Indeminifacation claus and valuation - do you accept this?

"you agree failure is worth $600k and you will pay..."

[paybacksa]

I was handed a first-draft contract for services that threw me for a laugh.

I have to agree to confidentiality/non-disclosure. But then I was asked to agree that if I disclosed her secrets anyway, it was worth $600k, and that I would have to pay this lady $600k as compensation.

I said no thnaks, and she said "so then how much should we write in here".

Is this common and how do you view this? I suppose I could buy more insurance to cover her $XXX indemnification and then charge her for it, but I'd rather say have a nice day to that!

[diamondgrl]

It's not perfectly typical but it is certainly known. I was advised by a lawyer from a top law firm to have a clause of $1 million to scare the bejeezus out of people and make them realize that I was serious about nondisclosure, which I am.

The point is, non-disclosure damages are only relevant if you disclose. Obey the contract and you'll be fine.

[incrediBILL]

As a developer / programmer / contractor business owner, I would first decline, then walk away if it was a deal breaker. I have built MANY sites for customers and they all want similar things, so what happens when customer A. claims I breached their contract building the same "secrets" for customer B.? Even if I write the code for customer B. from scratch, and it was his initiated idea, customer A. can still sue me and I'm out the costs of defending their nonsense in court.

If I went courting customer B. using what I learned from customer A., they have an obvious case. If customer B. came to me out of the blue wanting what customer A. already had, it's a fuzzy grey matter if I get involved and then I'm potentially telling customer B. to go away just to save my hide.

In one instance I told a customer to sign that, which prohibits me from working on XX for other customers, would cost them 5x my original bid considering how many customers ask for the same thing to maintain an exclusive.

Customer backed down, we still did the site.

Never signed one without a bunch of caveats, and never with a fixed dollar amount.

[paybacksa]

Thanks for the feedback. I also considered upping the fees alot, but in my analysis this added claus appears to be nothing short of an exit strategy for her.

If the venture fails and all money is lost, there sits an opportunity to pursue to get some value back from me (even if just through coercive tactics leading to settlementto avoid legal fees). No thanks.