Introduction
This practice note addresses a focused drafting question: when, if at all, a non-signatory should be able to enforce confidentiality obligations under an NDA. It examines how different legal systems treat third-party rights and explains why careful clause drafting is essential in cross-border agreements to ensure that enforcement rights are allocated deliberately rather than by implication.
Comparative Jurisdictional Overview of Third-Party Rights
| Jurisdiction | Core rule | Drafting implication for NDAs |
| UK | Under the Contracts (Rights of Third Parties) Act 1999, a non-party may enforce a term if the contract expressly allows it or if the term purports to confer a benefit on that person and the contract does not show a contrary intention. | If English law governs, an NDA should usually contain an express exclusion unless identified affiliates, clients, investors, or advisers are intended to enforce specific confidentiality protections. |
| US | State law generally distinguishes intended beneficiaries, who may enforce, from incidental beneficiaries, who may not; the analysis is heavily driven by contractual intent and wording. | If US law governs, the NDA should state clearly whether any non-party is or is not an intended beneficiary, because ambiguity invites litigation over drafting intent. |
| Civil law systems | Many civil law systems remain more restrictive and generally require a clear stipulation before a third party acquires enforceable contractual rights. | The practical risk is usually under-inclusion rather than over-inclusion, so intended beneficiaries should be identified expressly and the scope of their rights should be limited with precision. |
| South Africa | South African law recognises a stipulatio alteri, under which a contract may confer a benefit on a third party that becomes enforceable upon acceptance by that third party. | Where South African law governs, the NDA should make clear whether any third-party benefit is intended and, if so, how acceptance and enforcement are meant to operate. |
Relevance to NDAs
For NDA drafting, the issue is not academic. Third-party rights affect who can enforce confidentiality, who can seek remedies, and whether parties have unintentionally expanded the litigation and negotiation perimeter beyond the signatories.
- Unintended enforcement risk: If the clause is silent or imprecise, affiliates, investors, service providers, or other non-signatories may argue that they were meant to benefit from the NDA.
- Remedy control: A clear clause preserves control over who may seek damages, injunctive relief, or other contractual remedies for misuse of confidential information.
- Commercial structuring: In group, client, investment, and collaboration contexts, targeted third-party rights may be useful, but they should be granted narrowly and only to identified beneficiaries.
When to Exclude vs. Include Third-Party Rights in NDAs
(a) Exclude third-party rights as the default rule
- This is the preferred position for most NDAs because confidentiality obligations are typically intended to remain enforceable only between the contracting parties.
- Use this approach where the NDA is bilateral, the confidential information is controlled by the signatories, or the parties want to avoid collateral claims from loosely connected group entities or advisers.
- If English law governs, exclusion should be express rather than assumed; if US law governs, the clause should also state that no non-party is an intended beneficiary.
(b) Include third-party rights only for defined beneficiaries
- Inclusion may be justified where the NDA protects information owned by identified affiliates, clients, investors, licensors, or project partners that need direct enforcement rights.
- If rights are included, identify the beneficiary by name or class, specify which clauses are enforceable by that beneficiary, and preserve the parties’ ability to amend the agreement except to the extent restricted by the governing law.
- Avoid broad formulations that extend rights to all group companies, advisers, or related persons unless that broader enforcement architecture is genuinely intended.
Key Risks and Drafting Considerations
- Match the clause to the governing law: The same commercial intent can produce different enforcement outcomes across jurisdictions, so the third-party rights clause should be drafted with the chosen governing law, not as generic boilerplate.
- Use a clear exclusion formulation: A practical exclusion clause states that no person other than the parties may enforce any term of the NDA and, where relevant, expressly disapplies the applicable third-party rights statute or doctrine.
- Use a narrow inclusion formulation: If specific non-parties need protection, the NDA should grant enforcement rights only to those identified beneficiaries and only in respect of the confidentiality, non-use, return or destruction, and remedy provisions intended for their benefit.
- Control amendment mechanics: Where rights are granted to third parties, address whether the contracting parties may rescind or amend the agreement without beneficiary consent, because this point is treated differently across legal regimes.
Conclusion
The drafting recommendation is straightforward: exclude third-party rights in NDAs unless there is a clear business case for direct enforcement by a specified non-party. Where inclusion is necessary, the safer approach is to identify the beneficiary, limit the enforceable provisions, and coordinate the clause expressly with the governing law so that the intended allocation of enforcement rights is not left to implication or later dispute.
References and Further Information
- UK statutory starting point: Contracts (Rights of Third Parties) Act 1999 explanatory material
- US doctrinal starting point: intended versus incidental beneficiary analysis under mainstream contract law authorities.
- South African doctrinal starting point: stipulatio alteri and acceptance-based enforcement principles.
Disclaimer
This practice note provides general information and does not constitute legal advice. For specific legal guidance, consult a qualified attorney.