The Notion of “Term” and “Termination” in Confidentiality Agreements

[Updated 12 April 2018: I still use the approach outlined in this post.]

I’ve structured Koncision’s automated confidentiality-agreement template so that you have (1) a period during which one party provides the other with, or the parties exchange, confidential information and (2) a subsequent period during which a party that received information during that initial period must keep it confidential.

I had previously contemplated referring to the initial term as “the term of the agreement,” with the end of that period constituting termination of the agreement. That’s a pretty standard arrangement, but it flat-out doesn’t make sense. After the initial period, the contract is by no means over. Instead, it continues to serve its primary purpose—restricting disclosure of confidential information.

So I plan on no longer using “term” and “termination” with respect to the initial period. What I do instead will depend on the context, but if the confidentiality agreement relates to due diligence in advance of a proposed transaction, I have in mind using the defined term Due-Diligence Period for the initial period. [Updated 12 April 2018: I now use the defined term Disclosure Period.]

Some might find disconcerting a confidentiality agreement that doesn’t refer to termination. Well, any comfort derived from termination that is said to occur at the end of the due-diligence period would have to be based on a misunderstanding.

And otherwise, Koncision’s confidentiality agreement will say that the obligation to keep information confidential continues perpetually after the due-diligence period, for a stated time after the due-diligence period, or for some combination of the two. So far nothing in the drafting logic requires that I pronounce that the end of any such stated period constitutes termination of the contract.

But these ideas are about two hours old. Any thoughts?

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.