A non-disclosure agreement is a contract whereby two parties signing it agree not to disclose any confidential information outside of work. Non-disclosure agreements are generally made to protect business confidential.
Non-Disclosure Agreement
A Non-Disclosure Agreement (NDA), also known as a confidentiality agreement, is a legally binding contract between two or more parties designed to protect sensitive information shared during a business relationship.Key elements typically addressed in a Non-Disclosure Agreement include the definition of confidential information,the duration of the confidentiality obligations, the permitted disclosures (if any), and the consequences of a breach. NDAs can be mutual, where both parties agree to keep each other’s information confidential, or one-sided, where only one party is sharing confidential information.
Contents and Terms in a Non-Disclosure Agreement (NDA)
- Parties – The parties to the confidentiality agreement will be the potential buyer and seller. It describes the buyer as the “Receiving Party” and the seller as the “Disclosing Party.” In case the buyer has few or no assets, then a guarantor may also be involved.
- Confidentiality – It defines the meaning of “confidentiality.” It includes data, information, or any other note shared electronically or physically, including meetings, that can’t be obtained from public sources. A very important clause from a “Disclosing Party” perspective is that all documents exchanged will be considered “confidential” rather than just the documents that are “specifically marked as confidential,” as there can be a situation wherein the seller misses marking a few documents as confidential.
- Exceptions to Confidentiality – Confidentiality agreements usually exclude certain information, which doesn’t amount to a breach of the confidentiality clause. Some of the exception clauses are:
- – Information that is in the public domain
- – Information that the disclosing party disclosed before signing the agreement
- – Information received by the “receiving party” from a third party, wherein the third party was not obliged to keep the information confidential
- – Information that was in the lawful possession of the receiving party before the date of signing of the NDA
- Disclosure of Information – The NDA will usually define the objective of the agreement. It will include the purchaser and other parties whom the information can be disclosed to for the assessment of a potential transaction. Generally, the receiving party is allowed to disclose the information to its employees, advisors, lawyers, and investment bankers.
- Destruction of Materials – The disclosing party would always want to include a provision that all information, including all physical and electronic data, should be destroyed if the parties terminate negotiations. However, the receiving party generally negotiates this clause with the disclosing party and reaches the conclusion that the destruction of such records does not apply to their internal recordkeeping, any electronic backup storage, or professional recordkeeping.
- Period of Enforcement / Termination of Confidentiality – The NDA would definitely specify the length of time the agreement is in force. No potential buyer would like to get tied up with an agreement for an indefinite period. Generally, an agreement is in force for a period of one or two years. Sometimes, parties also agree to terminate the agreement on completion of the transaction.
- Restraint Provisions – Confidentiality agreements also include non-solicit provisions. It restricts the receiving party and its subsidiary companies from approaching and soliciting any employee of the disclosing party. Sometimes, the disclosing party is also prevented from approaching any customer that the receiving party wouldn’t have in their ordinary course of business.
- Governing Law and Jurisdiction – It mentions that the agreement will be governed by a State body and the language of conduct for court proceedings in case of any dispute regarding confidentiality.
- Binding Agreement – The receiving party makes sure that the language clearly distinguishes and differentiates it from an agreement to negotiate a transaction. The objective of the NDA agreement is to explore an opportunity and explore its feasibility in terms of business fit and rationale for investment, rather than a commitment to bid for the deal.
- Implications for Breach of Confidentiality – It is very common and obvious that there is never an adequate remedy for breach of confidentiality by the receiving party. The disclosing party keeps a provision to apply for an injunction and specific performance and other relief on an actual basis.
Non-Disclosure Agreement Template
MUTUAL CONFIDENTIALITY AND NON DISCLOSURE AGREEMENT
This Confidentiality and Non-Disclosure Agreement (“Agreement”) dated Date, Month, Year (“Effective Date”) is entered into by and between ………………………………….a company incorporated under the provisions of Companies Act, 2013 and having its principal place of business at ……………………………………….., (hereinafter referred to as “……………….” which expression shall mean and include its parent, affiliates, sister concerns, subsidiaries and assigns), And ………………………….. a company incorporated under the provisions of Companies Act, 2013 and having its principal place of business at …………………………………………. (hereinafter referred to as “Company” which expression shall mean and include its parent, affiliates, sister concerns, subsidiaries and assigns)
Purpose
Parties have to disclose certain confidential, technical and business information to each other in furtherance of business. To protect the said confidential information both the parties desire to sign this Non- Disclosure agreement.
Disclosure of Confidential Information
Either party may disclose to the other party either orally or in any recorded medium, information comprising or relating to its / or its affiliates, parent, sister concerns group companies: techniques; schematics; designs; contracts; financial information; sales and marketing plans; business plans; clients; client data; business affairs; operations; strategies; inventions; methodologies; technologies; employees; subcontractors; pricing; service proposals; methods of operations; procedures; products and/or services (“Confidential Information”). Confidential Information shall include all nonpublic information furnished, disclosed or transmitted regardless of form.
Confidentiality
Either Party shall use the Confidential Information solely in furtherance of the actual or potential business relationship between the parties. The parties shall not use the Confidential Information in any way that is directly or indirectly detrimental to the other party or its subsidiaries or affiliates, and shall not disclose the Confidential Information to any unauthorized third party. Parties shall ensure that access to Confidential Information is granted only to those of its employees or agents (“Representatives”) who have a demonstrated need to know such information in order to carry out the business purpose of this Agreement. Prior to disclosing any Confidential Information to such Representatives, party shall inform them of the confidential nature of the information and their obligation to refrain from disclosure of the Confidential Information. Each party and its Representatives will take all reasonable measures to maintain the confidentiality of the Confidential Information, but in no event less than the measures it uses for its own information of similar type. Parties and its Representatives shall not disclose to any person including, without limitation, any corporation, sovereign, partnership, limited liability company, entity or individual (i) the fact that any investigations, discussions or negotiations are taking place concerning the actual or potential business relationship between the parties, (ii) that it has requested or received Confidential Information, or (iii) any of the terms, conditions or any other fact about the actual or potential business relationship. Each Party and its Representatives will immediately notify the other Party of any use or disclosure of the Confidential Information that is not authorized by this Agreement. Each Party and its Representatives will use its best efforts to assist the other Party in remedying any such unauthorized use or disclosure of the Confidential Information. Either Party shall implement and follow the rules as laid down in the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 [‘the Rules’]. Either Party shall monitor the security practices, control processes and checks in place in respect of the Confidential Information on a regular basis and disclose any breaches in the security practices, control processes and checks in place to the other Party. The obligations contained in this Section 2 will not apply to the extent that either Party can demonstrate that the Confidential Information: (a) was part of the public domain at the time of disclosure or properly became part of the public domain, by publication or otherwise; (b) was rightfully acquired by Receiving Party prior to disclosure by Disclosing Party; (c) was independently developed by Receiving Party or its Representatives without reference to the Confidential Information; or (d) is required to be disclosed by a government agency or by a proper court of competent jurisdiction; provided, however, that Receiving Party and its Representatives shall provide Disclosing Party prompt prior written notice of such requirement, shall consult with and assist Disclosing Party in obtaining a protective order prior to such disclosure, and shall only disclose the portion of Confidential Information which it has been advised by written opinion of counsel is legally required to be disclosed and shall use its best efforts to obtain assurance that confidential treatment will be accorded such information if the protective order is not obtained or if Disclosing Party waives disclosure of such information.
Ownership of Materials/No Warranty
Each Party retains all rights, title and interest to its Confidential Information. No license under any trademark, patent or copyright, or application for same which are now or thereafter may be obtained by the other Party is either granted or implied by the disclosure of Confidential Information. Confidential Information is provided “as is” with all faults. In no event shall parties be liable for the accuracy or completeness of the Confidential Information.
Term
This Agreement shall terminate two (2) years from the Effective Date. Receiving Party’s obligations with respect to confidentiality shall expire after two (2) years from the date of disclosure.
Return of Confidential Information
Upon written request of either Party, Parties and its Representatives shall promptly return to the other Party all copies of Confidential Information in its possession including, without limitation, all copies of any analyses, compilations, studies or other documents prepared by Receiving Party or its Representatives containing or reflecting any Confidential Information. Either Party shall certify in writing that it and its Representatives have returned all such information to the other Party.
General
a) This Agreement shall be governed by and construed in accordance with the laws India without regard to its conflicts of law provisions. b) Either Party agrees that the breach of the provisions of this Agreement by any Party will cause the other Party an irreparable damage for which recovery of money damages would be inadequate. Either Party will, therefore, be entitled to obtain timely injunctive relief to protect its rights under this Agreement in addition to any and all remedies available at law or in equity. Receiving Party and its Representatives hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts of Bangalore, Karnataka for any actions, suits or proceedings arising out of or relating to this Agreement and the transactions contemplated hereby (and agree not to commence any action, suit or proceeding relating thereto except in such courts), and further agree that service of any process, summons, notice or document by registered mail or tracked courier service to the address set forth above shall be effective service of process for any action, suit or proceeding brought against Receiving Party and its Representatives in any such court. c) Neither party may assign any of its rights or obligations under this Agreement without the prior written consent of the other party. This Agreement shall be binding upon and inure to the benefit of the parties permitted successors and assigns. d) This Agreement may be amended or supplemented only by a writing that is signed by duly authorized representatives of both parties. e) No term or provision hereof will be considered waived by either party, and no breach excused by it, unless such waiver or consent is in writing signed an authorized representative of the non-breaching party. No consent to, or waiver of, a breach by a party, whether express or implied, will constitute a consent to, waiver of, or excuse of any other, different, or subsequent breach. f) If any part of this Agreement is found invalid or unenforceable, that part will be amended to achieve as nearly as possible the same economic and legal effect as the original provision and the remainder of this Agreement will remain in full force. g) This Agreement constitutes the entire agreement between the parties relating to this subject matter and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral. h) This agreement may be executed in two counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same agreement. Accepted and agreed as of the date first above written by the following authorized Party representatives:
| …………………………………………………………………………………….. | …………………………………………………………………………………….. |
| Company Name | Company Name |
| Signed By: | Signed By: |
| Designation: | Designation: |
FAQs
Why use a Non-Disclosure Agreement (NDA)?
An NDA is very important and useful for the seller (disclosing party), as the seller is the one who is disclosing every piece of confidential information about their company. They face more risk from others finding out about the information, as it may not generate positive sentiments from customers and employees.
A non-disclosure agreement usually has the following clauses?
- Parties to the contract: There are two types of non-disclosure agreements, namely-
- Unilateral or one-way agreement- Under this agreement, only one party has the information that has to be shared with the other party before the contract is signed.The party having the information is called disclosing party and the other party is called the receiving party.
- Mutual or two-way agreement- Under this agreement, both the parties have the information which they share with each other.
- Confidential Information: The agreement must state what information needs to be protected or kept confidential.
- Disclosure of Confidentiality: This clause specifies the purpose for which such information can be used. Also, it may specify the name of such persons with whom confidential information can be shared.
- Term of the contract: The agreement should specify the date of the agreement and the duration for which the contract exists. It may provide clauses for whether disclosure rules and obligation will apply after the expiry of the contract or not.
- Remedies: The agreement must provide for remedies to be adopted in case either of the party breaches the contract.