When signing a non-disclosure agreement, the benefits of including a term clause (i.e., end of the contractual obligations) depend on whether you are more likely to be disclosing or receiving confidential information. If you are the disclosing party, you want to ensure that your confidential information is kept confidential and there are no potential unauthorized disclosures. This means you want to protect the confidentiality of that information for as long as possible. If you are the receiving party, you want to limit your obligations in the agreement, which includes what information you have to keep confidential and for how long you have to keep it confidential.
Term of a Confidentiality Agreement
If a term clause is not included in an NDA, the parties can imply that the NDA will be in effect indefinitely. An NDA with no term clause is more common in an agreement where an ongoing relationship is taking place. Assuming that the NDA contains a termination clause, once a party gives notice to terminate the contract, all of the obligations under the contract will terminate on the termination date unless the NDA includes a survival clause. However, circumstances may vary depending on whether the information is considered a trade secret, where the Ontario Court of Appeal held that disclosing a company’s trade secrets can be considered a restraint on trade. Note that after the termination date, the receiving party will no longer be under an obligation of confidentiality for information received after the termination date. This will be true whether or not the confidentiality clause continues to apply to confidential information received before the termination date.
You can view and customize a Confidentiality Agreement on Clausehound here!
Survival Clause
The exception to all the obligations being terminated on the termination date is where a survival clause has been included. A survival clause explicitly states which obligations will ‘survive’ the life of the agreement. Clauses that survive an agreement usually include the confidentiality clause. Although a confidentiality clause can ‘survive’ the term of the agreement, the standard term of survival for a confidentiality clause is generally two to four years after the termination date. Companies that are receiving confidential information will be reluctant to agree to an unlimited term for the confidentiality clause.
For an example of a contract with a survival clause, click here!
To see a standard non-disclosure agreement, click here or visit our Small Business Law Library!