“No Reliance” Language for a Confidentiality Agreement

In this May 2011 blog post discussing the Texas Supreme Court’s opinion in Italian Cowboy Partners, I acknowledged that if you want to increase the odds of avoiding fraud liability for extracontractual statements of fact, it would be prudent to use “no reliance” language instead of just saying that Acme has made no representations other than those stated in the contract. (In standard “no reliance” language, a party states that it’s not relying on any representations other than those in the contract.) And in that blog post I proposed my own enhanced “no reliance” language.

Soon West LegalEdcenter will be unleashing on the world my webcast on confidentiality agreements, with co-presenters Chris Lemens and Glenn West. One of the topics touched on in the webcast is “no reliance” language. I subsequently realized that for purposes of a confidentiality agreement being entered into in advance of a proposed transaction, the “no reliance” language I had offered in my blog post wouldn’t work—because the recipient would simply be considering whether to enter into the proposed transaction, it wouldn’t be clear until such time as the parties enter into a definitive agreement how the recipient could be said to be relying on any factual statements. (Any definitive agreement would contain its own “no reliance” language.)

So afters some back-and-forth with Glenn, I tweaked as follows my “no reliance” language so that it works for purposes of a confidentiality agreement being entered into in advance of a proposed transaction:

Acme acknowledges that because in exploring the Proposed Transaction and examining Confidential Information it has not relied on, and will not be relying on, any statements made by Widgetco to Acme regarding accuracy of any Confidential Information, Acme will have no basis for bringing any claim for fraud in connection with any such statements.

This language reflects that Widgetco isn’t making any representations in the confidentiality agreement. More significantly, it also makes it clear where the potential reliance lies—a recipient could conceivably bring a claim for fraud against the disclosing party on the grounds that it had relied on statements regarding the Confidential Information and as a result had wasted time and money on due diligence and had foregone other opportunities.

If this language passes muster in the marketplace of ideas, I expect to add it to Koncision’s confidentiality-agreement template.

By the way, is it only Texas courts that have a thing about “no reliance” language, or have other jurisdictions adopted the same approach? (I assume that this isn’t an issue outside the U.S.)

[Updated 14 April 2018: For more on no-reliance language in confidentiality agreements, see this post date 14 June 2012.]

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.