This clause requires both parties to keep all information shared during contract negotiations confidential, even if the deal ultimately falls through. The purpose is to encourage open, honest discussion during negotiations without fear that sensitive business information, pricing strategies, financial data, or strategic plans will be leaked to competitors or the public if the deal doesn't close. This is particularly important in SaaS contexts where parties may discuss proprietary technology, customer lists, pricing models, or integration capabilities. The clause protects both parties equally—neither can use information learned during negotiations to their advantage if the deal fails.
The key tension with this clause is determining what happens after negotiations end. Does the confidentiality obligation last forever, or does it expire after a certain period? What if one party learns information that's already public or independently develops similar knowledge? What if the information is required to be disclosed by law or court order? A well-drafted clause will address these scenarios, but many don't. Additionally, this clause can create practical problems if one party later wants to negotiate with a competitor—they may be restricted from using general knowledge or insights gained during the failed negotiation, which could put them at a disadvantage.
Accept this clause as a general principle—it's reasonable and fairly standard—but negotiate the following protections: (1) set a time limit on the confidentiality obligation (e.g., 2-3 years after negotiations end), (2) include standard carve-outs for information that is publicly available, independently developed, rightfully received from a third party, or required to be disclosed by law or court order, (3) clarify that general ideas, concepts, or know-how (as opposed to specific confidential information) are not protected, and (4) ensure that if negotiations resume, the confidentiality obligation continues but doesn't prevent you from using general business knowledge. Also confirm that the obligation doesn't prevent you from negotiating with competitors or discussing general industry practices learned during the process.
Frequently Asked Questions
What does this clause mean in simple terms?
This clause requires both parties to keep all information shared during contract negotiations confidential, even if the deal ultimately falls through. The purpose is to encourage open, honest discussion during negotiations without fear that sensitive business information, pricing strategies, financial data, or strategic plans will be leaked to competitors or the public if the deal doesn't close.
Why should I care about this clause?
This is particularly important in SaaS contexts where parties may discuss proprietary technology, customer lists, pricing models, or integration capabilities. The clause protects both parties equally—neither can use information learned during negotiations to their advantage if the deal fails.
What are my options?
The key tension with this clause is determining what happens after negotiations end. Does the confidentiality obligation last forever, or does it expire after a certain period?
How does this affect small businesses?
What if one party learns information that's already public or independently develops similar knowledge? What if the information is required to be disclosed by law or court order?