A "No Obligation to Proceed" clause (sometimes called a "No Commitment" or "Disclaimer of Obligation" clause) makes it crystal clear that signing an NDA does not obligate either party to:
Complete a transaction: Just because you signed the NDA doesn't mean you must buy, sell, invest, or partner
Continue negotiations: Either party can walk away at any point without liability
Accept any terms: No duty to agree to any particular deal structure or pricing
Negotiate exclusively: Both parties remain free to explore other opportunities (unless a separate exclusivity agreement exists)
This clause is particularly important in M&A discussions, venture capital pitches, partnership negotiations, and any exploratory business conversations where sharing confidential information is necessary before parties know if a deal makes sense.
Without this clause, a party might later argue that the NDA created an implied duty to negotiate in good faith or complete a transaction, potentially exposing the other party to claims for wasted deal costs or lost opportunity.
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Why This Clause Matters
Prevents Implied Obligations: Courts sometimes find implied duties in agreements. This clause explicitly negates any such interpretation.
Protects Against Deal Fatigue Claims: If negotiations fail after months of work, the other party cannot claim you "led them on" or wasted their resources.
Enables Free Exploration: Parties can explore multiple opportunities simultaneously without fear of exclusivity claims.
Reduces Litigation Risk: Clear language about no commitment makes frivolous lawsuits about failed deals less likely to succeed.
Especially Important for Buyers/Investors: Those evaluating opportunities need freedom to say "no" after due diligence reveals problems.
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Clause Versions
No Obligation to Proceed
Nothing in this Agreement shall be construed as creating any obligation on either party to:
(a) Enter into any business relationship, transaction, or further agreement;
(b) Continue any discussions or negotiations beyond this Agreement;
(c) Disclose any particular Confidential Information;
(d) Accept any proposal, offer, or term sheet; or
(e) Refrain from entering into any agreement or relationship with any third party.
Either party may, in its sole and absolute discretion, terminate discussions at any time and for any reason, without incurring any liability to the other party for costs, expenses, lost profits, lost opportunities, or any other damages arising from the termination of such discussions.
The parties acknowledge that no contract or agreement providing for any transaction shall be deemed to exist unless and until a final definitive agreement has been executed and delivered by both parties.
Note: This balanced version applies equally to both parties, covers all common scenarios, and explicitly protects against claims for costs and damages from failed negotiations.
No Obligation; Freedom of Action
This Agreement is entered into solely to protect Confidential Information during exploratory discussions. Nothing in this Agreement shall:
(a) Obligate either party to proceed with any transaction, investment, partnership, or business relationship;
(b) Constitute or imply any commitment, offer, or agreement to enter into any transaction;
(c) Create any duty to negotiate in good faith or continue negotiations for any period of time;
(d) Restrict either party from pursuing or entering into similar discussions, negotiations, or agreements with any other party;
(e) Create any fiduciary duty, partnership, joint venture, or agency relationship between the parties; or
(f) Give rise to any claim for reliance damages, expectation damages, promissory estoppel, unjust enrichment, or similar theories.
Each party acknowledges that it is not relying on any oral or written representation, warranty, or assurance about the likelihood of any transaction, and each party bears its own costs and expenses in connection with evaluating any potential transaction.
No binding obligation regarding any transaction shall arise unless and until a definitive written agreement is negotiated, agreed upon, and executed by authorized representatives of both parties, and any such agreement shall be subject to approval by each party's board of directors [or other governing body] as applicable.
Why this favors you: Explicitly negates good faith negotiation duties, blocks reliance and promissory estoppel claims, confirms each party bears own costs, requires board approval for any binding deal, and prevents fiduciary duty arguments.
No Binding Transaction Obligation
The parties acknowledge that this Agreement does not create an obligation to consummate any transaction.
Each party reserves the right to terminate discussions at any time. However, each party agrees to engage in good faith discussions regarding any proposed transaction for a reasonable period of time, and to provide prompt written notice if it determines not to proceed with further discussions.
If either party terminates discussions after substantial due diligence has been conducted, that party shall reimburse the other party for documented out-of-pocket expenses reasonably incurred in connection with evaluating the proposed transaction, up to a maximum of [AMOUNT].
The parties agree that during the term of this Agreement, they shall negotiate exclusively with each other regarding the subject matter hereof and shall not solicit, encourage, or enter into discussions with any third party regarding a similar transaction.
Warning - Creates obligations: Despite being labeled "no obligation," this version actually creates duties: good faith negotiation requirement, expense reimbursement if you walk away, and exclusivity. This significantly limits your freedom to exit.
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Key Takeaways
1
Always Include This Clause: Even if it seems obvious, explicit language prevents later disputes about implied obligations or good faith duties.
2
Watch for Hidden Obligations: Some "no obligation" clauses actually contain obligations like exclusivity, expense reimbursement, or good faith negotiation duties buried in the language.
3
Pair with Other Protections: This clause works best alongside clear purpose limitation, term provisions, and entire agreement clauses.
4
Each Party Bears Own Costs: Explicitly stating this prevents expense reimbursement claims if the deal falls through.
5
Require Definitive Agreement: Specifying that no binding deal exists until a signed definitive agreement prevents arguments about binding term sheets or letters of intent.