The Basics of a Non-Disclosure Agreement
- What is a NDA?
A Non-Disclosure Agreement “NDA” (also known as Confidentiality agreement), is an agreement entered into between two parties where one of them is the party disclosing the information and who is known as the “Disclosing Party” and the other party is the one receiving the information and has the obligation to keep the information confidential and who is known as the “Receiving Party”.
- Why and when do we need a NDA?
Every company has certain information that is considers as confidential; whether this is comprised of trade secrets, know-how, information on clients, business ideas or projects. If this information is leaked and becomes known to the public including competitors, it could cause irreparable damages and loss to the company and hence, harm its business. For example, if a startup has an idea for a project that wishes to implement, it must take severe measures to protect this information from being disclosed to the marker. For that reason, we recommend that before the company speaks about this idea with any third party, to ensure that a well drafted NDA is signed with such third party.
The NDA will grant you the necessary protection which you will require in order to safeguard of the secrecy of your confidential information.
- What is included in a NDA?
First and foremost, the NDA must specify as to what is considered as confidential information and this includes the means of how this information is disclosed (i.e. in writing, verbally or both) which is usually inserted in the definition of confidential information. In the event where a company is unable to determine exactly what is the information that is considered confidential, the definition can be expanded to encompass all information, and this done by adding the phrase “including but not limited” to the definition. By doing so, the definition captures all information pertaining to the company. In cases, where the company has affiliates or subsidiaries and gives information regarding them to the Receiving Party, the definition can also include any information regarding such affiliates or subsidiaries.
Also, the NDA should include several other provisions which are mainly, the purpose for concluding the NDA, the restriction on the Receiving Party to not disclose the confidential information, the term of the agreement and the obligation on the Receiving Party to return any documents containing any confidential information to the Disclosing Party (if this was handed over by the Disclosing Party to the Receiving Party to be able to perform a particular task).
- What is the term of a NDA?
The customary term for a NDA (i.e. the period which the Receiving Party will be under the obligation to keep the information confidential) ranges from 3 to 5 years, unless the Disclosing Party wishes that the information is to remain confidential until it becomes known to the public by means of an announcement made by the Disclosing Party.
- Are there any exceptions to the non-disclosure obligation of the Receiving Party?
Yes, and this is mainly as follows:
- information that, at the time of disclosure, is generally available to and known by the public other than as a result of a disclosure by the Receiving Party
- If the Receiving Party is required by mandatory law to disclose all or part of the confidential information.
- Legal Risks for breaching a NDA
From a contractual and legal perspective, the Disclosing Party may include in the NDA terms that regulate the breach committed by the Receiving Party such the immediate termination of the agreement and the to receive a compensation as a result for the losses that it incurs due to the leakage of the confidential information.
