Plain English Explanation
The term and duration clause answers two key questions: (1) How long can the parties exchange confidential information? and (2) How long must the receiving party keep the information confidential?
These two periods can be different. For example, an NDA might allow information sharing for one year (the "disclosure period") but require confidentiality to continue for three years after each disclosure (the "confidentiality period"). Understanding this distinction is crucial for evaluating your obligations.
Why It Matters
Information Has a Shelf Life: Most business information becomes outdated and loses its competitive value over time. Last year's marketing strategy or product roadmap is rarely sensitive today. The duration should match the realistic period of competitive sensitivity.
Perpetual Obligations Are Disfavored: Courts increasingly view indefinite confidentiality obligations as unreasonable restraints. The famous Stormy Daniels NDA controversy highlighted how perpetual terms can undermine enforceability. A defined, reasonable term makes your NDA more likely to be upheld.
Trade Secrets Are Different: Information that qualifies as a trade secret under applicable law may warrant longer or indefinite protection. Many NDAs include a carve-out providing that trade secrets remain protected as long as they maintain trade secret status.
Risk Factors
-
Perpetual obligations without trade secret carve-out - Broad "forever" confidentiality for all information is likely overreaching and may undermine enforceability of the entire clause.
-
Unclear trigger dates - When does the confidentiality period start? From signing? From disclosure? From termination? Ambiguity creates disputes and compliance difficulties.
-
No termination rights - An NDA that cannot be terminated locks both parties into an ongoing relationship. Consider including termination for convenience with appropriate notice.
-
Duration mismatched to information type - A 10-year term for routine business information is excessive; a 1-year term for cutting-edge R&D may be insufficient.
Clause Versions
Short Term (1 Year): Best for preliminary discussions, fast-moving industries, or when confidential information has a short competitive lifespan.
✓ Advantages
- Easy for receiving party to comply
- More likely to be enforced by courts
- Appropriate for preliminary discussions
- Lower administrative burden for tracking
✗ Disadvantages
- May not protect truly sensitive information
- Competitors could wait out the period
- Not suitable for trade secrets
- May require new NDA for ongoing relationship
TERM AND DURATION (a) Term. This Agreement shall commence on the Effective Date and shall continue for a period of one (1) year thereafter (the "Term"), unless earlier terminated by either party upon fifteen (15) days' prior written notice to the other party. (b) Confidentiality Period. The Receiving Party's obligations of confidentiality and non-use under this Agreement shall survive expiration or termination of this Agreement and shall continue for a period of one (1) year following the date of disclosure of the applicable Confidential Information. (c) Automatic Expiration. Upon expiration of the confidentiality period applicable to any Confidential Information, such information shall no longer be considered Confidential Information under this Agreement, and the Receiving Party shall have no further obligations with respect thereto. (d) Effect of Termination. Upon termination or expiration of this Agreement, the Receiving Party's right to receive additional Confidential Information shall cease, but all confidentiality obligations with respect to previously disclosed Confidential Information shall continue in accordance with subsection (b) above.
Standard (3 Year): The most common approach for business NDAs. Balances protection with practicality. Includes trade secret carve-out.
✓ Advantages
- Industry-standard duration
- Balanced for most business information
- Trade secret carve-out included
- Generally enforceable by courts
✗ Disadvantages
- May be too long for routine information
- May be too short for R&D or technology
- Requires tracking disclosure dates
- One size may not fit all information types
TERM AND DURATION (a) Disclosure Period. This Agreement shall commence on the Effective Date and shall continue for a period of two (2) years thereafter (the "Disclosure Period"), unless earlier terminated by either party upon thirty (30) days' prior written notice to the other party. The parties may extend the Disclosure Period by mutual written agreement. (b) Confidentiality Period. The Receiving Party's obligations of confidentiality and non-use under this Agreement shall survive any expiration or termination of this Agreement and shall continue for a period of three (3) years following the date of disclosure of the applicable Confidential Information. (c) Trade Secrets. Notwithstanding subsection (b) above, any Confidential Information that constitutes a trade secret under applicable law shall remain subject to the confidentiality and non-use obligations of this Agreement for so long as such information continues to qualify as a trade secret. (d) No Obligation to Disclose. Nothing in this Agreement shall obligate either party to disclose any particular Confidential Information to the other party. All disclosures are voluntary. (e) Effect of Termination. Termination or expiration of this Agreement shall not affect: (i) the confidentiality obligations with respect to Confidential Information disclosed prior to such termination or expiration; or (ii) any other rights or obligations that expressly survive termination.
Perpetual / Trade Secret: For highly sensitive information or trade secrets. Use with caution - courts may limit enforceability.
✓ Advantages
- Maximum protection for disclosing party
- Appropriate for true trade secrets
- No expiration date to track
- Deters misappropriation indefinitely
✗ Disadvantages
- Courts may refuse to enforce
- Burdensome for receiving party
- May chill legitimate business activity
- Viewed as overreaching by many courts
TERM AND DURATION
(a) Term. This Agreement shall commence on the Effective Date and shall continue in effect until terminated by the Disclosing Party upon written notice to the Receiving Party. The Receiving Party may not unilaterally terminate this Agreement; provided, however, that the Receiving Party may request termination and the Disclosing Party shall not unreasonably withhold consent to such request.
(b) Perpetual Confidentiality. The Receiving Party's obligations of confidentiality and non-use under this Agreement shall survive any termination of this Agreement and shall continue in perpetuity with respect to all Confidential Information, including without limitation:
(i) All trade secrets, which shall remain protected for so long as they qualify as trade secrets under applicable law;
(ii) All technical information, including source code, algorithms, formulas, designs, and specifications;
(iii) All proprietary business information, including customer lists, pricing strategies, and business plans; and
(iv) Any other information designated as Confidential Information under this Agreement.
(c) Continuing Obligations. The Receiving Party acknowledges that the Confidential Information has enduring value and that the perpetual nature of the confidentiality obligations is reasonable and necessary to protect the Disclosing Party's legitimate business interests.
(d) Effect of Termination. Upon termination of this Agreement, the Receiving Party shall immediately cease all use of Confidential Information and shall comply with all return or destruction obligations set forth in this Agreement. The termination of this Agreement shall not affect any accrued rights or obligations of the parties.