Examples of Survival Terms in NDA’s
Survival clauses are a slippery slope.
For legal representatives of employees and Receiving Parties (the party that receives confidential information from a Disclosing Party), a survival term in an NDA, in particular, can be cause for long hours of contract review and exhaustive preparations for a lengthy legal fight.
That’s because survival terms and clauses are often one-sided and used unfairly by Disclosing Parties. For some Disclosing Parties, this tactic has paid off. For others, it cost them more in defensive legal fees than it was worth.
With that in mind, my goal with here is to try and clear up what a survival term is, what they look like in NDA’s and how they should be fairly used in your agreements.
- 1 What’s a Survival Term?
- 2 Examples of Survival Terms and Clauses
- 3 Survival for a specific time period
- 4 Survival terms as a statute of limitations
- 5 Summary
What’s a Survival Term?
One-in-the-same, a “non-disclosure” agreement or a “confidentiality” agreement is used when one or more parties reveal confidential and privileged company information during the time of doing business together, negotiating mergers or other business arrangements.
These agreements often appear in employment contracts, as well, and their main purpose is to protect a company’s valuable intellectual property and trade secrets.
A survival term or a survival clause is a clause which specifies which terms or provisions of a contract, if any, will remain in effect after the contract has been fully executed and the terms of the contract have been met.
Due to the nature and content of an NDA, survival terms are often compulsory.
When trade secrets and other intellectual property are being disclosed for the purposes of employment, mergers, acquisitions, partnerships, product development, and so forth, the privileged information may need to remain privileged long after the business relationship has ended.
After all, some privileged information, such as trade secrets or patents, must remain confidential for the sake of a company’s continued survival.
Therefore, survival terms and clauses may be necessary in your NDA.
Examples of Survival Terms and Clauses
Survival clauses can be drafted in a number of different ways, and for a number of different reasons, depending on the circumstances of your business relationship, what is being disclosed, and why it’s being disclosed in the first place.
Here, I’ll go over the most common ways that a survival clause or survival terms may be used in your NDA’s.
Some NDA’s may be generic and simply include verbiage to the effect that all logical provisions that should survive termination of the agreement, will. This often leaves the details to the judgment of common law standards.
That’s not to say it won’t suffice – it’s just a general way of wording it.
For more complex business arrangements or relationships that aren’t so solid, you may not be well advised to use a general survival term.
However, if your NDA is simple, the business relationship straightforward, and the terms of the privileged information uncomplicated, then a general survival clause may be all you need.
Survival by section number
Other NDA’s and their survival clauses will be more precise, stating that specific provisions of the agreement are to survive termination of the agreement.
These types of survival clauses often list the provisions by section number or in some other way identify specifically which segments of the NDA remain in effect.
These types of survival clauses are often useful when your NDA is lengthy or complex as some provisions will explicitly need survival terms while others will inevitably need to end with the termination of the contract.
Survival within a provision
To take that concept one step further, NDA’s can also be written so that certain provisions include survival terms within the provision, separate and apart from an actual survival clause.
This is where legalese can convolute the message and meaning of your NDA, so be careful of your wording.
For example, notwithstanding, as is used in the example survival clause below, likely means that Article 7 with survive for six years despite the fact that the survival period in Section 11.6 specifies a different time period.
A survival term within a provision may be important for any number of reasons, depending entirely on the details of your agreement.
Survival until occurrence of an event
Sometimes a term or provision survives the termination of an agreement only until a certain event occurs.
Often, with NDA’s, this particular event is the confidential information becoming public.
The example here spells it out quite clearly. Other specific events may be the completion of a merger or the final day of a provisional partnership, entered into for the performance of a certain project.
Survival for a specific time period
Time periods may also be established for survival of provisions in an NDA.
These may either be used in lieu of a specific event or when the parties simply agreed that after a certain period of time, the privileged information and promise to maintain confidentiality is no longer necessary or valid.
Sometimes this is specifically used to make sure that both parties have time to wrap up all loose ends. In other situations, there are specific circumstances that may lead to the choosing of a time period or specific date.
This one can get tricky, as the law recognizes that infinity is a difficult concept in legal terms, so if you include a survival clause with an unlimited application, be certain that the situation calls for it.
With employees or independent contractors, in particular, it may not always be plausible for you to limit or restrict their actions for too many years after they’ve ended their employment or work with your company.
The law will favor their right to work and provide for themselves.
However, some clauses, such as governing law and ownership of property, are rather suitable for an indefinite survival term.
This survival clause is a good example of such.
That may seem like a lot of survival clause options, but many are transposable and, in some instances, it doesn’t necessarily matter which format you choose.
In those cases, a general survival clause will often suffice. In other situations, it may be extremely pertinent that you word the survival terms in such a way that it protects you for a very specific period of time or in a specific way.
As with any contract or legal concept, survival clauses and terms have, at one point or another, been the topic of heated debate or, at the very least, healthy examination and conversation.
In recent years, the legal community has brought up two possible interpretations of survival clauses that are worth mentioning here.
Survival terms as a statute of limitations
In 2011, the Court of Chancery of the State of Delaware, ruled that a survival clause acted as a statute of limitations on a buyer’s ability to bring legal action for a breach of contract. (GRT, Inc. v. Marathon GTF Tech., Ltd., 2011 Del. Ch. LEXIS 99 (July 11, 2011).
While the contract, in question, was a purchase contract and not an NDA, it doesn’t negate the fact that it’s something you need to be aware of.
Every state and jurisdiction interprets survival clauses a bit differently, with some viewing them more narrowly or broadly than others. You’ll want to be familiar with your jurisdictions opinion on the subject.
For the purpose of NDA’s, this is important because with poor wording, your survival clause may either be entirely useless or have completely unintended consequences that result in exactly the type of legal battle you’re trying to avoid.
If you include a survival clause that pertains to some aspect of law that’s affected by a statute of limitations, make sure your wording is clear that the statute of limitations still applies or in some other manner make it clear what your survival clause is meant to do.
Another interesting concept is that of the ‘due diligence period.‘
Many standard NDA’s include language referring to the initial period of a business deal where the bulk of confidential information is exchanged.
The agreements will often state that the end of this exchange period comprises the ‘term‘ of the contract.
In other words, it alludes to the fact that once the information is exchanged, the contract is complete.
However, according to some experts, that wording is misleading because once the confidential information is exchanged, there’s still the business of keeping it confidential – which is the entire point of the NDA agreement.
Contract consultant Ken Adams has taken to referring to that initial period of exchanging information as the “due diligence period”, indicating that the initial exchange must be handled with utmost care, while still preserving the all-important detail that the parties obligation to maintain the confidentiality of the information hasn’t ended.
In other words, he’s eliminated the word ‘term’ and simply renamed the exchange of information as the “due diligence period” making it clear that when the initial exchange is over, the confidentiality obligation still remains and the contract is still in full force.
NDA’s often reference survival terms or clauses.
As you prepare your own NDA’s, the most important thing is to be careful of your wording – as is true with any legal contract.
Choose the most appropriate survival terms for your situation and make the verbiage clear.
Being familiar with your jurisdictions opinion and general interpretation of survival terms and clauses won’t hurt either.
Credits: Icon access granted by anbileru adaleru from the Noun Project.
Nov 16, 2017 | Non-disclosure Agreements
This article is not a substitute for professional legal advice. This article does not create an attorney-client relationship, nor is it a solicitation to offer legal advice.