Boiler Plates in a Non-Disclosure Agreement
We comment on the importance of boiler plate causes in a non-disclosure agreement (“NDA”), in this Part 6 of the In-House Legal Solutions NDA Guidance Note Series.
As is the case with nearly all commercial contracts, NDAs are no exception when it comes to the inclusion of boiler plate clauses. Rather than skimming over these clauses or not noticing their presence at all, it is important to check that these clauses are present and correct; essentially their job is to adequately protect the disclosing party through dictating the mechanics and legal aspects of the NDA. Boilerplate clauses are often standard and not typically heavily negotiated.
This note will focus on a non-exhaustive list of 5 of the more common boilerplate clauses seen in an NDA context:
- Entire Agreement
It is advisable to include an entire agreement clause to confirm that only the information within the NDA is legally binding on the parties, as opposed to all other discussions which may have taken place. Be wary of other agreements that are referenced to be incorporated or referred to. If correct drafted, this clause will ensure that this NDA supersedes all other previous agreements relating to the subject matter of the NDA, providing certainty to the agreement.
- Third Party Rights
Parties to an NDA will generally only wish for those parties to have rights to enforce under the agreement. Including a third-party rights clause will seek to ensure that the NDA does not give rise to any third-party rights under the Contracts (Rights of Third Parties) Act 1999. This clause can become over complicated however when group companies are involved, with the disclosing party sometimes seeking for their affiliates to have rights to enforce and this can even extend to directors, affiliates and advisors. Of all the boiler plate clauses, this clause needs to be carefully reviewed to ensure that rights to enforce under the NDA are not extending further than they should be.
The usual position is that the NDA cannot be assigned by either party without the prior written consent of the other party. This may be varied slightly in some NDAs involving an acquisition whereby the ultimate purchaser of the target may be given assignment rights.
This clause works to ensure that an agreement will continue to be enforceable even if one of its terms is found to be illegal, invalid or unenforceable. This allows an NDA to continue unaffected, rather than terminating because of one problem clause. Often you will see additional wording included to the effect that if any provision of the NDA is deemed deleted, then the parties will work together in good faith to establish the original commercial intention of the clause and find a suitable replacement clause.
This clause seeks to preserve a party’s rights if that party fails to take action in respect of a breach of the NDA. Essentially, this will act to ensure that a party retains any right or remedy under the NDA or by law regardless if they delay promptly exercising their right; they will still be able to do so.
- Governing Law and Jurisdiction
It is common to negotiate an NDA with companies based in different countries and as with all commercial contracts, this clause is crucial in determining what law will govern any disputes arising out of or in connection with the agreement. The parties’ location will usually determine the governing law, but English law is usually preferential. Factors such as costs and the process around bringing a claim under the NDA should be considered. It is important to also be alive to the inclusion of that law and jurisdiction for governing not only the NDA but the transaction, which is contemplated out of the NDA, especially if the law is not English law.
Whilst boilerplates are technically optional in an NDA, they are standard and should be included as a matter of good practice and provide certainty in the event any terms of the NDA are disputed.
In-House Legal Solutions can help you to ensure that your business needs are adequately protected when negotiating NDAs. For more information or to discuss this further, please contact [email protected].