What You Need to Know About Non-Disclosure Agreements

Do you share business ideas with potential investors, business partners, or other third parties? Do you wish to control the disclosure and use of such information by those parties? Well, a Non-Disclosure Agreement (“NDA”) is a document you should have handy. This newsletter provides information about Non-Disclosure Agreements that will interest you. 

An NDA (also called a Confidentiality Agreement) is a legal agreement between two or more parties were they agree not to reveal information (“Confidential Information”) shared between them to unauthorised third parties.

1.Definition of Confidential Information: An NDA must clearly define what should be termed confidential information. Confidential information here depends on the nature of the idea being protected. Ideally, this should include documents, emails, recorded conversations, business strategies, trade secrets, etc.

2.Survival of the NDA obligation: An NDA should expressly state how long the obligation of confidentiality will subsist even after termination of business discussions. The survival period is typically between 1 to 2 years.

3.No obligation to enter into a business relationship: Since NDAs are almost always signed prior to discussions for a business partnership or other commercial interest, it should include a no obligation clause which states that parties to the NDA can exit the agreement at any time and are not bound to enter into a substantive agreement.

4.Remedies to the breach of the NDA: A clause should be included in an NDA giving an aggrieved party the right to (in addition to other remedies for damages) apply to a court or arbitration panel for an injunction preventing the other party from continuing to breach the terms of the NDA.

5.Dispute Resolution and Governing Law Clause: A clear dispute resolution and governing law clause should be included in NDAs.

Where a substantive agreement is being negotiated or has been signed by parties and it contains a clear confidentiality provision, a separate NDA will not be required.

An NDA is a binding agreement and a breach of an NDA allows the disclosing party to pursue damages/awards in court or an arbitration tribunal, depending on the terms of the breached NDA.