While running a business, you may encounter sensitive information and need to implement a non-disclosure agreement (NDA) to protect this information from being leaked. However, this agreement may need to be revised over time, prompting the need to change or prolong the duration. Before you proceed, it is crucial to consider the potential legal implications to ensure the continued protection of your confidential business information and prevent potential competitors from getting their hands on it. This article will explore the purpose of NDAs and the feasibility of extending or varying your NDA.
What are Non-Disclosure Agreements?
NDAs serve as legal documents protecting confidential and private information in various business interactions and transactions. Generally, an NDA (or Confidentiality Agreement) lasts two to three years on the market.
The duration of an NDA is set by the specified term, dictating the period during which the contracting parties are legally obliged to uphold information confidentiality.
Extending the Duration of a NDA
The possibility of extending an NDA depends on the specific terms within the agreement. Typically, many NDAs incorporate a clause allowing either party to modify the contract based on mutual written agreement between both parties, which will apply to extend the duration of an NDA.
For example:
- “The terms of this agreement may only be amended by a written instrument signed by both parties to the contract.”
Negotiating a Duration Clause
This clause allows for potential amendments to extend the agreement’s duration, provided mutual consent from both parties. However, reaching this consensus may be difficult, especially if one party seeks more benefits from the contract or if it becomes too difficult to convince all contracting parties to sign a new agreement.
A duration clause in a NDA might look something like:
- “All obligations of confidentiality and non-use imposed upon the parties under this agreement shall expire three years after the expiration or earlier termination of this agreement; provided, however, that confidential information which constitutes the trade secrets of a party shall be kept confidential indefinitely, subject to the limitations outlined in sections 5.5. “
Negotiating an Expiry Clause
If you are worried about the contract’s duration, one approach involves drafting the agreement to continue until all parties mutually decide to terminate it. This may be difficult as the other party must agree to an ongoing contract. Usually, an NDA remains in force until the parties enter into new negotiations.
For example:
- “This agreement will expire on the earlier of after two years from the commencement date or upon the parties entering into a subsequent agreement.”
A Common Scenario
You are a startup founder discussing a potential collaboration with a marketing agency to promote your new products. If your NDA is nearing expiration before finalising a formal agreement, you can safeguard confidential business strategies by including a confidentiality clause in a new agreement with the agency. This clause binds the agency to maintain confidentiality throughout the project or beyond project completion.
Varying Terms Within an NDA
When considering varying terms of your NDA, it is essential to note that most NDAs contain a clause permitting both parties to consent to particular amendments to the agreement.
For instance, you might want to amend the confidentiality clauses to include any new information—like a new design or concept—that comes to light after the parties implement the agreement. However, adjustments that increase the demands made on the other party could encounter opposition.
Furthermore, persistently requesting revisions to signed documents even after prior discussions may strain your business relationships.
To protect your business, ensure supplier contracts meet your business’ needs. Our free Commercial Contracts Checklist will help.
What to Do if the Other Party Agrees to Change the NDA?
Once the other party has agreed to extend the legal contract’s duration or modify its terms, they must comply with the relevant clause, which outlines the circumstances under which you can amend the agreement.
Both parties must sign a written document specifying the necessary changes and the date the changes will take effect. You should consider legal advice to ensure your business interests are protected.
Key Takeaways
An NDA remains effective for the duration the parties agreed upon within the agreement. These agreements commonly feature clauses permitting either party to modify the terms or clauses, contingent upon mutual consent. However, altering these clauses might pose challenges, particularly if they disproportionately benefit one party or increase confidentiality obligations. This could lead to reluctance from the disadvantaged party, potentially straining the business relationship.
Therefore, drafting the NDA carefully to avoid such implications before entering the agreement is essential. Furthermore, you can take legal action upon the breach of confidentiality provisions within your NDA.
If you need assistance extending or varying an NDA, LegalVision’s experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.
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