In the course of business, you may need to share sensitive commercial information. Accordingly, to protect this information, you must utilise a robust non-disclosure agreement. However, where the length of this agreement is insufficient, you may seek to vary or extend it. This article will explore whether you can extend or vary your non-disclosure agreement and the factors you must consider.
What is an NDA?
A non-disclosure agreement (NDA), or a confidentiality agreement, is a legal document commonly used by businesses to protect the confidential information they may share with another party. The document creates an obligation on one or both parties from sharing confidential information for reasons other than what was agreed.
How Long Does an NDA Last?
The ‘term’ of an NDA refers to how long the NDA will remain in force. This means how long the parties are obliged to keep the information confidential. The term should be set out clearly in the NDA.
Several factors determine the length of your NDA. The market standard term of an NDA is two to three years.
Continue reading this article below the formCan I Extend the Term of an NDA?
Most NDAs will have a clause allowing either party to amend the agreement.
An example of this clause is as follows:
“This agreement may only be amended by a written instrument executed by the parties”.
Under this clause, it is possible to amend the agreement to extend the term. However, both parties must agree to this. Consequently, this may be difficult when the agreement favours one party more than the other. Likewise, it may be impractical to have both parties sign a new document.
Suppose you are concerned that the length of your NDA term is insufficient. Accordingly, you can draft the agreement so that it remains in force until the parties agree to terminate. Again, persuading the other party to sign such an agreement may be challenging.
Alternatively, it is common for an NDA to continue until the parties enter another agreement.
An example of this clause is as follows:
“This agreement will expire on the earlier of two years from the commencement date or on the date the parties enter another agreement.”
For example, suppose you are having discussions with a potential manufacturer to enter into an agreement. While your NDA will end before the two-year term if you enter a formal agreement with the manufacturer, you can still protect your confidential information through a confidentiality clause within that formal agreement. This confidentiality clause will create an obligation on the other party for the duration of that agreement or longer.
If you have already entered into the NDA and cannot extend the term, you can always enter a new NDA once the original agreement terminates. However, where a party is reluctant to extend the term of an NDA, it is essential to negotiate a new agreement that is reasonable and practical.
Can I Vary Clauses Within an NDA?
As mentioned above, most NDAs will have a clause that allows you and the other party to agree to certain changes within the agreement. For example, you may want to change the definition of “confidential information” to include a new piece of information that has become relevant after the parties entered the agreement, such as a new design or idea.
It is important to remember that where changes will create more obligations on the other party, they may be unlikely to agree. It may also reflect poorly on you and negatively impact your commercial relationship if you continually ask to amend signed documents, especially where there were prior negotiations.
What if the Other Party Agrees to Change the NDA?
Where both parties agree to vary the NDA, they must comply with the relevant clause that sets out how (if at all) the agreement can be amended.
Using the clause provided above as an example, both parties must sign a written document detailing the changes to be made and the date the changes are to come into force.
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Key Takeaways
A non-disclosure agreement will typically remain in force for the term agreed to by the parties. You should specify the term within the NDA. Most NDAs will have a clause allowing either party to make changes to the agreement, including changes to the term or any clauses. However, these clauses often require both parties to agree to the changes.
From a commercial perspective, this may be difficult when the changes favour one party more than the other or create more significant confidentiality obligations. The disadvantaged party will likely be reluctant to agree to the changes, which may negatively impact your relationship. Therefore, it is important to ensure you draft the NDA appropriately before entering the agreement.
If you need help drafting a non-disclosure agreement, our 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 1300 544 755 or visit our membership page.
Frequently Asked Questions
A non-disclosure agreement (NDA) is a document commonly used by businesses to protect their confidential information. It creates an obligation between the parties not to disclose the information specified within the agreement.
The market standard term of an NDA is two to three years.
This will depend on the NDA. Most NDAs will include a clause allowing amendments where both parties agree in writing.
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