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Explanatory Notes
Chinese Confidentiality Undertaking
This Agreement, in the form of a letter, is designed for use by a company which is approached by someone with an idea for a new product. Confidentiality is usually in the interests of both parties in such a situation. In paragraph 1, the obligation of strict confidentiality is imposed and the first sentence also makes it clear that both parties will be open with each other with regard to the information to be provided. Both parties are obliged to restrict access to the confidential information to persons who need access to it. Such persons are to be subject to obligations of confidentiality similar to those as set out in this letter. In paragraph 2 the Company sets a time limit within which it will decide whether or not to proceed with the development, and during that period the other party is required not to open negotiations with anyone else. Under paragraph 3, if negotiations are broken off at the end of the specified period, all confidential information provided by each party must be returned to the other or destroyed. Paragraph 4 obliges either party to tell the other of any breach of the terms of the Agreement, This is important as it allows the party whose confidential information has been misused to take action to protect its interests as soon as possible. Paragraph 5 makes it clear that information which gets into the public arena is not covered by the confidentiality obligations unless this is due to some breach of a confidentiality undertaking. Similarly, neither party will be held to be in beach of their obligations if they disclose confidential information where ordered to by the courts or a relevant regulatory authority. Paragraph 6 specifies what law that governs the agreement created by this letter and how disputes will be finally settled. Our wording gives a choice of either English or Chinese law with disputes resolved in either the English or Chinese courts. Before finalising the letter, you should delete the wording that does not apply. There are many factors to be considered when reaching a decision on these matters and we have some free documents on our website that give more information - Z138 Arbitration and Z139 Governing law and Jurisdiction. If the letter is written in both Chinese and English, it is sensible to have a paragraph specifying which language is the ruling one: e.g: "This letter is written in both the English and Chinese languages and in the event of any discrepancy, the ruling version shall be the [English/Chinese] version."
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