Explained: Non-Disclosure AgreemenT [ NDA ] [Sample]

In this Article, the author has explained the nuances of drafting a Non Disclosure Agreement ( NDA ); along with has been attached a Sample Format.

Introduction

A Non-Disclosure Agreement is an instrument; through which parties comes to a confidential relationship through which they agree to maintain each other’s confidential information.

What is a Non-Disclosure Agreement [ NDA ]?

A non-Disclosure agreement is a document signed between parties of an agreement, to protect the confidential information. Moreover, it also provide to not to use such information for any other purpose other than for which the information has been disclosed at first place.

Since a contract is incomplete without consideration, a Non-Disclosure agreement requires consideration too. In this case, the consideration is the exchange of information for the promise.

How to draft a NON-DISCLOSURE AGREEMENT [NDA] | Rohit Pradhan

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Unilateral or Bilateral sharing

Sometimes, only one party supplements the Confidential Agreement. For example, there could be a scenario of a Potential Acquisition. In such situation, the target company, which would be expecting to getting acquired, will share confidential information with the acquirer.

In some situation, both the parties share confidential information with each other. For example, there are two business entities, which comes together to run a Joint Venture. In such situation, both the entities will be sharing confidential information with each other.

When should one enter into an NDA?

Each business entity has its own fair share of tactics, strategies, business projections, etc; which is integral to the existence of such entity.

Such entities comes to an agreement, with its own employee to not disclose any such information with anyone, unless been expressly told.

It becomes obvious, that such entity would be; even more cautious while dealing with any 3rd parties.

In such situation, even before entering into any commercial agreement with any 3rd Party; parties execute a Non-Disclosure Agreement.

An NDA should protect accidental as well as intentional disclosure of confidential information.

Importance of NDA

Non-Disclosure Agreement [ NDA ] is a very important agreement. Many businesses or entities decides to collaborate or work with the other entities. They could work together to achieve a certain goal. Here, these entities would be sharing confidential information with each other; to ensure, that they reach their goal properly.

By signing an NDA, they will ensure, that their confidential information; would not be used adversely. Even, if its disclosed to someone, the defaulting party will be paying damages to the other party; for all the losses, that the other party suffered, due to such disclosure.

For the effective implementation of the NDA, it must be well written and carefully drafted; so that it can stand up in the court, in certain situations. Following are the clauses every Non-Disclosure Agreement should have:—

Title

“Non Disclosure Agreement”. This term should be mentioned at the top of the Agreement.

Recital Clause

This clause will condense whole agreement in few liners. This will help the reader to get the grasp of the agreement; without reading all the clauses.

Definition of Confidential Information:

This clause defines confidential information concerning the agreement formed and states about what information is not to be disclosed.

Parties:

This clause defines who are the disclosing party and recipient party/parties. There may more than one recipient party and in some cases; they may also contract a third party to perform some specific tasks. The third-party shall also be a part of the non-disclosure agreement.

Duration:

Every NDA should clearly express the term until when the information is to be kept confidential; and when does the agreement end.

Intended access of information:

This clause defines that for what reason or for what purpose the information has been shared to the receiving party. It also describe as in, how should they access the information, keeping it confidential at the same time.

Immunity for disclosing information:

A Non-Disclosure Application must contain a clause that should clarify that disclosing information; due to legal obligations is not a violation of the agreement. Moreover, the party disclosing the information is immune to any issue arising due to the same.

Return of the information:

The shared information needs to be returned or destroyed, whatever the clause says when the agreement ends. Sometimes it is difficult to destroy all the shared information, especially if it shared through an electronic medium. So to avoid these situations; the clause should include terms to avoid the receiving party using the information for any purpose in the future.

Jurisdiction:

This clause specifies which court to proceed if any dispute arises between the parties. Jurisdiction here simply means that which court has the authority to hear, try, and decide the case.

Remedies:

The NDA should contain a clause for preserving the disclosing party’s right; to seek justifiable remedies in case of breach of contract. Both parties must agree for whatever remedy is chosen. It should not be ex parte otherwise the recipient party may hang back before making the agreement.

Obligation over legal fees:

A Non-Disclosure Agreement should have a mutually agreeable clause between the disclosing party and the receiving party that; who will be responsible for the legal fees in case a suit is being filed by any of them against another.

Regardless of the court’s decision, the best should be that each party is responsible for their fees; and the same should be mentioned in the clause of the agreement.

Non-Binding Clause:

a Non-Disclosure Agreement is incomplete without the Non-Binding clause. This clause specifies that the parties to the agreement are not permanently bonded to each other; and preserve the right to withdraw from or terminate the agreement at any point in time.

Conclusion

Non-Disclosure agreements have become a very need in every business or any kind of contract. One cannot blindly trust anybody with important information about the business; or any other relevant info just because the parties are contracting with one another.

They need to establish a fiduciary relationship so that they can keep the required information and knowledge confidential. If any breach or violation takes place, the NDA is taken into consideration.

NDA Sample Template

NDA-Sample