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A two-way NDA protecting information exchanged during a business evaluation. Several clauses lean in favor of [Party B] (the receiving party), including a one-sided residual-use right and a non-solicit that is likely overbroad.
Section 1.1
"Confidential Information" means any non-public information disclosed by [Party A] or [Party B] that is marked as confidential or that should reasonably be understood as confidential given its nature and the circumstances of disclosure. Information shared orally shall be identified as confidential at the time of disclosure and confirmed in writing within thirty (30) days.
Why this matters
Standard bilateral definition with a sensible 30-day written-confirmation window for oral disclosures. The "reasonably understood" catch-all is well-drafted and symmetric — neither party is favored.
Suggestion
Retain as drafted; this is conventional and balanced.
Section 2.1
The obligations of confidentiality and non-use set forth in this Agreement shall survive for a period of three (3) years following the date of disclosure of each item of Confidential Information, after which such obligations shall automatically expire.
Why this matters
A three-year term is longer than the typical one-to-two-year market norm but is enforceable and not uncommon for trade-secret-heavy deals. Slightly favors the disclosing party by extending the tail; unlikely to be a deal-breaker.
Suggestion
If leverage allows, negotiate the term down to two years to match market convention.
Section 3.1
Each party may disclose Confidential Information to its employees, contractors, advisors, and affiliates who are bound by written confidentiality obligations no less protective than those in this Agreement. Each party shall remain responsible for any breach by its representatives.
Why this matters
The recipient list is broad (employees, contractors, advisors, affiliates) and is missing a need-to-know qualifier. Without it, a receiving party could share information with wide swaths of its organization rather than only those working on the evaluation. The indemnification-for-representatives language is good but does not cure the overbreadth.
Suggestion
Add an express "need to know" restriction limiting disclosures to those with a legitimate business need.
Section 4.2
Notwithstanding anything to the contrary, [Party B] shall be free to use for its own benefit any Residual Information — being Confidential Information in unaided memory — retained in the unaided memories of its employees and contractors who had access to such information. [Party B] agrees not to consciously reference or reproduce Confidential Information from documents or other tangible media.
Why this matters
This residuals clause is one-sided: only [Party B] (the receiving party) retains the residual-use right. In practice this lets [Party B]'s engineers walk away with embedded knowledge of [Party A]'s methods, creating meaningful leakage risk for software, algorithms, or process-oriented disclosures. The unaided-memory carve-out is narrow comfort given how hard it is to prove what is "aided."
Suggested edit
Notwithstanding anything to the contrary, each party shall be free to use for its own benefit any Residual Information retained in the unaided memories of its representatives who had authorized access, provided that neither party shall consciously reproduce or reference Confidential Information from any tangible medium. This residual right is granted mutually and symmetrically to both parties.
Section 5.3
For a period of twenty-four (24) months following the Effective Date, [Party B] shall not, directly or indirectly, solicit, recruit, hire, or engage any customer, prospective customer, supplier, or employee of [Party A], nor interfere with any such relationship. This restriction applies worldwide and is not limited to any party with whom [Party B] had contact under this Agreement.
Why this matters
Twenty-four months covering all prospective customers with no geographic limit and no contact-nexus requirement is almost certainly unenforceable as drafted in California and likely overbroad in most U.S. jurisdictions. Prospective-customer restrictions are particularly disfavored because they are nearly impossible to police and can be triggered unknowingly. This clause will likely be reformed or stricken by a court, which weakens the entire agreement.
Suggested edit
For a period of twelve (12) months following the Effective Date, [Party B] shall not, directly or indirectly, solicit or hire any employee of [Party A] with whom [Party B] had material contact under this Agreement, nor solicit any then-current customer of [Party A] with whom [Party B] engaged in substantive discussions during the term. General advertising and responses to unsolicited inquiries shall not constitute a breach.
Section 6.1
Each party acknowledges that a breach of this Agreement may cause irreparable harm for which monetary damages would be an inadequate remedy, and accordingly the non-breaching party shall be entitled to seek injunctive relief and specific performance, in addition to all other remedies available at law or in equity.
Why this matters
This is standard equitable-relief language and is generally enforceable. However, it lacks the customary advance-notice carveout requiring the non-breaching party to give notice (or show good cause for proceeding ex parte) before seeking an injunction, which can expose a party to surprise TRO filings in distant forums.
Suggestion
Add a notice provision requiring reasonable advance notice before seeking injunctive relief, except where notice would defeat the purpose of the injunction.
Section 7.1
This Agreement shall be governed by the laws of [Jurisdiction], without regard to its conflict-of-laws principles. The parties consent to the exclusive jurisdiction and venue of the state and federal courts located in [Jurisdiction] for any dispute arising out of or relating to this Agreement.
Why this matters
The forum selection is standard and enforceable under modern U.S. doctrine, but it binds a non-local party to litigate in [Jurisdiction], which can be a meaningful cost and convenience burden. Worth flagging so the signing party knowingly accepts the forum — not a substantive risk, but a negotiating point.
Suggestion
If you are the non-local party, push for a neutral forum or your home jurisdiction.
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