How Doing the Right Thing Nearly Lost a Client a Million Dollar Customer

In the high-stakes world of business negotiations, a seemingly innocuous act can have devastating consequences. Consider the case of XYZ Corp, a client and company on the cusp of securing a lucrative contract with new customer, Acme Co. Acme Co. was a major player in their industry. This contract had minimums in the six figures annually and was expected to reach seven figures within 2-3 years.

The excitement within XYZ Corp was palpable; this was a potential game-changer.

Both parties had signed a mutual non-disclosure agreement (NDA), a standard practice designed to protect sensitive information during negotiations and help develop trust between parties. 

Things were looking positive for both companies after months of hard work.

However, just as the deal neared completion, Acme Co. expressed a desire for expanded uses of XYZ Corp's product, a request that required collaboration with a third-party supplier.

XYZ Corp, eager to accommodate their potential client and secure the deal, reached out to their supplier in hopes of finding a solution.

Unbeknownst to XYZ Corp, Acme Co. had also initiated discussions with the supplier, seeking their own independent arrangement. When Acme Co. discovered XYZ Corp's unauthorized disclosure of the deal to the supplier, they threatened to enforce the NDA.

NDAs prohibit sharing any non-public information with any third party and the supplier was a third party. The NDA between Acme Co and XYZ Corp. also included a clause that the companies’ names and the fact they were in talks was also protected from disclosure.

XYZ Corp's sales and business representatives found themselves in a difficult situation and turned to me for help.

They had a long-standing relationship with the supplier and genuinely believed they were acting in the best interest of both parties. They were confident they could get this resolved quickly and successfully.

However, they were now facing the potential loss of a significant business opportunity due to their actions.

Who was right? Acme, Co or XYZ, Corp?

Both parties wanted to do what was right both for themselves and for the potential deal, but it was ultimately Acme, Co’s choice in how they wanted to proceed for their business. The NDA gave them that right.

Thanks to XYZ, Corp’s relationship with the supplier, Acme Co had the additional option of utilizing that pre-existing relationship to build their business, but it was not their only choice. Acme Co. could go to the supplier themselves, explore a different vendor, or any other option Acme Co. wanted to explore. 

It came down to what Acme Co felt was best for its business needs.

All XYZ Corp could do was offer assistance to the potential customer; it could not act on behalf of that customer, even if those actions were only helpful conversations.

The incident highlighted a crucial aspect of NDAs: breaches can arise from a variety of factors, including a well-intentioned desire to help.

In this case, while XYZ Corp's intentions were good, they failed to appreciate that Acme Co. had the right to make its own business decisions, including how to interact with the supplier.

The NDA was not simply about protecting secrets; it was about respecting Acme Co.'s autonomy and strategic choices.

XYZ Corp, like many businesses, assumed they understood the full picture of Acme Co.'s needs and motivations. However, they didn't have the complete context, nor were they entitled to it.

This lack of understanding led to a misstep that could have derailed the entire deal.

Thankfully, XYZ Corp responded quickly to honor Acme Co.’s request that the NDA be upheld and the harm from the breach did not inhibit Acme Co. from obtaining the agreement they wanted with the supplier.

The companies were able to move past the situation and successfully close the deal.

Need an NDA for your customer-vendor relationships? Download my free Mutual NDA Template for Business here.

Key Takeaways for Businesses:

1. NDAs Protect More Than Just Information: They uphold a company's right to make independent choices.
2. Good Intentions Can Still Lead to Breaches: Always prioritize clear communication and understanding of NDA terms.
3. Respecting Business Autonomy is Crucial: Assume that every company has reasons for its decisions, even if those reasons aren't immediately apparent.