assignment clause in an nda

What are the different clauses in an NDA?

Non-disclosure agreements, as we talked about in a previous blog post , are important tools for any company that shares confidential information with third parties.

Within a non-disclosure agreement (NDA), there can be different clauses about rights, relief and more. This post is meant to summarize some of the more “legalese” provisions that might appear in an NDA and why they matter.

Can a party assign their rights to a third party?

An assignment clause provides rules for whether a party is allowed to assign their rights or obligations under the NDA to a third party. There are situations where assignment could be helpful or harmful, depending on who is assigning. 

If a receiving party sells its assets to a third party, for example, and assigning its rights under an NDA to the buyer, the buyer may be a company that the disclosing party would not have wanted to share that confidential information. This situation could also arise in a change of control of the receiving party, so it is best practice to be careful whenever there is an assignment or change of control clause within an NDA.

Does choice of law matter?

Yes! There should be a clause within the NDA that chooses the laws of which state (or /province or country if outside the U.S.) will govern the agreement. This clause should probably also choose a proper venue or it may provide that the dispute resolution method will be arbitration instead of litigation. It is important to choose a reasonable jurisdiction to enforce the NDA, as well as one that is not too inconvenient or costly.

What is injunctive relief?

What happens when a receiving party discloses confidential information in violation of an NDA? In this case, the disclosing party can seek an injunction. An injunction is a court order for a party to do (or stop doing) something.

The party seeking the injunction must show that they have suffered or will suffer irreparable harm from the unauthorized use of their confidential information. “Irreparable harm” means the type of harm that cannot be cured through monetary compensation.

The cost of litigating an injunction can be significant, so some NDAs include a provision stipulating that the unauthorized disclosure of confidential information will cause irreparable harm. This does not necessarily mean that the judge will automatically grant an injunction, but it could make proving irreparable harm easier or improve the availability of emergency, short-term action by the court.

Who pays for the legal fees?

Similar to an injunction, the cost of seeking enforcement of an NDA can also be substantial. Therefore, it may be a good idea for the disclosing party to include a fee payment provision. Generally, this type of provision allows the prevailing party to recover its legal fees from the other party.

Without such a provision, a successful party may still suffer financial harm when paying the costs of their own legal fees, and in the face of the huge expense of enforcement, a party might be hesitant to enforce their rights at all.

Whether fees can be recovered in contract cases is a matter of state law, so choice of law is important!

What happens when a party is legally compelled to disclose information?

NDAs should have a provision that specifies what happens if the receiving party is compelled to disclose confidential information by law. For example, if the receiving party receives an order from a court or other governmental agency, or as part of the discovery process. Typically, these provisions require the receiving party to notify the disclosing party that such an order has been issued. Additionally, the receiving party should also be required to cooperate (within reason) with the disclosing party in acquiring a protective order.

A protective order allows the parties to keep confidential information protected from disclosure beyond the ordered disclosure to the court. This clause is important, especially with litigation, because either party can add documents to their court filings. These documents could then become generally accessible by the public, which would defeat the purpose of the NDA!

Strong non-disclosure agreements are essential tools for businesses to protect their commercially valuable information as well as the personal information of clients and employees. However, the strength of the agreement can hinge on the way key provisions are written.

Finding the best fit for each situation may take time, but the protection afforded by a well-drafted NDA is worth the time.

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NDAs and confidentiality agreements: What you need to know Protection of confidential information within an organization is usually a vital business priority. Learn what you need to know when structuring confidentiality agreements.

Nearly all businesses have valuable confidential information, and for many, confidential information is a dominant asset. Companies also share, receive, and exchange confidential information with and from customers, suppliers and other parties in the ordinary course of business and in a wide variety of commercial transactions and relationships.

Contractual confidentiality obligations are fundamental and necessary to help protect the parties that disclose information in these situations. Depending on the circumstances, these obligations can be documented in either:

• A free-standing confidentiality agreement (also known as a nondisclosure agreement or NDA)
• Clauses within an agreement that covers a larger transaction

When is a confidentiality agreement needed?

A range of commercial transactions and relationships involve either the disclosure of confidential information by one party to the other or a reciprocal exchange of information. In both cases, the parties should have a confidentiality agreement in place.

For example, confidentiality agreements may be used when evaluating or engaging a business or marketing consultant or agency, where the hiring company will necessarily disclose confidential information to enable the consultant to perform the assignment. They can also be used when soliciting proposals from vendors, software developers, or other service providers, which usually involves the exchange of pricing, strategies, personnel records, business methods, technical specifications, and other confidential information of both parties.

Finally, your company may need a confidentiality agreement when entering a co-marketing relationship, as an e-commerce business, with the operator of a complementary website or a similar type of strategic alliance.

Why is it necessary to have written confidentiality agreements?

• There are numerous reasons to enter into written confidentiality agreements, such as:
• Avoiding confusion over what the parties consider to be confidential.
• Allowing more flexibility in defining what is confidential.
• Delineating expectations regarding treatment of confidential information between the parties, whether disclosing or receiving confidential information.
• Enforcing written contracts is easier than oral agreements.
• Memorializing confidentiality agreements is often required under upstream agreements with third parties (for example, a service provider's customer agreement may require written confidentiality agreements with subcontractors).
• Maximizing protection of trade secrets, because under state law this protection can be weakened or lost (deemed waived) if disclosed without a written agreement. 
• Covering issues that are indirectly related to confidentiality, such as non-solicitation.
• Maintaining standards that are expected of most commercial transactions and relationships.

The forms of confidentiality agreements

Depending on the type of transaction or relationship, only one party may share its confidential information with the other, or the parties may engage in a mutual or reciprocal exchange of information.

In unilateral confidentiality agreements, the nondisclosure obligations and access and use restrictions will apply only to the party that is the recipient of confidential information, but the operative provisions can be drafted to favor either party.

In mutual confidentiality agreements, each party is treated as both a discloser of its—and a recipient of the other party's—confidential information (such as when two companies form a strategic marketing alliance). In these situations, both parties are subject to identical nondisclosure obligations and access and use restrictions for information disclosed by the other party.

In some circumstances, the parties may share certain confidential information with each other but not on a mutual basis. Instead of entering into a fully mutual confidentiality agreement, the parties enter into a reciprocal confidentiality agreement, in which the scope and nature of the confidential information that each party will disclose is separately defined and their respective nondisclosure obligations and access and use restrictions may differ accordingly.

Limitations and risks of confidentiality agreements

Confidentiality agreements are very useful to prevent unauthorized disclosures of information, but they have inherent limitations and risks, particularly when recipients have little intention of complying with them. These limitations include the following:

• Once information is wrongfully disclosed and becomes part of the public domain, it cannot later be "undisclosed."
• Proving a breach of a confidentiality agreement can be very difficult.
• Damages for breach of contract (or an accounting of profits, where the recipient has made commercial use of the information) may be the only legal remedy available once the information is disclosed. However, damages may not be adequate or may be difficult to ascertain, especially when the confidential information has potential future value as opposed to present value.
• Even where a recipient complies with all the confidentiality agreement's requirements, it may indirectly use the disclosed confidential information to its commercial advantage.

Nondisclosure obligations

In general, recipients of confidential information are subject to an affirmative duty to keep the information confidential, and not to disclose it to third parties except as expressly permitted by the agreement. The recipient's duty is often tied to a specified standard of care. For example, the agreement may require the recipient to maintain the confidentiality of the information using the same degree of care used to protect its own confidential information, but not less than a reasonable degree of care.

Recipients should ensure there are appropriate exceptions to the general nondisclosure obligations, including for disclosures:

• To its representatives. Most confidentiality agreements permit disclosure to specified representatives for the purpose of evaluating the information and participating in negotiations of the principal agreement.
• Required by law. Confidentiality agreements usually allow the recipient to disclose confidential information if required to do so by court order or other legal process. The recipient usually must notify the disclosing party of any such order (if legally permitted to do so) and cooperate with the disclosing party to obtain a protective order.

Disclosing parties commonly try to ensure that recipients are required to have downstream confidentiality agreements in place with any third parties to which subsequent disclosure of confidential information is permitted. In these cases, either the recipient or the discloser may prefer to have these third parties enter into separate confidentiality agreements directly with the discloser.

Term of agreement and survival of nondisclosure obligations

Confidentiality agreements can run indefinitely, covering the parties' disclosures of confidential information at any time, or can terminate on a certain date or event.

Whether or not the overall agreement has a definite term, the parties' nondisclosure obligations can be stated to survive for a set period. Survival periods of one to five years are typical. The term often depends on the type of information involved and how quickly the information changes.

The information in this article was excerpted from Confidentiality and Nondisclosure Agreements. The full practice note, one of more than 65,000 resources, is available at the Thomson Reuters Practical Law website.

The information in this article was excerpted from  Confidentiality and Nondisclosure Agreements . The full practice note, one of more than 65,000 resources, is available at the Thomson Reuters Practical Law website.

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• Non-disclosure (NDA)

10 Key Clauses to Have in Non-Disclosure Agreements

Non-disclosure agreements (NDAs) have become so commonplace in business transactions that they almost seem generic and clichéd, causing many business professionals to neglect their true significance.

To make matters worse, of those who want to use one, few understand how to do so correctly so the drafted agreement often ends up being weak and ineffective , if not worthless and outright void .

Despite its bad reputation, however, an NDA is a crucial legal document, essential to the protection of any legitimate company or business owner. In fact, neglecting to implement this kind of well-written legal agreement can cause your business considerable harm.

In an effort to bring some love back to this overlooked and habitually misused agreement, we’ve taken the liberty of highlighting its importance here and revealing the 10 key clauses needed to make your non-disclosure agreement worth more than just the paper it’s written on.

The importance of signing non-disclosure agreements

First, to address the growing notion that NDAs are irrelevant, I say to you this: ideas are the foundation of all trade, are they not?

Without an idea , you have no industry. Without an industry, you have no business. In fact, for most companies, their net worth is entirely wrapped up in their patents, trademarks, designs, systems, processes, trade secrets and clientele base. Money follows unique ideas and their results.

Second, I address the sad fact that NDAs, when used, are far too often done so incorrectly .

Remember, an NDA is simply an agreement wherein two or more parties agree to keep certain privileged information confidential or secret. This kind of legal agreement can be a mutual or one-way agreement, but always the main goal is to protect information or trade secrets that are critical to a company’s success.

In order for this kind of legal agreement to effectively protect your confidential information, however, it has to be a well-written, legitimate and compelling agreement. In other words, if it won’t stand up in court, then what’s the point?

On that note, let’s go over the 10 key clauses you should have in every non-disclosure agreement.

Clause #1: Definition of Confidential Information

Without a doubt, the most critical component of a non-disclosure is the definition of the confidential information.

This clause clearly spells out what information is not to be disclosed. This is the whole point of the agreement right here.

Here’s an example of this kind of clause from Sonnyboo Non-Disclosure Agreement where it basically states that all information disclosed by the writer to the producer is confidential:

And as simple as it sounds, far too many agreements have ambiguous definitions which don’t hold up so well in court.

Included in this type of clause should be specifications about what constitutes “ privileged ” information, as well as an explanation of which formats are covered.

In other words, cover all your bases and specify that information shared through documents, emails, oral conversations, hand-written notes, letters, etc. is all included.

If you’re the Disclosing Party in the agreement, you want to cast a wide net, but not leave any holes.

Clause #2: The Parties

Besides the obvious need to define the Disclosing and the Recipient parties, a non-disclosure should also contain a clause that specifies who else the Recipient Party may disclose the confidential information to during the course of due diligence and business discussions.

For example, the Recipient Party may have their own accountants and attorneys who may need to review the information.

Or, they may contract a third-party to perform some work, such as a graphic designer, editor, developer, etc. These third-party recipients of your confidential information are critical to the performance of this legal contract and should be included in the non-disclosure.

Clause #3: The Terms and Duration

Every non-disclosure agreement should have a clearly defined timeframe .

When does the agreement end and for how long does the confidential information need to stay confidential?

There’s no standard time-limit for these agreements, as each situation is unique. Some trade secrets may be just as crucial 10 years from now as they are today, so specify that in the agreement.

Other details, however, may be irrelevant in 18 months and the agreement should reflect that as well.

Under this type of clause, it’s important to keep in mind that most jurisdictions won’t enforce unrealistic time limits on any legal agreement, including non-disclosures.

While you want to protect your business and the information you’re about to disclose, you also have to be practical and fair to the receiving party.

Clause #4: The Permitted Use of the Information

This clause is where you need to clearly define the intended use of the shared, confidential information.

In other words, why are you sharing this information with the Recipient Party in the first place? Be specific. Sometimes this clause is also used to define third parties, but we prefer to keep those separate for clarity’s sake.

For example, a standard non-disclosure agreement often includes this type of clause like this:

Clause #5: The Legal Obligation to Disclose

Even the most careful and reliable of Recipients to confidential information may, at some point, be legally compelled to disclose the information they agreed to keep confidential under this type of agreement.

This may come from a government agency, administrative entity or via the courts.

To protect both parties – the Disclosing and the Recipient – in these kind of instances, your non-disclosure should include a clause acknowledging that a legal obligation to disclose is not a violation of the agreement.

However, as the Disclosing Party (the party that discloses the information to another party), you also want to include verbiage stating that the Recipient Party (the party that receives the information), if compelled to disclose, will only disclose the information that’s absolutely necessary and that they’ll notify you if such a demand occurs.

Clause #6: The Return of the Information

At the end of the agreement, the confidential information typically needs to be returned or destroyed by the Recipient Party.

Your non-disclosure should contain a clause stipulating exactly how and when this should occur. This can largely depends on the circumstances of your relationship.

Due to the advent of hard drives, drop boxes, thumb drives, email storage, etc. it’s nearly impossible to completely destroy or return every bit of information that’s shared electronically.

But this type of clause would inform the Recipient Party that all received information must be returned or deleted. If the information is difficult to erase, the clause can include verbiage to prevent the Recipient Party from using the information in the normal course of business or sharing it in the future.

Clause #7: The Jurisdiction

Even the most diligent and thorough of contracts can’t prevent every possible conflict between business parties. Breaches occur and misunderstandings happen.

You want to be prepared for this unfortunate event by including a clause in your non-disclosure that specifies which court has jurisdiction over any resulting legal action.

Believe it or not, arguments about jurisdiction can become just as big as whatever disagreement started the legal action in the first place. Avoid this non-sense by affirming jurisdiction in the agreement.

Clause #8: The Remedies

Along the same lines as the Jurisdiction clause explained above, your agreement should also include a clause that specifies the acceptable remedies in the case of a breach from the Recipient Party’s part.

The costs of a breach can be hard to calculate or prove, so a mutual agreement up front as to what constitutes a fair remedy will help you avoid a lengthy legal battle later on.

This clause should include the possible consequences of a breach and explicitly preserve your right as the Disclosing Party to seek equitable remedies.

Remember that this clause should be a mutually agreeable one so be careful to avoid being too specific, excessive in your remedy requirements or one-sided when it comes to possible resolutions. If it’s too biased, the Recipient Party may be hesitant to sign the agreement as well.

Clause #9: Responsibility over Legal Fees

Many in the legal world frown upon clauses that specifically award attorney’s fees or punitive damages to the Disclosing Party, should they prevail in case of a breach of contract.

The argument is that such a clause renders this kind of legal agreement partial to the Disclosing Party and gives them too much incentive to file suit, even for the most trivial of matters.

With that in mind, it’s best to have a mutually agreeable clause that clearly defines who will be responsible for legal fees should a suit be filed. Even if that means clarifying that each party will be responsible for their own fees , regardless of the outcome. The point is to have that discussion up front and make sure everybody is on the same page.

Clause #10: The No Binding

Last, but certainly not least, no non-disclosure should be complete without a non-binding clause .

Because these agreements are often initiated prior to negotiations for a merger, partnership, temporary project, or other similar collaboration, it’s important to include a non-binding clause which allows both parties to terminate the relationship at any point.

In other words, the signing of a non-disclosure agreement generally doesn’t signify a permanent relationship and you should preserve your right to withdraw from the relationship at any point you see fit, provided you abide by any relevant laws or contractual stipulations (the terms in your agreement) when doing so.

Here’s what a standard “ No Obligation ” clause will look like:

At the end of the day, when non-disclosure agreements are used properly, they protect confidential information, keep trade secrets, and preserve the unique aspects that make your business work.

A well-written NDA will cast a broad net for the Disclosing Party and close any potential loopholes while still retaining a respectable level of fairness and value for the Recipient Party.

Credits: Icon Bulleted List by Travis Avery 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.

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7 Considerations While Drafting a Non-Disclosure Agreement (NDA)

Introduction.

Lawyers work with inventors to draft non-disclosure agreements for protecting confidential aspects of their invention. Almost every business discussion between two parties requires disclosure (or exchange) of confidential information, which mandates the execution of a non-disclosure agreement (NDA), also known as the confidentiality agreement. The main goal of NDA is to protect confidential and proprietary information shared by each party.

Parties sign non-disclosure agreement or an NDA to protect the confidential nature of discussions with others. Attorneys draft the NDA for each transaction in a customised manner to sure that all the aspects of the discussion are protected.

In most cases, NDAs act as first step towards subsequent business agreements and contracts, which include additional provisions to cover complexities of business transactions between the parties.

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While drafting a confidentiality (non-disclosure) agreement , it is crucial to ensure interests of both the parties is adequately secured by including the required provisions in a well-defined manner and excluding provisions that are not required.

Here are some important provisions to be considered while drafting a NDA:

Proper Definition of Confidential Information

Confidential information should be specifically defined for both the parties . Mostly generic definition is used to include a broad category of information, which is not advisable.

Always be specific to exactly define the scope of confidential information, which may be same or different for both the parties. For example, in case of a discussion involving mutual exchange of confidential information by both the parties, the type of information to be shared by each party may not be same . Hence, providing an exact definition of confidential information for each party makes sense in such cases.

Proper Definition of Confidentiality Obligations & Right to Take Action

Based on the same principle as explained above, confidential obligations for each party should be defined for both the parties, which again can be same or different for each party.

Similarly, it is important to define right to take proactive action for each party in case of breach of any provision of confidentiality agreement (NDA).

Inclusion of Related Clauses in NDA

It is a common practice to include various other related clauses in a NDA. However, in some cases, inclusion of such clauses may lead to issues as described below:

• Non-Compete Clause: including a non-compete clause in a NDA is not advisable as it can become problematic for both the parties. If the parties intend to include a non-compete provision, it should be a part of separate business agreement between both the parties .
• Assignment of Intellectual Property Rights (IPR): it is strongly advisable to specifically define IP assignment or non-assignment if such clause is included. In case it is decided to include IP assignment clause, appropriate care must be taken to ensure that the clause is not generic (broad) and its full scope and intent should be defined. A disclosing Party should specifically disclaim grant of any kind of IP rights .
• No Warranties: it is always advisable to state in NDA that confidential information is shared “As is” without any warranties .
• Non-solicitation: a non-solicitation clause can be included in the agreement with proper definition of scope, intent and duration, all of which can be practically enforced and justified. For example, such non-solicitation clauses can prevent each party from hiring and soliciting employees from other party for a certain period of time. In certain cases, non-solicitation clauses can be replaced by no-hire clauses as well.

Term (Duration) of NDA

Term of NDA may or may not be same as the term of contractual obligations, and hence, specific definition of term is required. Perpetual clauses should be avoided unless the same are within the context of discussions between both the parties.

NDA Executed by Authorized Signatory

It should be ensured that signatory should be authorized person to sign the agreement. In addition, full name and designation of parties should be included to make it legally binding.

Specifically Define Non-Disclosure and Non-Use Provisions

In both types of NDA – both mutual and one-sided, the agreement should include separate non-disclosure and non-use provisions.

Residual Clauses

Residual Clauses should be excluded from NDA as they are mostly friendly to the receiving party by specifying exceptions to restrictions against use & disclosure of confidential information.

How Courts Interpret Confidentiality Agreements?

Judicial interpretation of NDAs will vary across jurisdictions and laws of relevant country will prevail in case of any dispute.

One major challenge faced during such disputes is to prove that the NDA has actually been breached, and subsequently to prove that the party to NDA has indeed breached said NDA .

Summary – Avoid Confusion

It should be ensured that negotiations and discussions do not get stuck due to unacceptable clauses of the NDA. The lawyers involved in drafting and negotiating NDAs should always assign priority to the business goal , and unnecessary clauses should be avoided whereas utmost importance should be given to standard clauses in NDA.

In case of any complications, it is always better to stick to the primary goal of signing NDA, i.e. confidentiality and restricting usage of confidential information, while additional agreements should be executed to include related clauses (Non-compete, Non-solicit, IP Assignment, IP Licensing etc.).

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What Is an Assignment Clause?

An assignment clause spells out which contractual obligations, rights, and duties may be transferred from one of the contractual parties to another party. 3 min read updated on February 01, 2023

Updated October 29, 2020:

An assignment clause spells out which contractual obligations, rights, and duties may be transferred from one of the contractual parties to another party. The assignment may be in whole or in part, and the clause also details the conditions under which a party can assign these duties.

U.S. law dictates that most contractual rights can be freely assigned or delegated, unless an agreement states otherwise.

The assignment clause often overlaps with two other clauses:

• Parties in Interest
• Successors and Assigns

These control who assumes contractual rights and obligations.

Legal Background and Freely Assignable Rights

When one party in a contract “assigns” the agreement to someone else, this means the first party — the assignor — transfers its contractual rights and obligations to the second party — the assignee.

In some instances, one party will not want the other contractual party to freely assign its duties. Contracts will then include language that states this.

One exception to the general assignability rule is intellectual property licenses . Legally, a licensor must first give consent before an IP licensee can assign or delegate its rights or obligations, even in the case where the license agreement is silent.

Requirements for Assignment Consent

There are different ways to say the same thing in a contract. Some people prefer lengthier statements, and others like to keep things brief. The following are various ways to make the same points.

• One contractual party isn't allowed to assign its agreement to another person without prior written consent of the other contractual party, except as provided for in the contract. If an assignment is made without this consent, it won't be considered valid.
• One party may not assign any interest or right arising out of this contract — in whole or in part — without prior consent.
• To keep all doubts at bay, no consent is required for an assignment — including collateral, absolute, or other — for a contractual right to payment.

These are the takeaways from these stipulations:

• This type of requirement for an assignment clause can create obstacles for the non-assigning party in corporate reorganizations or future mergers.
• The party that's being asked to consent to an assignment clause requirement may want to negotiate its position. For instance, it may find negotiations helpful in a situation when the assignment involves a substantial sale.

A Party May Not Unreasonably Withhold or Delay Consent

It's not permissible to hold up consent to unreasonable delays.

Other ways to state this include:

• To avoid doubt, a party that suffers damage due to the unreasonable delay or withholding of consent by the other party can treat them as direct damages.
• To avoid doubt, damages that arise to one party from the unreasonable delay or withholding of consent by the other party aren't excluded from remedies.

Even when these provisions aren't in place, the law may still impose a reasonableness requirement. This requirement may not hold a lot of practical value, whether it's implied by the law or contractual. A reasonableness requirement can't guarantee that the non-assigning party will give consent when the assigning party wants it. By the time a case has worked its way through the court system to a decision, the deal that the assigning party was working on could have fallen through or otherwise be negated or moot.

However, this provision for unreasonable withholding should get the non-assigning party to carefully consider taking too much time due to the prospect of being held liable for damages. This can result in costly consequences.

On the other hand, having an unreasonable delay provision could create conflict with the provision concerning material breach of contract.

When you enter into a contract, it's important that you know what your rights and obligations are, as well as the other party's rights and obligations. If you don't want certain outcomes — assignment of duties, for instance — you must usually make it clear in the agreement. Getting help from a legal professional in the contract law field is a good idea when writing up a contract . That way, you increase the chances of covering everything you want covered, from the finer points to the bigger ones.

If you need help with contracts, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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• Legal Assignment
• Assignment Law
• Consent to Assignment
• Assignment of Rights and Obligations Under a Contract
• Assignment of Rights Example
• Assignment Contract Law
• Assignability Of Contracts
• What Is the Definition of Assigns
• Assignment Legal Definition
• Delegation vs Assignment

• Assignment Clause

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Contract Clauses

• Acceleration Clause
• Arbitration Clause
• Cancellation Clause
• Choice of Law Clause
• Confidentiality Clause
• Consideration Clause
• Definitions Clause
• Dispute Resolution Clause
• Entire Agreement Clause
• Escalation Clause
• Exclusivity Clause
• Exculpatory Clause
• Force Majeure Clause
• Governing Law Clause
• Indemnification Clause
• Indemnity Clause
• Insurance Clause
• Integration Clause
• Merger Clause
• Non-Competition Clause
• Non-Disparagement Clause
• Non-Exclusivity Clause
• Non-Solicitation Clause
• Privacy Clause
• Release Clause
• Severability Clause
• Subordination Clause
• Subrogation Clause
• Survival Clause
• Termination Clause
• Time of Essence Clause

Jump to Section

Assignment clause defined.

Assignment clauses are legally binding provisions in contracts that give a party the chance to engage in a transfer of ownership or assign their contractual obligations and rights to a different contracting party.

In other words, an assignment clause can reassign contracts to another party. They can commonly be seen in contracts related to business purchases.

Here’s an article about assignment clauses.

Assignment Clause Explained

Assignment contracts are helpful when you need to maintain an ongoing obligation regardless of ownership. Some agreements have limitations or prohibitions on assignments, while other parties can freely enter into them.

Here’s another article about assignment clauses.

Purpose of Assignment Clause

The purpose of assignment clauses is to establish the terms around transferring contractual obligations. The Uniform Commercial Code (UCC) permits the enforceability of assignment clauses.

Assignment Clause Examples

Examples of assignment clauses include:

• Example 1 . A business closing or a change of control occurs
• Example 2 . New services providers taking over existing customer contracts
• Example 3 . Unique real estate obligations transferring to a new property owner as a condition of sale
• Example 4 . Many mergers and acquisitions transactions, such as insurance companies taking over customer policies during a merger

Here’s an article about the different types of assignment clauses.

Assignment Clause Samples

Sample 1 – sales contract.

Assignment; Survival .  Neither party shall assign all or any portion of the Contract without the other party’s prior written consent, which consent shall not be unreasonably withheld; provided, however, that either party may, without such consent, assign this Agreement, in whole or in part, in connection with the transfer or sale of all or substantially all of the assets or business of such Party relating to the product(s) to which this Agreement relates. The Contract shall bind and inure to the benefit of the successors and permitted assigns of the respective parties. Any assignment or transfer not in accordance with this Contract shall be void. In order that the parties may fully exercise their rights and perform their obligations arising under the Contract, any provisions of the Contract that are required to ensure such exercise or performance (including any obligation accrued as of the termination date) shall survive the termination of the Contract.

Reference :

Security Exchange Commission - Edgar Database,  EX-10.29 3 dex1029.htm SALES CONTRACT , Viewed May 10, 2021, <  https://www.sec.gov/Archives/edgar/data/1492426/000119312510226984/dex1029.htm >.

Sample 2 – Purchase and Sale Agreement

Assignment . Purchaser shall not assign this Agreement or any interest therein to any Person, without the prior written consent of Seller, which consent may be withheld in Seller’s sole discretion. Notwithstanding the foregoing, upon prior written notice to Seller, Purchaser may designate any Affiliate as its nominee to receive title to the Property, or assign all of its right, title and interest in this Agreement to any Affiliate of Purchaser by providing written notice to Seller no later than five (5) Business Days prior to the Closing; provided, however, that (a) such Affiliate remains an Affiliate of Purchaser, (b) Purchaser shall not be released from any of its liabilities and obligations under this Agreement by reason of such designation or assignment, (c) such designation or assignment shall not be effective until Purchaser has provided Seller with a fully executed copy of such designation or assignment and assumption instrument, which shall (i) provide that Purchaser and such designee or assignee shall be jointly and severally liable for all liabilities and obligations of Purchaser under this Agreement, (ii) provide that Purchaser and its designee or assignee agree to pay any additional transfer tax as a result of such designation or assignment, (iii) include a representation and warranty in favor of Seller that all representations and warranties made by Purchaser in this Agreement are true and correct with respect to such designee or assignee as of the date of such designation or assignment, and will be true and correct as of the Closing, and (iv) otherwise be in form and substance satisfactory to Seller and (d) such Assignee is approved by Manager as an assignee of the Management Agreement under Article X of the Management Agreement. For purposes of this Section 16.4, “Affiliate” shall include any direct or indirect member or shareholder of the Person in question, in addition to any Person that would be deemed an Affiliate pursuant to the definition of “Affiliate” under Section 1.1 hereof and not by way of limitation of such definition.

Security Exchange Commission - Edgar Database,  EX-10.8 3 dex108.htm PURCHASE AND SALE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1490985/000119312510160407/dex108.htm >.

Sample 3 – Share Purchase Agreement

Assignment . Neither this Agreement nor any right or obligation hereunder may be assigned by any Party without the prior written consent of the other Parties, and any attempted assignment without the required consents shall be void.

Security Exchange Commission - Edgar Database,  EX-4.12 3 dex412.htm SHARE PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1329394/000119312507148404/dex412.htm >.

Sample 4 – Asset Purchase Agreement

Assignment . This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, at any time after the Closing, are freely assignable by Buyer. This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, are assignable by Seller only upon the prior written consent of Buyer, which consent shall not be unreasonably withheld. This Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns.

Security Exchange Commission - Edgar Database,  EX-2.1 2 dex21.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1428669/000119312510013625/dex21.htm >.

Sample 5 – Asset Purchase Agreement

Assignment; Binding Effect; Severability

This Agreement may not be assigned by any party hereto without the other party’s written consent; provided, that Buyer may transfer or assign in whole or in part to one or more Buyer Designee its right to purchase all or a portion of the Purchased Assets, but no such transfer or assignment will relieve Buyer of its obligations hereunder. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors, legal representatives and permitted assigns of each party hereto. The provisions of this Agreement are severable, and in the event that any one or more provisions are deemed illegal or unenforceable the remaining provisions shall remain in full force and effect unless the deletion of such provision shall cause this Agreement to become materially adverse to either party, in which event the parties shall use reasonable commercial efforts to arrive at an accommodation that best preserves for the parties the benefits and obligations of the offending provision.

Security Exchange Commission - Edgar Database,  EX-2.4 2 dex24.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1002047/000119312511171858/dex24.htm >.

Common Contracts with Assignment Clauses

Common contracts with assignment clauses include:

• Real estate contracts
• Sales contract
• Asset purchase agreement
• Purchase and sale agreement
• Bill of sale
• Assignment and transaction financing agreement

Assignment Clause FAQs

Assignment clauses are powerful when used correctly. Check out the assignment clause FAQs below to learn more:

What is an assignment clause in real estate?

Assignment clauses in real estate transfer legal obligations from one owner to another party. They also allow house flippers to engage in a contract negotiation with a seller and then assign the real estate to the buyer while collecting a fee for their services. Real estate lawyers assist in the drafting of assignment clauses in real estate transactions.

What does no assignment clause mean?

No assignment clauses prohibit the transfer or assignment of contract obligations from one part to another.

What’s the purpose of the transfer and assignment clause in the purchase agreement?

The purpose of the transfer and assignment clause in the purchase agreement is to protect all involved parties’ rights and ensure that assignments are not to be unreasonably withheld. Contract lawyers can help you avoid legal mistakes when drafting your business contracts’ transfer and assignment clauses.

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Don’t Confuse Change of Control and Assignment Terms

• David Tollen
• September 11, 2020

An assignment clause governs whether and when a party can transfer the contract to someone else. Often, it covers what happens in a change of control: whether a party can assign the contract to its buyer if it gets merged into a company or completely bought out. But that doesn’t make it a change of control clause. Change of control terms don’t address assignment. They say whether a party can terminate if the other party goes through a merger or other change of control. And they sometimes address other change of control consequences.

Don’t confuse the two. In a contract about software or other IT, you should think through the issues raised by each. (Also, don’t confuse assignment of contracts with assignment of IP .)

Here’s an assignment clause:

Assignment. Neither party may assign this Agreement or any of its rights or obligations hereunder without the other’s express written consent, except that either party may assign this Agreement to the surviving party in a merger of that party into another entity or in an acquisition of all or substantially all its assets. No assignment becomes effective unless and until the assignee agrees in writing to be bound by all the assigning party’s obligations in this Agreement. Except to the extent forbidden in this Section __, this Agreement will be binding upon and inure to the benefit of the parties’ respective successors and assigns.

As you can see, that clause says no assignment is allowed, with one exception:

• Assignment to Surviving Entity in M&A: Under the clause above, a party can assign the contract to its buyer — the “surviving entity” — if it gets merged into another company or otherwise bought — in other words, if it ceases to exist through an M&A deal (or becomes an irrelevant shell company).

Consider the following additional issues for assignment clauses:

• Assignment to Affiliates: Can a party assign the contract to its sister companies, parents, and/or subs — a.k.a. its “Affiliates”?
• Assignment to Divested Entities: If a party spins off its key department or other business unit involved in the contract, can it assign the contract to that spun-off company — a.k.a. the “divested entity”? That’s particularly important in technology outsourcing deals and similar contracts. They often leave a customer department highly dependent on the provider’s services. If the customer can’t assign the contract to the divested entity, the spin-off won’t work; the new/divested company won’t be viable.
• Assignment to Competitors: If a party does get any assignment rights, can it assign to the other party’s competitors ? (If so, you’ve got to define “Competitor,” since the word alone can refer to almost any company.)
• All Assignments or None: The contract should usually say something about assignments. Otherwise, the law might allow all assignments. (Check your jurisdiction.) If so, your contracting partner could assign your agreement to someone totally unacceptable. (Most likely, though, your contracting partner would remain liable.) If none of the assignments suggested above fits, forbid all assignments.

Change of Control

Here’s a change of control clause:

Change of Control. If a party undergoes a Change of Control, the other party may terminate this Agreement on 30 days’ written notice. (“Change of Control” means a transaction or series of transactions by which more than 50% of the outstanding shares of the target company or beneficial ownership thereof are acquired within a 1-year period, other than by a person or entity that owned or had beneficial ownership of more than 50% of such outstanding shares before the close of such transactions(s).)

• Termination on Change of Control: A party can terminate if controlling ownership of the other party changes hands.

Change of control and assignment terms actually address opposite ownership changes. If an assignment clause addresses change of control, it says what happens if a party goes through an M&A deal and no longer exists (or becomes a shell company). A change of control clause, on the other hand, matters when the party subject to M&A does still exist . That party just has new owners (shareholders, etc.).

Consider the following additional issues for change of control clauses:

• Smaller Change of Ownership: The clause above defines “Change of Control” as any 50%-plus ownership shift. Does that set the bar too high? Should a 25% change authorize termination by the other party, or even less? In public companies and some private ones, new bosses can take control by acquiring far less than half the stock.
• No Right to Terminate: Should a change of control give any right to terminate, and if so, why? (Keep in mind, all that’s changed is the party’s owners — possibly irrelevant shareholders.)
• Divested Entity Rights: What if, again, a party spins off the department or business until involved in the deal? If that party can’t assign the contract to the divested entity, per the above, can it at least “sublicense” its rights to products or service, if it’s the customer? Or can it subcontract its performance obligations to the divested entity, if it’s the provider? Or maybe the contract should require that the other party sign an identical contract with the divested entity, at least for a short term.

Some of this text comes from the 3rd edition of The Tech Contracts Handbook , available to order (and review) from Amazon  here , or purchase directly from its publisher, the American Bar Association, here.

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Related Practices & Jurisdictions

• Intellectual Property
• Litigation / Trial Practice
• All Federal

Several states have passed new laws restricting use of nondisclosure agreements (NDAs), making it timely for companies to review their policies and practices. Below are some general “best practices” related to NDAs.

An NDA Is Still Critically Important.

It is still important to ensure that an appropriate NDA is in place before disclosing your company’s confidential information, whether you are exploring a potential joint development, procuring specialized parts, or even hiring a new employee. Disclosure without an NDA may bar your ability to maintain the trade secret status of your company’s key information, and allow others to freely use them based on your “voluntary” disclosure without an NDA.

Don’t Ignore Future Threats.

In negotiating an NDA, it is important to recognize that the relationship may eventually sour (e.g., the employee is terminated and goes to a competitor; the joint venture transaction does not come to fruition or ends badly; the other party’s representations were a ruse to gain access to your confidential information). Thus, your demands in the NDA negotiations should take into account the possibility that the other party may attempt to steal your trade secrets or accuse you of stealing its trade secrets.

Don’t Inadvertently Enter Into a Relationship Between the Parties Prematurely.

NDAs are often executed when parties are exploring a potential relationship (e.g., a sale of a business or a joint venture). If beneficial for your business, articulate in the NDA that neither party is agreeing to the potential relationship by signing it and, instead, its purpose is only to afford the parties protection against misuse of confidential information exchanged during the exploration of the potential relationship.

Consider the Direction(s) of Information Flow.

Another important consideration is whether confidential information will be exchanged by both parties. If the flow of information will be mutual, keep in mind that the obligations that you attempt to impose on the other party to protect your confidential information likely will be imposed on you by the other party to protect its confidential information. Thus, weigh the costs and benefits before interjecting into the negotiations a provision that imposes obligations to protect confidential information.

Scope of Protected Information Should Not Be Boilerplate.

Beware of provisions that require you to protect the other party’s non-confidential information. Protecting information is burdensome and expensive. Moreover, such provision could expand the potential scope of misappropriation or breach of contract claims that the other party may assert against you in the future. Articulate what is excluded from the scope of the duty to protect information under the NDA. For example, while it may seem obvious, explicitly state that any information that is readily ascertainable or independently developed is not protected under the NDA.

Be Mindful of the “As Required By Law” Carve Out.

Often NDAs will carve out from the obligation not to disclose confidential information “as required by law.” It is important to understand what is being carved under that exception so you know when you may disclose information the other party designates as confidential and when the other party can disclose information you designate as confidential. An obvious exception is when a court orders the disclosure of the information. But you should also be aware of a growing body of “whistleblowing” exceptions, including the following:

• The federal Defend Trade Secrets Act protects whistleblowers who disclose trade secret information to government officials or private attorneys for purpose of reporting or investigating suspected violations of law.[1]
• The Securities and Exchange Commission (SEC) considers any limitation on an individual’s ability to communicate directly with the SEC about a possible securities law violation illegal. [2]
• Other statutory provisions that afford protection for whistleblowers include 5 U.S.C. § 7211 (governing disclosures to Congress) and 5 U.S.C. § 2302(b)(8) (governing disclosures of illegality, waste, fraud, abuse or public health or safety threats).
• A number of states have restricted an employer’s ability to prohibit certain disclosures by an employee. For example, California’s Government Code § 12964.5 (effective January 1, 2019) makes it unlawful to require an employee “to sign a … document that purports to deny the employee the right to disclose information about unlawful acts in the workplace….” [3]

Pay Attention to Ownership Issues.

Watch out for proposed provisions that may result in a transfer of ownership of proprietary information. For example, a provision that a party disclosing a document will own any and all information in that document may give the counterparty an argument that it owns your information because it disclosed a document containing your information to you. The NDA should address which party will own any intellectual property derived from information disclosed by the parties (assuming the NDA contemplates the creation of intellectual property).

Do Not Ignore Third Party Access Rights and Obligations.

You should determine which third parties, if any, you may need to disclose the other party’s information to and negotiate a provision that meets your needs. For example, you may want to be able to share the other party’s information with your financial and/or legal advisors. On the flip side, the NDA should define clearly how the other party may use the information you disclose – namely, to which third parties, if any, such information may be disclosed and third parties’ obligation to protect the information to which they are given access. You may also want to include a provision requiring the other party to (i) give you notice if it is going to be acquired by a third party and (ii) to return all of your confidential information upon demand. That way, if the acquirer is one of your competitors, you can prevent it from gaining access to your confidential information.

Carefully Weigh Rights to Assign.

Special attention should be given to provisions that allow assignment of NDA rights to third parties or affiliates. Consider requiring the other party to obtain your consent prior to assigning the NDA or disclosing information subject to the NDA to third parties or even the other party’s affiliates since such affiliates may be your competitors. Even if the counterparty has no affiliates that are your competitors now, that may change in the future.

Set an Appropriate Duration for Confidentiality Obligations.

The length of confidentiality obligations should be driven by the nature of the information being disclosed – whether it is expected to remain a trade secret for a long time or will no longer be secret or valuable after a certain period. Confidentiality obligations may continue after the parties terminate their relationship. However, since protecting information can be expensive and burdensome, parties should avoid agreeing to protection period that is unnecessarily long.

Suitable Protection Measures Should Be Imposed.

NDAs often provide that “reasonable efforts” must be taken to protect the other party’s confidential information. But, given the wide latitude in determining “reasonable” efforts, this is sometimes the reason unnecessary litigation arises. For example, what is considered reasonable can vary depending on the scale and sophistication of a particular business. To avoid such dispute, your company should consider whether the NDA should expressly identify what specific protection measures the other party must use to protect your confidential information.

Consider Audit Rights.

The right to inspect the other party’s business records to determine how your confidential information is being used, disclosed, and protected may be important to assuage your concerns, should suspicions of misuse or negligent protection arise. They may be important later to build a case or to obtain an injunction against the other party, and in litigation (especially in jurisdictions where there are limited discovery rights, e.g., in certain non-U.S. countries or under certain arbitral rules).

Don’t Permit an Integration Clause to Backfire.

While it is generally a good practice to include an integration clause – a declaration that the written contract is the complete and final agreement between the parties and supersedes all prior negotiations – in NDAs, be careful not to inadvertently supersede (or worse, nullify) the terms of other agreements between the parties, which is sometimes is the main reason that the parties entered into a relationship in the first place.

Give Special Attention to Choice of Law and Forum Selection Provisions.

Careful consideration should be given to (i) the provision designating which state’s or jurisdiction’s law will apply to interpret the NDA, and (ii) which venue will be chosen to litigate any dispute that may arise, since these provisions may affect enforceability of the NDA, as well as availability of sometimes crucial injunctive relief (and, when foreign jurisdiction is involved, ability to obtain discovery that may be crucial to prove misappropriation). For example, some jurisdictions (e.g., China, Korea) do not provide for discovery similar to that allowed in the United States. Discovery rights also differ based on the arbitral forum chosen. These are essential provisions when it becomes necessary to enforce the NDA.

Educate Your Employees About the NDA and Obtain Their Acknowledgment.

In event that your company may later be required to show its exercise of reasonable efforts to comply with the NDA, it should educate employees who will have access to the other party’s confidential information about their obligations under the NDA, and better yet, obtain their acknowledgment of the training. This goal will also be furthered by maintaining appropriate records, including communications relating to the NDA with the other party, as well as documentation of the information designated as confidential under the NDA (which party designated it as confidential, which employees accessed it, how it was used, and where it is kept within your systems).

Reduce Risk of Misappropriation Claims by the Other Party.

Businesses should control access to the other party’s confidential information, as well as how it is utilized. When a product is being developed that potentially may later be falsely accused of having incorporated the other company’s confidential information, your company should carefully and methodically document the development of such product to be able to demonstrate that it was independently developed without use of the other party’s confidential information. Such documentation may allow your company to avoid (and, if necessary, prevail in) any potential litigation filed by the owner of the confidential information asserting misappropriation.

Stay on Top of Rights and Obligations at Termination of the Relationship.

Once the parties’ relationship is terminated, neither party should use or access the other’s confidential information except to return or destroy documents in compliance with the NDA. Plan in advance so that you can timely return or destroy the other party’s confidential documents and information, and to timely meet such demand by the other party (e.g., keep track from the onset of the location of documents containing such information, and dissemination of the information by the company’s email system, etc.).

[1]  18 U.S.C. § 1833.

[2]  Securities Exchange Commission, Rule 21F-17(a), available  here.

[3]  Other state legislation related to disclosures of sexual harassment and assaults in the work place include:

• New Jersey – Effective March 18, 2019. P.L. 2019, c.39 precludes any “provision in any employment contract that waives any substantive or procedural right or remedy relating to a claim of discrimination, retaliation, or harassment.”
• Tennessee – Effective May 15, 2018. Tennessee’s Pub. Ch. 965 prohibits an employer from requiring an employee “to execute or renew a non-disclosure agreement with respect to sexual harassment in the workplace as a condition of employment.”
• Vermont – Effective July 1, 2018. Act No. 183 prohibits employers from requiring “any employee or prospective employee, as a condition of employment, to sign an agreement or waiver” that restricts the employee from disclosing sexual harassment.
• Washington State – Effective June 7, 2018. Chapter 117, Laws of 2018 forbids employers from requiring employees to “sign a nondisclosure agreement … that prevents the employee from disclosing sexual harassment or sexual assault occurring in the workplace” as a condition of employment.

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Spotting issues with assignment clauses in M&A Due Diligence

Written by: Kira Systems

January 19, 2016

6 minute read

Although not nearly as complex as change of control provisions , assignment provisions may still present a challenge in due diligence projects. We hope this blog post will help you navigate the ambiguities of assignment clauses with greater ease by explaining some of the common variations. (And, if you like it, please check out our full guide on Reviewing Change of Control and Assignment Provisions in Due Diligence. )

What is an Assignment Clause?

First, the basics:

Anti-assignment clauses are common because without them, generally, contracts are freely assignable. (The exceptions are (i) contracts that are subject to statutes or public policies prohibiting their assignment, such as intellectual property contracts, or (ii) contracts where an assignment without consent would cause material and adverse consequences to non-assigning counterparties, such as employment agreements and consulting agreements.) For all other contracts, parties may want an anti-assignment clause that allows them the opportunity to review and understand the impact of an assignment (or change of control) before deciding whether to continue or terminate the relationship.

In the mergers and acquisitions context, an assignment of a contract from a target company entity to the relevant acquirer entity is needed whenever a contract has to be placed in the name of an entity other than the existing target company entity after consummation of a transaction. This is why reviewing contracts for assignment clauses is so critical.

A simple anti-assignment provision provides that a party may not assign the agreement without the consent of the other party. Assignment provisions may also provide specific exclusions or inclusions to a counterparty’s right to consent to the assignment of a contract. Below are five common occurrences in which assignment provisions may provide exclusions or inclusions.

Common Exclusions and Inclusions

Exclusion for change of control transactions.

In negotiating an anti-assignment clause, a company would typically seek the exclusion of assignments undertaken in connection with change of control transactions, including mergers and sales of all or substantially all of the assets of the company. This allows a company to undertake a strategic transaction without worry. If an anti-assignment clause doesn’t exclude change of control transactions, a counterparty might materially affect a strategic transaction through delay and/or refusal of consent. Because there are many types of change of control transactions, there is no standard language for these. An example might be:

In the event of the sale or transfer by [Party B] of all or substantially all of its assets related to this Agreement to an Affiliate or to a third party, whether by sale, merger, or change of control, [Party B] would have the right to assign any or all rights and obligations contained herein and the Agreement to such Affiliate or third party without the consent of [Party A] and the Agreement shall be binding upon such acquirer and would remain in full force and effect, at least until the expiration of the then current Term.

Exclusion for Affiliate Transactions

A typical exclusion is one that allows a target company to assign a contract to an affiliate without needing the consent of the contract counterparty. This is much like an exclusion with respect to change of control, since in affiliate transfers or assignments, the ultimate actors and responsible parties under the contract remain essentially the same even though the nominal parties may change. For example:

Either party may assign its rights under this Agreement, including its right to receive payments hereunder, to a subsidiary, affiliate or any financial institution, but in such case the assigning party shall remain liable to the other party for the assigning party’s obligations hereunder. All or any portion of the rights and obligations of [Party A] under this Agreement may be transferred by [Party A] to any of its Affiliates without the consent of [Party B].

Assignment by Operation of Law

Assignments by operation of law typically occur in the context of transfers of rights and obligations in accordance with merger statutes and can be specifically included in or excluded from assignment provisions. An inclusion could be negotiated by the parties to broaden the anti-assignment clause and to ensure that an assignment occurring by operation of law requires counterparty approval:

[Party A] agrees that it will not assign, sublet or otherwise transfer its rights hereunder, either voluntarily or by operations of law, without the prior written consent of [Party B].

while an exclusion could be negotiated by a target company to make it clear that it has the right to assign the contract even though it might otherwise have that right as a matter of law:

This Guaranty shall be binding upon the successors and assigns of [Party A]; provided, that no transfer, assignment or delegation by [Party A], other than a transfer, assignment or delegation by operation of law, without the consent of [Party B], shall release [Party A] from its liabilities hereunder.

This helps settle any ambiguity regarding assignments and their effects under mergers statutes (particularly in forward triangular mergers and forward mergers since the target company ceases to exist upon consummation of the merger).

Direct or Indirect Assignment

More ambiguity can arise regarding which actions or transactions require a counterparty’s consent when assignment clauses prohibit both direct and indirect assignments without the consent of a counterparty. Transaction parties will typically choose to err on the side of over-inclusiveness in determining which contracts will require consent when dealing with material contracts. An example clause prohibiting direct or indirect assignment might be:

Except as provided hereunder or under the Merger Agreement, such Shareholder shall not, directly or indirectly, (i) transfer (which term shall include any sale, assignment, gift, pledge, hypothecation or other disposition), or consent to or permit any such transfer of, any or all of its Subject Shares, or any interest therein.

“Transfer” of Agreement vs. “Assignment” of Agreement

In some instances, assignment provisions prohibit “transfers” of agreements in addition to, or instead of, explicitly prohibiting “assignments”. Often, the word “transfer” is not defined in the agreement, in which case the governing law of the contract will determine the meaning of the term and whether prohibition on transfers are meant to prohibit a broader or narrower range of transactions than prohibitions on assignments. Note that the current jurisprudence on the meaning of an assignment is broader and deeper than it is on the meaning of a transfer. In the rarer case where “transfer” is defined, it might look like this:

As used in this Agreement, the term “transfer” includes the Franchisee’s voluntary, involuntary, direct or indirect assignment, sale, gift or other disposition of any interest in…

The examples listed above are only of five common occurrences in which an assignment provision may provide exclusions or inclusions. As you continue with due diligence review, you may find that assignment provisions offer greater variety beyond the factors discussed in this blog post. However, you now have a basic understand of the possible variations of assignment clauses. For a more in-depth discussion of reviewing change of control and assignment provisions in due diligence, please download our full guide on Reviewing Change of Control and Assignment Provisions in Due Diligence.

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United States: When Is An "Assignment" Clause Worth Fighting For?

Q. My small business is negotiating with a vendor who has asked to remove our contract’s “assignment” clause entirely. Is it worth the time to argue over whether to include an assignment clause?

A.  First, it’s important to understand the purpose of the assignment clause. “Assignment” occurs when a party transfers its rights and obligations under a contract to another party. Generally, unless the parties have agreed otherwise, each can assign its rights and obligations freely.

Article 2 of the Uniform Commercial Code, a set of laws governing the sale of goods that has been adopted by 49 states, including New Hampshire, provides that a party can freely assign its rights and obligations to another unless such assignment would materially change the duties of the other party, burden the other party, or decrease the other party’s chances of receiving performance under the contract.

If your vendor eliminates the assignment clause and no agreement on the topic is provided in the contract, your vendor will be free to transfer its obligations to another person or company without giving you notice or obtaining your approval.

Parties do have the ability, however, to mutually decide against the free assignability of a contract and this is often accomplished through an assignment clause. An assignment clause spells out which, if any, of a party’s obligations and rights under a contract are able to be assigned, or transferred, to another party. Free assignability and no assignability are not the only options, and you and your vendor can negotiate terms for assignment that are amenable to both of you.

For example, some clauses allow for assignment with the other party’s consent, meaning, the vendor would have to obtain your approval of the assignee prior to assigning any of its rights or obligations under the contract. Other times, assignment clauses allow for free assignment only to certain persons or entities, such as the vendor’s subsidiaries and affiliates, provided that the vendor gives you notice of such permitted assignment. Another option is to allow for assignment by the vendor provided that it guaranties the assignee’s performance.

Consider potential situations in which the vendor may want to assign the contract and determine whether it’s important to you to have control over assignment in each instance.

Consider discussing situations in which it may be important for the vendor to have freedom of assignment and, instead of removing the provision all together, specify those situations in which assignment is permitted, list those rights or obligations that are assignable, and consider whether, when assignment is permitted, notice, consent or a guaranty will be required.

Published in the Union Leader (2/25/2019)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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FAQ on Non-Compete Agreements

Najah farley, how non-competes stifle worker power and disproportionately impede women and workers of color.

(This FAQ was produced with assistance from Sophia Balemian-Spencer, Korosh Razazi, and Prof. Marcy Karin of the Legislation Clinic at the University of the District of Columbia David A. Clarke School of Law.)

This fact sheet addresses the following frequently asked questions about non-compete agreements in employment contracts and how employers are using them in abusive ways to lock workers into low-wage jobs:

Why Do We Need to Ban Non-Competes?

Non-compete agreements are harmful to workers. Originally meant to protect a business’s trade secrets and other confidential information, non-competes are increasingly being used by companies in low-wage industries to block workers from changing jobs—effectively limiting workers’ economic opportunity and suppressing their incomes. Workers in underpaid industries often make more money by moving to another job, so non-competes prevent these workers from improving their wages and working conditions.

Non-competes are disproportionately harmful to women and people of color and have a history linked to racial injustice. Protecting corporations and businesses from potential violations of trade secrets is no reason to limit worker mobility, particularly when those concerns have remedies at law.

What Are Non-Compete Agreements?

Non-compete agreements are clauses in employment contracts that prevent workers from working for “competitor” companies during or after their current employment. [1] These contracts typically restrict workers through time, industry, and/or geography. [2] A time restriction prevents someone from working for a competitor for a defined period of time after leaving a position; a geographic restriction may restrict someone from accepting work in entire regions of the United States; [3] and an industry restriction can prevent a worker from working for a particular type of company. [4] Sometimes, non-competes prevent workers from starting their own competitor companies. [5]

More than 30 million workers—at least 18 percent of the U.S. workforce—are required to sign non-competes as a condition to accepting a job.

More than 30 million workers—at least 18 percent of the U.S. workforce—are required to sign non-competes as a condition to accepting a job. [6] , [7] These include a wide range of workers, from financial services executives to janitors and dog walkers. This is because employers will often present non-competes as a “take it or leave it” contract, forcing workers either to sign it or forego employment. [8] Consequently, less than 10 percent of workers negotiate these clauses, and 93 percent of them read and sign them anyway. [9] In addition, 30 to 40 percent of workers are asked to sign non-competes after they have already accepted the position. [10]

How Do Non-Competes Relate to Other Problematic Contractual Provisions Between Workers and Employers?

Non-competes are only one type of clause in an employment contract that can restrict worker mobility. Other limiting clauses include coworker non-poaching agreements; customer non-solicitation agreements; customer non-dealing agreements; non-disclosure agreements; non-disparaging clauses; and pre-invention assignment clauses. [11] Mandatory arbitration agreements bar workers from bringing claims for workers’ rights violations in state or federal courts. These agreements have reduced the amount of anti-discrimination litigation in courts. [12] Alongside these can be a series of procedural clauses related to choice of forum, choice of law, anti-aggregation of claims, severability, reformation, or liquidated damages. [13] Contracts that contain several of these generic copy-and-paste clauses are sometimes called “boilerplate contracts,” and cover 80 percent of private sector workers. [14] Courts, when adjudicating a case, typically begin with examining whether the combination of restrictive covenants in a boilerplate contract makes it unconscionable, and thus, unenforceable.

Why Are Non-Competes So Problematic for Workers, Particularly Underpaid Workers?

Non-competes were originally created to protect trade secrets and other confidential information. While they remain prevalent for well-paid and highly educated workers, these agreements are increasingly more common in underpaid industries, irrespective of job duties or access to confidential information. [15] Currently, almost 30 percent of non-competes cover workers who make below $13 per hour . [16]

Difficult to Challenge: Legally, they are almost impossible for workers to challenge unless they are clearly unconscionable. Even where they are clearly unconscionable or inappropriate, however, many underpaid workers do not have the time, money, or access to counsel to challenge them. [17]

Restricts Job Mobility : Signing non-competes also makes it more difficult for workers to leave for better and higher-paying jobs. [18] Changing a job is one of the most common ways workers receive higher pay. [19] “Job hopping,” especially early in one’s career, is correlated to stronger lifetime earnings . [20] By limiting where people can work, non-competes decrease competition between industries, consequently reducing overall wages. [21] With limited employers to compete for, workers have less of an opportunity to bargain for a higher wage and demand a better workplace. [22]

Disproportionately Affects Women and People of Color: Banning non-competes would help alleviate racial and gender wage gaps because the underpaid workers who are most affected are disproportionality women and people of color. In fact, the use of non-competes can be traced back to the Reconstruction Era, when former owners of enslaved people used non-competes to keep freed Black workers working for them and maintain the master-slave relationship. [23]

Almost 30 percent of non-competes cover workers who make below $13 per hour.

Some reasons why non-competes can have a stronger impact on women and people of color are because they decrease entrepreneurship; reduce outside work due to limited ability and willingness to commute; produce fewer wage gains; and provide firms more power to discriminate. [24]

Studies have shown that women are also less willing to violate the terms of non-competes. [25] Women in states with stricter non-compete enforcement are less likely than men to leave their jobs or start rival companies if they are subject to a non-compete. [26]

Women and workers of color also are less likely to negotiate than their white counterparts, which may result in more restrictive agreements for them. [27] Further, the earnings of women and workers of color are reduced by twice as much as white male workers when there is stricter non-compete enforcement. [28]

The use of non-competes can be traced back to the Reconstruction Era, when former owners of enslaved people used non-competes to keep freed Black workers working for them and maintain the master-slave relationship.

Are Non-Competes Necessary to Protect Business Interests?

Those who support non-competes argue they protect trade secrets, intellectual property, confidential or sensitive information, client lists, customer lists, pricing lists, and investment in worker training. [29]

There are many other mechanisms in place, however, to protect employers against these breaches of confidentiality. For example, federal laws such as the Uniform Trade Secrets Act and the Economic Espionage Act protect companies from unauthorized usage or misappropriation of protected trade secrets. [30] There are also state regulations governing similar issues, [31] and workers are bound by state common law fiduciary duties and duties of loyalty. These statutory and common law protections of company information can fill any void that employers may fear come with banning non-competes. [32]

Non-competes also harm employers and the economy. These clauses reduce the number of available workers, making it harder for businesses to grow. [33] Job mobility helps to stimulate the economy because it encourages innovation when information is shared; entrepreneurship when workers leave their job to start new businesses; and regional industry development because companies can share workers with experience in the field. [34] Non-competes contribute to negative trends in the economy by reducing economic dynamism and impeding labor market competition, thus contributing to wage stagnation. [35] Companies are raising prices while simultaneously lowering their wages with non-competes, costing the average U.S. household $5,000 per year. [36]

How Are Non-Competes Enforced?

Historically, common law has governed non-competes. [37] Generally, courts will uphold a non-compete if there is a protectable interest and the clause is reasonable. A variety of factors are analyzed to determine reasonableness. [38] Although governed by individual state laws, common factors include whether the employer has a legitimate interest to protect; whether the geographic scope prevents the worker from making a living; the length of restriction; whether the agreement prevents workers from doing different work from what they are doing; and whether the employer provides additional compensation or benefits in exchange for the worker signing the non-compete. [39] Applying this test requires a case-by-case analysis, which leads to unpredictable results. [40] Consequently, there has been a call for reform and a movement to ban these clauses altogether.

What Are the Current Proposals to Change the Enforcement Scheme?

No federal ban on non-compete agreements exists. However, on July 5, 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy that encourages the Federal Trade Commission to ban or limit the use of non-competes. [41] In addition, the bipartisan Workforce Mobility Act and Freedom to Compete Act were introduced in 2021 to prevent the enforcement and creation of non-competes. [42]

There is a growing movement to ban non-competes on the state level.

There is also a growing movement to ban non-competes on the state level. State laws that ban non-competes generally fall into one of three categories: (1) laws to eliminate non-competes for everyone; (2) laws to eliminate non-competes for some, based on occupation or income level; and (3) laws to codify stricter requirements in enforcing them. [43] Some examples of states that have passed progressive bans on non-competes include California, Connecticut, Illinois, Maine, Maryland, Massachusetts, New Hampshire, Oregon, and Washington. [44] However, even in states that have non-compete bans, some workers are still required to sign them. In California, for example, non-competes have been unenforceable for over 100 years, but research showed that 19 percent of workers had signed unenforceable non-competes. [45] In 2017, the California Labor Code was amended to prohibit non-competes that use a choice of law provision to get around the state prohibition. [46]

How Has the Pandemic Impacted Non-Competes?

During the pandemic, many workers have been filing cases to challenge the enforceability of non-competes. Although courts continue to enforce these clauses, some have increased the level of scrutiny used to analyze them and have expanded their inquiry. [47] For example, a court considered the growing number of businesses that have adopted teleworking practices during the pandemic in determining whether a geographic restriction was reasonable. [48]

Some businesses have argued that non-competes are even more important during the pandemic, claiming that trade secrets are harder to protect when people are working from home with less supervision. [49] However, some researchers have seen a decrease in the usage of non-competes since the pandemic, due to the labor shortage. Changing the laws now is imperative to keep the labor market moving and protect workers from being bound by these agreements as the labor shortage subsides.

Another issue workers are facing during the pandemic is determining whether their employer can still enforce their non-compete if they have been furloughed. In these cases, courts, reluctant to keep people out of work, have generally found the non-competes unenforceable. [50] Relatedly, while the legislative movement to eliminate non-competes pre-dates the pandemic, some jurisdictions are creating pandemic-specific protections related to non-compete enforcement. For example, Illinois recently banned employers from entering into a non-compete agreement with a worker who has been terminated or furloughed because of the pandemic. [51]

[1] Mark A. Lemley & Orly Lobel, Banning Noncompete Agreements to Create Competitive Job Markets (Jan. 26, 2021), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3773893 .

[2] Testimony of Najah Farley, In Support of Proposed B23-494, Ban on Non-Compete Agreements Amendment Act of 2019, Before the D.C. Council Comm. on Lab. & Workforce , (Dec. 6, 2019), https://s27147.pcdn.co/wp-content/uploads/NELP-Testimony-DC-Council-Non-Compete-bill.pdf .

[4] Legal Nature, Is My Non-Compete Agreement Enforceable? (accessed Nov. 1, 2020), https://www.legalnature.com/guides/is-my-non-compete-agreement-enforceable#industry-restrictions .

[5] Matt Marx, Employee Non-Compete Agreement, Gender, and Entrepreneurship , 27 (May 4, 2020), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3173831 .

[6] White House, Fact Sheet: Executive Order on Promoting Competition in the American Economy (July 9, 2021), https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy/ .

[7] Additionally, up to 40 percent of workers have signed a non-compete at some time during their career. U.S. Department of the Treasury, Office of Economic Policy, Non-compete Contracts: Economic Effects and Policy Implications , March 2016, at 3, 7.

[8] Najah Farley, Non-Compete Provisions in Context: Why NELP Supports Calls For Reform , National Employment Law Project (Sept. 27, 2018), https://www.nelp.org/blog/non-compete-provisions-context-nelp-supports-calls-reform/ .

[9] Evan Starr, The Use, Abuse, & Enforceability of Non-Compete and Non-Poach Agreements , Economic Innovation Group (accessed Oct. 18, 2021), https://eig.org/noncompetesbrief .

[11] Orly Lobel, Boilerplate Collusion: Clause Aggregation, Antitrust Law & Contract Governance , Minn. L. Rev (forthcoming 2021) (manuscript, at 18), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3810250 .

[12] Cynthia Estlund, The Black Hole of Mandatory Arbitration, 96 N.C. L. Rev. 679 (2018).

Available at: http://scholarship.law.unc.edu/nclr/vol96/iss3/3

[14] Id. at 3.

[15] Response of Patrick Hulin, An Act Concerning Non-Compete Agreements SB-906 : Labor and Public Employees Committee Joint Favorable Report (March 23, 2021), https://www.cga.ct.gov/2021/JFR/S/PDF/2021SB-00906-R00LAB-JFR.PDF .

[16] National Public Radio, Biden Moves to Restrict Noncompete Agreements, Saying They’re Bad For Workers (July 9, 2021), https://www.npr.org/2021/07/09/1014366577/biden-moves-to-restrict-non-compete-agreements-saying-theyre-bad-for-workers .

[17] Mark Lemley & Orly Lobel, Supporting Talent Mobility and Enhancing Human Capital: Banning Noncompete Agreements to Create Competitive Job Markets , Day One Project, 10 (Jan. 2021), https://9381c384-0c59-41d7-bbdf-62bbf54449a6.filesusr.com/ugd/14d834_5a463eb009844f37a1e952025642c748.pdf ; Response of Najah Farley, An Act Concerning Non-Compete Agreements SB-906 : Labor and Public Employees Committee Joint Favorable Report (March 23, 2021), https://www.cga.ct.gov/2021/JFR/S/PDF/2021SB-00906-R00LAB-JFR.PDF ; see also infra at “What Mechanisms are Available to Enforce Non-Competes.”

[18] White House Fact Sheet supra note 6.

[19] Alexander J.S. Colvin & Heidi Shierholz, Noncompete Agreements , Economic Policy Institute

Economic Policy Institute (Dec. 10, 2019), https://www.epi.org/publication/noncompete-agreements/ .

[20] John W. Lettieri, Noncompete Agreements and American Workers—Testimony before the Senate Committee on Small Business , Economic Innovation Group (Nov. 14, 2019), https://eig.org/news/testimony-before-the-senate-committee-on-small-business-noncompete-agreements-and-american-workers .

[21] Colvin supra note 19.

[22] White House Fact Sheet supra note 6.

[23] Ayesha Bell Hardaway, The Paradox of the Right to Contract: Noncompete Agreements as Thirteenth Amendment Violations, The Paradox of the Right to Contract: Noncompete Agreements as Thirteenth Amendment Violations , 39 Seattle U. L. Rev. 957, 959 (2016).

[24] Id. at 10-11.

[25] Id. at 4.

[26] Marx supra note 5 at 3, 27.

[27] Id. at 11.

[28] Matthew Johnson, Kurt Lavetti, & Michael Lipsitz, The Labor Market Effects of Legal Restrictions on Worker Mobility (June 6, 2020), 4, https://ssrn.com/abstract=3455381 .

[29] Karla Walter, The Freedom to Leave , Center for American Progress (Jan 9, 2019), https://www.americanprogress.org/issues/economy/reports/2019/01/09/464831/the-freedom-to-leave/.

[30] See e.g. , Uniform Trade Secrets Act (making a uniform definition of trade secrets and creating claims that can be brought in federal court when there is a misappropriation of trade secrets. 47 states, including the District of Columbia have adopted the Uniform Trade Secrets Act); Economic Espionage Act, 18 U.S.C § 1831-1839 (making it a federal crime to receive, purchase, or possess a misappropriated trade secret).

[31] See Brian Yeh, Protection of Trade Secrets: Overview of Current Law and Legislation , Congressional Research Service (April 22, 2016), available at: https://fas.org/sgp/crs/secrecy/R43714.pdf .

[32] Scott V. Heck, Employee’s Duty of Loyalty May Fill Non-Compete Void , Scarinci Hollenbeck Attorneys at Law (Jan. 25, 2019), https://scarincihollenbeck.com/law-firm-insights/labor-employment/duty-of-loyalty-nj-non-compete .

[33] Lettieri supra note 20.

[34] Walter supra note 29.

[36] White House Fact Sheet supra note 6.

[37] Walter supra note 29.

[38] Workplace Fairness, Your Rights: Non-Compete Agreements , Workplace Fairness (last visited Nov. 1, 2021), https://www.workplacefairness.org/non-compete-agreements#4 .

[40] Lemley supra note 17 at 5.

[41] White House Fact Sheet supra note 6.

[42] The Workforce Mobility Act, S. 483/H.R. 1367 (117th Cong. 2021); Freedom to Compete Act, S. 2375 (117th Cong. 2021).

[43] Charles A. Sullivan, Non-Competes in a Downsizing World , 8 San Diego L. Rev. 677, 681 (2021).

[44] See e.g., Cal. Bus. & Prof. Code § 16600; CT St 42-110b (2019); Illinois Freedom to Work Act, 820 ILCS 90/10 (2017); Maine, 26 M.R.S.A. § 599-A (2019); MD Code, Lab & Emp., § 3-716 2019 (2019); Massachusetts Noncompetition Agreement Act, MA st 149 s 24L; NH ST § 275:70 (2019); Or. St. 653.295 (2020); Wash St. 49.62.020 (2020); see also, Testimony of Najah Farley, In Support of Proposed B23-494, Ban on Non-Compete Agreements Amendment Act of 2019: Hearing Before the Council of the District of Columbia , (Dec. 6, 2019), https://s27147.pcdn.co/wp-content/uploads/NELP-Testimony-DC-Council-Non-Compete-bill.pdf .

[45] Department of the Treasury, Office of Economic Policy, Non-compete Contracts: Economic Effects and Policy Implications , March 2016, at 4; Cal. Bus. & Prof. Code § 16600 .

[46] California Code, Labor Code – LAB § 925.

[47] Lisa Nagele-Piazza, Are Noncompetes Enforceable During the Pandemic , SHRM (Oct. 1, 2020), https://www.shrm.org/resourcesandtools/legal-and-compliance/state-and-local-updates/pages/are-noncompetes-enforceable-during-the-covid-19-pandemic.aspx .

[50] Nagele-Piazza supra note 47; see also Mark P. Carey, Covid-19 and Noncompetition Agreements: 4 Situations Where they Are Not Enforceable , Carey & Associates, P.C. (March 30, 2020), https://capclaw.com/covid-19-and-noncompetition-agreements-4-situations-where-they-are-not-enforceable/ .

[51] Illinois Freedom to Work Act, 820 ILCS 90/10(c) (2021).

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Legal Templates

Home Business Non-Disclosure Agreement Interview

Interview Non-Disclosure Agreement Template

• 4.8 110 Ratings

Updated September 27, 2023 Written by Josh Sainsbury | Reviewed by Brooke Davis

An interview candidate non-disclosure agreement , or an interview confidentiality agreement, protects your company from any disclosure of information made to a candidate who applies for a position.

Many companies have NDAs that protect their proprietary information and trade secrets. However, you can’t use these documents on candidates in the application process.

This type of non-disclosure lets you thoroughly vet candidates without concern over divulging information they might take to other companies or make public.

When to Use

• For high-level candidates
• For positions working with proprietary data and programs
• For positions where trade secrets are worked on broadly within the organization
• Before discussing sensitive information
• For more honest and thorough interviews
• For better candidate assessments and cultural fits

What To Include

Consequences of not having an interview nda.

The interview NDA is often a simple contract, including critical points. Here are some things that should be present in the agreement:

 The Parties Involved: The contract should clearly state the company and interviewee’s legal names. It may also delineate terminology for parties, such as referring to the interviewee as “applicant.”

 The Job Title or Position : The contract should stipulate the position the prospective employee is interviewing for.

 The Protections the NDA Offers: A section within the agreement should stipulate that the agreement protects the company from disclosures that can harm its interests in the marketplace, etc.

 Definition of Information Which Cannot Be Disclosed: The contract should stipulate information that can’t be discussed outside the interview. This might include trade secrets, products, and unique information.

 The Clause on Not Disclosing Confidential Information from Another Company : One clause many companies add is that interviewees may not disclose information pertinent to another entity, such as their current or past employment. This protects the company from liability if its products or upcoming projects appear similar to a competing entity through chance.

Signatures and Dates: The contract is legally binding after it’s signed and dated.

Your company will likely interview many candidates who are never hired permanently or temporarily. None of those interviewees can be covered under a standard employee NDA. The interview confidentiality agreement offers legal protection against intellectual property theft in these scenarios.

Below, you can download an interview non-disclosure agreement in PDF or Word format:

The most logical consequence of not using an interview NDA is that the candidates you interview might leak information, intentionally or accidentally. They might also bring information back to their current or future place of employment.

Without a signed contract, you’ll have no recourse in those scenarios.

Many companies that don’t use non-disclosure agreements won’t discuss sensitive information during the interview. This possibility can keep your data more secure but can often mean a less productive interview process.

The ability to thoroughly discuss responsibilities and future projects for the role can give the interviewer essential information to assess candidates accurately.

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The document above is a sample. Please note that the language you see here may change depending on your answers to the document questionnaire.

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• Content and Format of Composition Statement and Corresponding Statement of Ingredients in Labeling in NDAs and ANDAs

GUIDANCE DOCUMENT

Content and Format of Composition Statement and Corresponding Statement of Ingredients in Labeling in NDAs and ANDAs April 2024

Not for implementation. Contains non-binding recommendations.

This guidance is being distributed for comment purposes only.

Submit Comments by 06/28/2024

Although you can comment on any guidance at any time (see 21 CFR 10.115(g)(5)), to ensure that the FDA considers your comment on a draft guidance before it begins work on the final version of the guidance, submit either online or written comments on the draft guidance before the close date.

If unable to submit comments online, please mail written comments to:

Dockets Management Food and Drug Administration 5630 Fishers Lane, Rm 1061 Rockville, MD 20852

All written comments should be identified with this document's docket number: FDA-2024-D-1461

The Food and Drug Administration (FDA or Agency) is announcing the availability of a draft guidance for industry entitled “Content and Format of Composition Statements in NDAs and ANDAs and Corresponding Statement of Ingredients in Labeling.”  This guidance is intended to assist new drug application (NDA) and abbreviated new drug application (ANDA) applicants in submitting an accurate and complete composition statement in their applications and corresponding statement of ingredients in the labeling, when applicable.  This guidance describes best practices for writing the composition statement and corresponding statement of ingredients in labeling.  This guidance recommends how applicants can provide complete information with the goal of minimizing the number of assessment cycles and communications that are necessary for approval, as well as ensuring product labels are written clearly.