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We use contractual agreements in our daily life to bind people to certain obligations. A contract is binding as the court can legally enforce it. However, this can only happen if the contract has met all the elements of a binding contract. Alternatively, a court can award damages if either party has failed to uphold the contract. One contract that you will often use in commercial dealings is a non-disclosure agreement. This is an agreement that protects confidential information. This article will outline what a non-disclosure agreement is and how to terminate one.

What is a Non-Disclosure Agreement?

A non-disclosure agreement is a legal contract that requires the person signing it to withhold certain information from either the general public or specific people. It protects sensitive information that could cause issues if it becomes widely known. For example, many employers ask their employees to sign non-disclosure agreements to ensure that they do not leak valuable intellectual property and trade secrets to competitors. 

How to Terminate a Non-Disclosure Agreement?

Termination Clause

Many contracts will include a termination clause, and a non-disclosure agreement is not different. A termination clause is a term that allows either party to terminate the agreement if certain conditions are met. In the case of a non-disclosure agreement, the non-disclosure may only apply while the product is being developed and is considered confidential information. Once it is out to the market, then you can use the termination clause to end the non-disclosure agreement. This means you will no longer need to protect commercially sensitive information.

Alternatively, there may be an option to terminate the agreement once you have left employment. However, the contract may likely include a clause requiring the negotiation of an additional non-disclosure agreement once you have left the business. 

You should make sure you have met the circumstances provided in the termination clause before you decide to cancel the non-disclosure agreement. This is because if you wrongfully cancel the agreement, you could be liable for breach of contract and the penalties for breaching a non-disclosure agreement can be severe.

Mutual Consent 

Another way that you can terminate a non-disclosure agreement is through mutual consent. This refers to when both the disclosing party and receiving party agree to cancel the agreement at a certain point. Both parties must put their intention to cancel in writing so that there is no dispute in further legal proceedings. Once both parties have formally agreed to end the agreement, neither party is obligated to follow the agreement’s terms. This means that they no longer need to protect sensitive information.

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Breach

Another way that you can terminate your non-disclosure agreement is if either party breaches the terms of the agreement. If your contracting party breaches the agreement, then you can cancel it. You should note that if you cancel the agreement after a breach, you can still claim damages for any loss you have incurred because of the breach. 

Contract Expiry

Most contracts will often have a date that the contract expires. Usually, this might mean that there is a right of renewal. This means either party can choose to carry over the agreement, albeit with altered terms. However, if your contract does not have a right of renewal, you are under no further obligations from the contract after it has come to the end of its term.

Key Takeaways

A contract is a legal document. It can be enforced in court if it meets the terms of a binding contract. A non-disclosure agreement is a type of contract that requires the party to the contract to withhold certain information due to its nature. For example, this information might be intellectual property or trade secrets. Breaching a non-disclosure agreement can lead to severe penalties. Therefore, if you wish to terminate your agreement, you should do it in one of the prescribed ways and seek legal advice. For legal assistance with managing your contracts, contact LegalVision’s New Zealand contract lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Will my non-disclosure agreement always have an expiry date?

No, some contracts do not have an expiry date, so you must use one of the other methods to terminate your non-disclosure agreement.

Are non-disclosure agreements always enforceable?

As long as they meet all elements of a binding contract, a court will enforce them. 

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