A Guide to Non-Disclosure Agreements

This is the information age, and today, data and information of various kinds is more valuable than it has ever been. A company relies on its information to retain a competitive edge, and a Non-Disclosure Agreement (NDA) or Confidentiality Agreement helps it to do exactly that.

What’s in a name? 

The difference between a Confidentiality Agreement and a NDA is one of those questions that many wonder, but few ask. The answer is that they are both the same thing. You might even hear other names, such as Secrecy Agreement or Confidential Disclosure Agreement, particularly if you are dealing with business partners in the USA.

Whatever you choose to call it, the purpose behind it is the same – to protect proprietary or confidential information from being disclosed to other parties.

Types of NDA

A Non-Disclosure Agreement might be used in a variety of settings, including the following:

• Between B2B parties – when businesses work together or enter into a contractual relationship, they will, by necessity, need to divulge information that might be sensitive or proprietary. This might include information on pricing, business practices, clients or suppliers, that would be damaging if it reached their competitors.
• Between an employer and employee – staff members and contractors acquire all manner of knowledge in the course of their work. These days, there is far more churn, as individuals develop their careers by moving from one company to another, than there used to be. An NDA ensures that when they leave, they cannot divulge sensitive information to their new employer.
• Between disputing parties – the vast majority of legal disputes, whether they are with companies or former employees, are settled before they go anywhere near a court. If a financial settlement is made, there is always the risk of it opening the floodgates for similar claims. An NDA ensures that the details do not become public knowledge.

What is in a NDA?

The precise details will vary from one NDA to the next, but each will follow the same core framework, and will consist of the following:

• Names of the contracting parties
• Date of the agreement
• Definition of confidential information
• Ownership of confidential information
• Restrictions regarding disclosure
• Rules for notification in the event of disclosure, for example if confidential information is inadvertently disclosed
• Return or destruction of confidential information
• Duration of obligations under the agreement
• Legal jurisdiction
• Signatures
• Other miscellaneous information

Enforceability

If one party breaches the terms of an NDA, the other can seek financial restitution for the loss suffered. The law provides this kind of protection anyway, even if an NDA is not in place, but by having one, there is a greater probability of a successful outcome. The NDA provides evidence that confidential information has been shared, and that the offending party knew and accepted that they were not entitled to disclose it.

However, this misses the point. The real benefit of an NDA is as a preventative measure. When parties have signed up to one, it highlights the sensitive nature of the information they are handling, and drastically reduces the likelihood of them leaking it to other parties, either intentionally or accidentally.