Can a buyer back out of an NDA if there was never a real offer?

Ending the talks and ending the NDA are two different things. The privacy statutes below each provide for a transaction that does not proceed or is not concluded. PIPEDA speaks of a prospective business transaction, and its definition of business transaction includes the purchase, sale or other acquisition or disposition of an organization or part of it or its assets (s.2(1), s.7.2(1)). What a buyer owes after walking away comes from the NDA itself and from any privacy law that applies to the information that was shared.

What to read in the NDA

The NDA, not the stage of the deal, answers the question (see NDAs in a business sale). Read it for these points before assuming it is over.

• How long the confidentiality duty runs, and whether any part continues after the term ends.
• Whether either side may terminate, and what notice that takes.
• What counts as confidential information, and what is excluded.
• Whether the buyer must return or destroy materials and confirm it in writing.
• Whether the buyer has agreed not to approach the seller’s staff, customers or suppliers.

What the privacy statutes add

PIPEDA s.7.2(1) applies in addition to s.7(2) and (3). It permits parties to a prospective business transaction to use and disclose personal information without the individual’s knowledge or consent if an agreement requires the recipient to use and disclose it solely for purposes related to the transaction, to protect it, and, if the transaction does not proceed, to return it or destroy it within a reasonable time, and the information is necessary. Section 7.2(3) requires the organization to comply with that agreement, and s.7.2(4) excludes a transaction whose primary purpose or result is the purchase, sale or other acquisition or disposition, or lease, of personal information. British Columbia (s.20) and Alberta (s.22) have their own business-transaction sections in their personal information protection Acts, each with a provision for a transaction that does not proceed or is not completed. Quebec’s private-sector Act (s.18.4) requires the agreement first and destruction if the transaction is not concluded.

If the buyer wants out

A buyer who wants to stop should say so in writing, return or destroy the materials as the NDA requires, and ask the seller to acknowledge it. A seller can ask for the same confirmation. If either side believes the NDA has been breached, get legal advice before acting, because the NDA’s own remedies clause will matter.