry (autos...?), not an agency working in translation.

Regards
Dan


[Edited at 2016-08-07 13:14 GMT]


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philgoddard
United States
Member (2009)
German to English
+ ...
Are you planning to violate the NDA? Aug 7, 2016

Otherwise, this discussion doesn't seem to be particularly relevant. Life's too short to make a fuss about clauses that are never likely be enforced.

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Thomas T. Frost  Identity Verified
Member (2014)
French to Danish
+ ...
Automatic penalties Aug 7, 2016

In addition to the one-sided aspect of this, it's the automatic aspect of this I don't like, Dan. I'd never dream of leaking information, but in case it should ever happen that an outsourcer considers that I'd done something wrong, I want a judge to evaluate any damages, not a pre-defined clause with a set amount. A judge may or may not overrule such a clause, but I don't want to gamble on that.

Such contracts never have penalty clauses in case of non-payment, by the way. Why should the penalties only go one way?

Many of the contracts I've seen with penalty clauses also lacked provisions to exclude information in the public domain and other information already legitimately known by the translator from the scope of confidentiality. A judge should throw out such claims, but it's better to have it written in the contract.

You have professional liability insurance, you say, but they may well refuse to pay up if they somehow consider that you have accepted liability in advance by signing such a clause. If you look through the clauses, you'll probably find that you are not supposed to admit liability under any circumstances. Or the insurance may consider that it's a contractual sum due, not liability.


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Thayenga  Identity Verified
Germany
Local time: 17:21
Member (2009)
English to German
+ ...
Who needs to prove what Aug 7, 2016

Now, I'm not a lawyer, but do know a few. The commonly applied rule - yes, even in commerce - is: innocent until proven guilty. This means that the party who believes that a disclosure has occurred - either you or the agency - will have to prove that the other has violated the NDA... and not the other way around, as they stipulate. And they would also have to prove the intent to violate the agreement - upon which the fine(s) is(are) also based..

...it shall owe the Disclosing Party a contractual penalty irrespective of the damage and/or fault, in the amount of EUR 20 000 – for each violation.

The amount of the penalty to be paid - if proven guilty - depends on the actual damage that has been done by such violation. EUR 20.000 carries the scent of greed.

[Edited at 2016-08-07 13:58 GMT]


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Федор Хатламаджиев
Russian Federation
Local time: 19:21
English to Russian
+ ...
TOPIC STARTER
I surely don't! Aug 7, 2016

philgoddard wrote:

Are you planning to violate the NDA?
Otherwise, this discussion doesn't seem to be particularly relevant. Life's too short to make a fuss about clauses that are never likely be enforced.


The only thing I want to avoid and have concerns about is that some 2-3 years later (the NDA is valid for 5 years after the latest service rendering) I get a notice to pay the penalty. Of course I refuse it - they go to court and ask to prove sthg I have done not. And this is impossble as far as I understand or very expensive.
The company is very big and is presented on all the continents and this penalty is peanuts for them.
That's clear, by this clause they want to have a 100% protection.

My concern is just a supposition, of course, which however cannot be refused...


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Lianne van de Ven  Identity Verified
United States
Local time: 11:21
Member (2008)
English to Dutch
+ ...
Not new Aug 7, 2016

http://www.proz.com/forum/money_matters/102686-25000_euro_penalty_for_breach_of_nda.html

An option is to just delete the clause and sign the NDA. Maybe they never even notice.
I believe I have done that once myself, don't even remember which client.

[Edited at 2016-08-07 16:58 GMT]


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Bernhard Sulzer  Identity Verified
United States
Local time: 11:21
English to German
+ ...
Don't work with them Aug 7, 2016

Федор Хатламаджиев wrote:

Dear colleagues,

I got into contact with a very big and serious company from Austria for provision of translation services.
One of their requirements was signing of NDA, which is an obligatory condition and text of which is an absolutely standard for all contractors.

I was to sign the NDA very quickly before signing contract, because I have already worked with this company at a different project (so it is proven and reliable, at least as contractor), but there was a condition which made me ask for your help: "If the receiving party violates the provisions of this agreement, it shall owe the Disclosing Party a contractual penalty irrespective of the damage and/or fault, in the amount of EUR 20 000 – for each violation. It shall rest with the receiving party to submit evidence that no violation of the obligation to confidentiality exists".

Amount of penalty is quite strange, but even stranger is that I will have to prove that I did not violate the terms.
In my understanding this is something impossible, but I may be wrong, so please, I would be very grateful if you could comment on this.

Thanks in advance.


I would never work with such a company. Not in a million years. And I am originally from Austria. You are the service provider. You determine the rules. Otherwise, you're just a pawn in their game. You are only asking for big trouble - a nightmare - as a colleague specified. And I can't believe someone else here is seriously suggesting to cross out the line and sign the NDA because "maybe they won't notice it." Seriously?!


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Kay-Viktor Stegemann
Germany
Local time: 17:21
Member (2016)
English to German
The burden of proof is the point. Aug 7, 2016

philgoddard wrote:
Are you planning to violate the NDA?

Otherwise, this discussion doesn't seem to be particularly relevant. Life's too short to make a fuss about clauses that are never likely be enforced.


Phil, the problem here should be obvious. Nobody here assumes that anyone plans to violate the NDA. But this contract seems to be made particularly to put the blame on the translator when something goes wrong. If anyone else, a third party or the client himself or whoever, discloses something, the translator can be blamed and the translator is obligated to prove their innocence here, even if they did nothing wrong! How could anyone prove NOT to have disclosed something?

I don't care much about obscure clauses, like you, but this thing seems to be a VERY hot potato to me. On the other hand, I indeed think that any court would dismiss this nonsense anyway, so maybe you could sign and forget it.


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Lianne van de Ven  Identity Verified
United States
Local time: 11:21
Member (2008)
English to Dutch
+ ...
It has been suggested before as well Aug 7, 2016

Bernhard Sulzer wrote:

And I can't believe someone else here is seriously suggesting to cross out the line and sign the NDA because "maybe they won't notice it." Seriously?!


Okay, I went a step too far, but don't be intimidated by whatever contracts someone sends you to sign. I have deleted lines in contracts that I did not agree to, signed the contract AND I did let the client know what I had done.

However, there is (used to be) a good reason for signing a contract in person with both or all parties and a witness present. Here's what a court decided:
http://www.adamsdrafting.com/making-sneaky-changes-to-a-contract-before-signing-it/


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xxxIlan Rubin  Identity Verified
Russian Federation
Local time: 19:21
Russian to English
Just say no Aug 7, 2016

I have never signed an NDA with an indemnity higher than the price of the one specific job in question. Sometimes it's meant not working with the given agency. Good. I wouldn't want to work with such an exploitative agency.

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