Non-Disclosure Agreement (Mutual).

The residuals clause: the clause most parties skip

In genuine two-way collaborations, employees on both sides will inevitably retain general knowledge, skills and approaches learned during discussions, even without deliberately memorising confidential documents. A residuals clause carves out unaided memory of general concepts from the confidentiality obligation, while still protecting specific confidential information, trade secrets and documents. Without this clause, a strict reading of the NDA could arguably prevent your team from using general industry knowledge gained during a joint venture that ultimately doesn't proceed — which is commercially unworkable and rarely what either side actually intended.

Defining confidential information precisely

We define confidential information broadly enough to cover financial data, customer lists, technical specifications, pricing and strategic plans, but with standard carve-outs for information already in the public domain, already known to the recipient before disclosure, independently developed without reference to the disclosed material, or required to be disclosed by law or a regulator such as ASIC.

Term, survival and return of information

Mutual NDAs used for M&A due diligence typically need a longer survival period than a standard commercial NDA — often three to five years — because the value of the information being protected (deal terms, valuation methodology, target financials) doesn't decay quickly. We also build in an obligation to return or destroy confidential documents if the deal doesn't proceed, with a certification requirement so you have evidence of compliance.

Interaction with due diligence and exclusivity

For M&A and joint venture contexts, the mutual NDA is often signed alongside, or shortly before, a term sheet or heads of agreement containing an exclusivity or standstill clause. We check the NDA doesn't inadvertently create binding deal terms or an obligation to proceed — its role is strictly to protect information, not to commit either party to the transaction.

Enforcement realities in a two-way relationship

Because both parties are bound, enforcement of a mutual NDA is genuinely symmetrical — if the deal collapses acrimoniously, either side can pursue the other for misuse. We draft governing law, jurisdiction and injunctive relief clauses so that if urgent action is needed to stop threatened disclosure, either party can seek an interlocutory injunction in an Australian court without being forced into a slower arbitration process first.

What the fixed fee covers

• Mutual NDA drafted for your specific transaction type (JV, M&A, partnership)
• Residuals clause addressing retained know-how
• Definition of confidential information with standard statutory carve-outs
• Term, survival period and return/destruction obligations
• Governing law, jurisdiction and injunctive relief clause

Mistakes we see

• Using a mutual NDA when only one party is actually disclosing sensitive information
• No residuals clause, creating unworkable restrictions on general industry knowledge
• Survival period too short for M&A deal information that stays sensitive for years
• No return-or-destroy obligation if the deal falls through
• Treating the NDA as creating exclusivity when that needs a separate clause or term sheet

Who this is for

• Businesses entering joint venture or partnership discussions
• Companies exchanging information during M&A due diligence
• Technology partners contributing proprietary systems to a collaboration
• Parties negotiating a co-development or licensing arrangement

Frequently asked questions

Is a mutual NDA legally different from a one-way NDA in Australia?

The underlying legal principles are the same — both rely on contract law to create obligations of confidence — but a mutual NDA imposes symmetrical obligations on both signatories rather than restricting only one. The drafting focus shifts to fairness of carve-outs and residuals since both parties are exposed.

Do we need a residuals clause even for a short-term discussion?

It depends on how technical the discussions are. If your teams will be exchanging specifications, methodologies or systems knowledge rather than just commercial terms, a residuals clause protects both sides from later disputes about what was 'confidential' versus generally learned.

Can a mutual NDA be used before a joint venture agreement is signed?

Yes — this is one of its most common uses. It's signed before commercial terms are finalised so both parties can share the information needed to assess whether the joint venture is worth pursuing, without that exploratory information leaking or being used outside the discussions.

What happens if one party breaches the NDA during due diligence?

The non-breaching party can seek damages and, where the breach involves ongoing or threatened misuse, injunctive relief to stop further disclosure. In practice, well-drafted NDAs deter breach more than they compensate after the fact, which is why the drafting quality and clear definitions matter.

Should the mutual NDA include a non-solicitation clause?

Not automatically, but it's common to add one in JV and M&A contexts to prevent either party poaching the other's staff during discussions. We add it as a discrete clause with its own reasonable time limit rather than folding it into the confidentiality obligation itself.