Complete framework for analyzing every significant clause in non-disclosure agreements
When Clause is Missing, Favors:
Disclosing Party Receiving Party Neither (Neutral) Context DependentRisk Levels:
High Risk Medium Risk Low Risk| Clause Name | Industry Standard Range | Implication if Missing | Missing Favors | Dependencies & Context |
|---|---|---|---|---|
| 🔐 CORE CONFIDENTIALITY PROVISIONS | ||||
| Definition of Confidential Information | Ranges from narrow (marked only) to broad (all disclosed info). Standard includes specific categories with reasonable exclusions. | Creates ambiguity about what constitutes confidential information. Severely limits enforceability of entire agreement. | Receiving | Foundation clause - impacts all other provisions. Broad definitions require stronger exclusions. |
| Exclusions from Confidential Information | Standard exclusions: public domain, prior knowledge, independently developed, third-party rightful disclosure, required by law. | Everything becomes potentially confidential with no safe harbors for receiving party. | Disclosing | Critical if confidential info definition is broad. Absence creates unenforceable over-reach. |
| Purpose/Use Limitation | Specific purpose (M&A evaluation) to broad business relationship evaluation. Often tied to transaction type. | May allow broader internal use; reduces enforceability and clarity of permitted scope. | Receiving | Should align with business context. Narrow purposes require broader exclusions for practical use. |
| Non-Disclosure Obligation | Strict prohibition with need-to-know sharing to employees/agents under confidentiality obligations. | No enforceable duty to keep information confidential - defeats entire purpose of NDA. | Receiving | Core provision - without this, agreement is meaningless regardless of other terms. |
| Standard of Care/Protection | Reasonable care (same as own confidential info) or specific security measures. Some require "strict confidence." | Ambiguity about level of protection required; may default to general negligence standards. | Receiving | If missing, other provisions should clearly define protection obligations. |
| ⏰ TERM AND DURATION | ||||
| Term of Agreement | 1-3 years for evaluation period. May be indefinite for ongoing relationships. | Creates uncertainty about when disclosure obligations end and enforceability timeline. | Context | Should coordinate with confidentiality obligation term. Missing creates interpretation disputes. |
| Term of Confidentiality Obligations | 2-5 years post-disclosure standard. Trade secrets often indefinite. Some tied to information type. | Confidentiality duties may expire with agreement term or become indefinite - creates uncertainty. | Receiving | More critical if agreement term is short. Should specify different terms for different info types. |
| Survival of Obligations | Confidentiality, return, and remedy provisions typically survive. IP and indemnification may survive longer. | Key obligations may terminate with agreement, eliminating ongoing protections. | Receiving | Critical for short-term agreements. Should specify which provisions survive and for how long. |
| 📁 INFORMATION HANDLING | ||||
| Return/Destruction of Information | Prompt return/destruction on termination or request, with certification. 30-60 day compliance window typical. | Receiving party may retain confidential information indefinitely. | Receiving | More important for physical documents. Should address backup copies and legal retention requirements. |
| Permitted Disclosures (Legal Compulsion) | Allows disclosure required by law/court with advance notice and cooperation in seeking protective order. | No mechanism for lawful disclosure; may force breach of confidentiality or legal requirements. | Context | Essential for regulated industries. Should coordinate with notice provisions. |
| Notice Requirements (Breach/Compulsion) | Prompt notice of breach or compelled disclosure, reasonable time to seek protection. | Disclosing party lacks opportunity to protect information or seek remedies. | Disclosing | Pairs with permitted disclosure clause. Timeline should be practically achievable. |
| Third Party Representatives/Agents | Limited disclosure to employees, advisors, agents on need-to-know basis under confidentiality obligations. | Unclear who can receive information; potential for broader unauthorized disclosure. | Receiving | Should define categories clearly. Important for companies with complex structures. |
| 💡 INTELLECTUAL PROPERTY | ||||
| No License Granted | Express statement that disclosure grants no IP rights, licenses, or ownership interests. | May create implied license or rights argument, especially for technical information. | Receiving | Critical for patent/trade secret disclosure. Pairs with ownership clarification. |
| Ownership/Title Clarification | Discloser retains all rights, title, and interest. No transfer of ownership. | Potential disputes over ownership, especially in joint development scenarios. | Receiving | Important for joint ventures. Should address improvements/derivatives. |
| Residuals/Residual Knowledge | Often excluded from strong discloser-friendly agreements. When included, limited to general knowledge/skills without specific disclosure. | Safer for disclosing party - no automatic carve-out for general knowledge retention. | Disclosing | Significant impact on receiving party's ability to use general knowledge. Controversial provision. |
| 🤝 BUSINESS RELATIONSHIP | ||||
| No Obligation to Proceed | Standard disclaimer that NDA creates no obligation to enter business relationship or continue discussions. | Receiving party may claim detrimental reliance or expectation of business relationship. | Disclosing | Important for M&A and investment contexts. Protects against reliance claims. |
| Non-Solicitation (Employees) | Often excluded unless strategic partnership context. When included, 12-24 month term for key employees. | No restriction on hiring/recruiting employees during sensitive discussions. | Receiving | More important for operational information sharing. May face enforceability challenges. |
| Non-Circumvention | Generally omitted unless involving introductions to third parties or specific business opportunities. | No restriction on bypassing introducing party or directly contacting disclosed relationships. | Receiving | Specific to context where introductions are made. Often overreaches in standard NDAs. |
| ⚖️ ENFORCEMENT AND REMEDIES | ||||
| Injunctive Relief Right | Standard provision acknowledging irreparable harm and right to immediate equitable relief. | Limits ability to stop ongoing disclosure; may need to prove irreparable harm. | Receiving | Critical for practical enforcement. Should pair with reasonable remedy limitations. |
| Monetary Damages/Liquidated Damages | Either actual damages or reasonable liquidated damages. Unlimited damages less common. | May limit remedy options; relies on proving actual financial harm. | Receiving | Liquidated damages must be reasonable to be enforceable. |
| Attorneys' Fees | Often omitted or limited to successful enforcement. Mutual fee-shifting less common. | Each party bears own costs regardless of outcome; may discourage enforcement. | Receiving | Can significantly affect enforcement economics. One-way fees favor stronger party. |
| Limitation of Liability | Often excludes consequential damages. May cap total liability. | Full damages potentially available; no caps on liability exposure. | Disclosing | Should carve out intentional breaches. Interacts with indemnification provisions. |
| 🏛️ GOVERNANCE | ||||
| Governing Law | Usually disclosing party's jurisdiction or neutral business-friendly state (DE, NY). | Potential conflict over applicable law; may default to where breach occurred. | Context | Should align with jurisdiction clause. Different states have varying IP/trade secret laws. |
| Jurisdiction/Venue | Exclusive jurisdiction in specific courts, often aligned with governing law. | Potential forum shopping; inconvenience for enforcement. | Context | Should consider where parties located and where breach likely to occur. |
| Dispute Resolution (ADR) | Often omitted for NDAs. When included, typically mediation then arbitration. | Disputes go to court litigation; may be slower but preserves appeal rights. | Neither | May conflict with injunctive relief needs. Should carve out emergency relief. |
| ⚙️ OPERATIONAL | ||||
| Assignment/Transfer Rights | Generally requires consent except for affiliates/successors. May be freely assignable by disclosing party. | May allow free assignment/transfer to any third party without consent. | Receiving | Important for M&A contexts. Should address change of control scenarios. |
| Amendment/Modification | Requires written agreement signed by both parties. | May allow oral modifications or course of conduct changes. | Neither | Standard provision - absence creates enforceability uncertainty. |
| Notice Provisions | Written notice to specified addresses, effective upon delivery/receipt. | Unclear how to provide required notices under agreement. | Neither | Critical if other clauses require notice (termination, breach, compelled disclosure). |
| Marking/Identification Requirements | Varies widely - some require marking, others allow oral identification with written follow-up. | Ambiguity about what constitutes confidential information in practice. | Receiving | Should align with confidential information definition. Stricter marking helps receiving party compliance. |
| No Presumption Against Drafting Party | Increasingly common in sophisticated agreements. Negates contra proferentem rule that ambiguities favor non-drafting party. | Ambiguous terms will be interpreted against the drafting party under traditional contract law principles. | Receiving | More important when other provisions are ambiguously drafted. Assumes disclosing party typically drafts agreement. |