What is a Non-Disclosure Agreement?

A non-disclosure agreement (NDA) is a clause included in a contract, or it can be a stand-alone agreement. It prevents the signatories from disclosing certain information. This allows a business to operate without the fear that confidential ideas or details will be leaked.

Confidentiality in business

A crucial element in the operation of a successful business is confidentiality. You must be able to discuss and negotiate ideas and information freely, whilst ensuring that your business is protected. A non-disclosure agreement does just that. It binds the relevant parties from disclosing confidential information. It also provides for remedies, should one or more parties breach the agreement.

A non-disclosure agreement is a clause incorporated into a contract, or it can be a stand-alone agreement. In it, one or more parties agree not to disclose certain information they have discussed in the course of business. This is an important tool to protect classified details that are often exposed during negotiations.

What should an NDA contain?

The clause should be drafted in a way that fits your business needs. A clause that is too narrow or too broad may not provide you with the protection you require.

Terms often found in non-disclosure agreements and their effect include:

Confidential Information – This is the content and material you are seeking to prevent from being disclosed or shared. It is crucial that your clause encompasses the relevant information; otherwise, your business secrets and ideas are left exposed.

Non-Disclosure Communication – It is important to specify what operations and discussions are covered by the agreement. This can include telephone calls, presentations, meetings and correspondence.

Duration – Ideally, the clause will be infinitely termed. However, if you are a selling business, you will need to reach a reasonable compromise, as a buyer will often be unwilling to afford protection beyond a few years. You need to negotiate a sufficient period of protection for your business.

Exceptions – It is also prudent to include the information that is not to be covered by the scope of the agreement. This may include information that is already in the public domain. This ensures your agreement is not so tightly drafted as to dissuade investors or buyers.

What happens if an NDA is breached?

As long as you have a carefully drafted non-disclosure agreement, you are able to rely on its use and are provided with remedies in the event that it is breached. As a breach of the NDA is a breach of contract, you may seek to recover damages for your loss, specific performance or an injunction to prevent further disclosure.

Do you want to draft an NDA?

If you would like to draft a non-disclosure agreement, or you would like further advice regarding NDAs, please contact our commercial litigation solicitors. We offer practical legal advice and assistance.