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What happens on tender, stays on tender

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Legalese: Architects need to be cautious about the potential for risks arising from the increasingly common use of non-disclosure agreements, says Mark Klimt

Confidentiality clauses and non-disclosure agreements (NDAs) are now a staple ingredient of appointment documentation on commercial projects.  With the collaborative Building Information Modelling system a requirement of all publicly funded projects with effect from next year – and the system’s use growing apace – such wordings look set to become even more widespread. But such provisions often go further than they need to and, as with everything else, need to be approached with caution.

All that is really needed in an NDA is a wording and an understanding that information is going to be exchanged between parties (sometimes on a speculative basis for a collaborative tender, or sometimes to further a project) and that the receiving party will not use the disclosing party’s materials so supplied elsewhere, or to the disclosing party’s commercial disadvantage.

It is usual and acceptable for the purpose of the exchange of information to be rehearsed, for the materials caught by the obligations to be defined and for exceptions to the definition to be set out (for example, documentation that was already in the possession of the receiving party or in the public domain). An NDA may also provide for the disclosing party to be informed if the receiving party faces an application for production of its confidential information and typically sets out the sanctions for breach, including injunctive relief.

It is common in NDAs for disclosing parties to disclaim any responsibility for the materials supplied. This is now so commonplace as not to be resistible but such a disclaimer in truth has no relevance in a document which is supposed to be governing arrangements for keeping commercially sensitive material private. However, there are other insertions which architects may face as the receiving party that need to be resisted.

Firstly, employers tend now to insert exclusivity provisions into NDAs, preventing, say, the receiving party from making any contact by itself with the party to whom the collaborative tender is being addressed. This might be fine as far as the particular project is concerned but, depending on the wording, it could result in the receiving party unwittingly being unable to pursue future business opportunities with that party, regardless of whether the tender on one project is successful or not.

Another potentially dangerous obligation is one requiring the architect to ‘ensure’ that other parties to whom it may disclose the confidential information in the course of providing its services comply with the secrecy requirements. These other parties may be people over whom the architect cannot exert control, so the obligation should be tempered by the use of the wording ‘all reasonable steps’ or ‘skill and care’. 

Wide-ranging indemnities for breach are another danger in NDAs. Even if compliance is within the architect’s control, it should not accept a responsibility to indemnify – and certainly not for some of the wide-ranging losses claimed under documents of this nature, such as loss of earnings and loss of reputation.

It is usual for NDAs to require the receiving party to deliver up all of the confidential information supplied once the project or the relationship comes to an end.  This too needs to be tempered. An architect will usually be required by quality control and other regulations to keep a full record of all its projects, so delivery up or destruction should have this as an exception, particularly where (as is common) the receiving party is required to certify that all materials have been returned or destroyed. An architect can agree to behave responsibly and carefully with other party’s sensitive data, but a document that goes beyond that should be approached with caution.

  • Mark Klimt is a partner at law firm DWF
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