NDA: Return or Destruction of Confidential Information

Jan 30, 2017

Non-disclosure agreements (or “NDA”) are usually commercial contracts where parties agree to share confidential information for the purpose of furthering other business transactions. An NDA lawyer may advise the disclosing party about the considerations for what happens if the agreement is not accomplished.

Usually, if the agreement is not consummated or memorialized, a receiving party has to return all disclosed confidential information, together with any derivative information, to the other party. Some choose to require destruction of the shared information.  

An NDA attorney could advise the receiving party that such return-or-destroy requirement is ineffective and that parties in an NDA should not agree on it. They may reason that most receiving parties would not even remember complying with it upon termination of an NDA and that it could be impractical for receiving parties to trace other permitted recipients and to retrieve the shared information. Nonetheless, including such provision may still be beneficial for both parties at the end of the agreement. Having the return-or-destroy requirement clause upon termination or upon a specified period of time is better than having no basis at all once an NDA is terminated or expires.

Furthermore, parties may agree to include certain exceptions where the receiving party may be allowed to retain certain confidential information, such as electronically stored data to comply with laws or with its internal retention policies. As long as the disclosing party agrees and the information is not used for unauthorized purposes, such terms and conditions may be reasonably included in the agreement. Consulting with an  NDA attorney could further help the parties decide how to continue protecting the shared information even upon termination or expiration of an NDA.

By Heliane Fabian