Author’s Note:

Non-Disclosure Agreement – Confidentiality Agreement – Privacy Covenant – Trust Agreement. They all mean the same thing. Don’t let synonymous terms confuse you.

As your professional exposure expands, you’ll inevitably encounter Non-Disclosure Agreements (NDAs), formidable documents designed to shield confidential information from prying eyes.

As a businessman, you need to understand how NDAs function. So, that you don’t sign NDAs that will suffocate you legally.

As a lawyer, you must know all of this already to be able to protect your client against lawyers who already know this and more.

Anatomy of an NDA & all other Agreements

The structure of a Non-Disclosure Agreement (NDA) is typically akin to that of any standard contract or agreement, comprising the following – Preamble, Recital, Body, Signatures & Witnesses (if any).

Here is a checklist of important details that you should evaluate before signing any agreement:

1. Introduction/Preamble: Sets agreement context, identifies involved parties, and outlines agreement purpose.
2. Definitions: Clarifies key terms to avoid ambiguity and ensure mutual understanding.
3. Obligations of the Parties: Outlines handling and protection responsibilities for confidential information.
4. Scope of Confidential Information: Specifies types of protected information, including trade secrets and proprietary data.
5. Duration of Confidentiality: Establishes a timeframe for confidentiality obligations, whether fixed or indefinite.
6. Exclusions: Identifies information exempt from confidentiality, like publicly available data or independently developed material.
7. Disclosure and Use Restrictions: Governs how confidential information may be shared and used, requiring prior consent for disclosure to third parties.
8. Remedies for Breach: Details available recourse in case of NDA violation, such as injunctive relief or monetary damages.
9. Consideration: Ensures both parties receive something of value in exchange for their obligations under the agreement, as required by contract law principles. It can be in the form of time, resources, knowledge, etc.

Understanding NDA

Now that we have a clear understanding of how agreements are structured generally. We can move onto dissecting the intricacies of NDAs or Confidentiality Agreements.

What is an NDA?

At its core, a Non-Disclosure Agreement is a legal contract between parties, outlining the terms and conditions for sharing and protecting confidential information.

In the dynamic landscape of businesses, startups & entrepreneurship, NDAs serve as the fortress guarding your company’s most valuable assets, ideas & know-how.

How to Review NDAs before signing? 

As your business evolves, you’ll encounter the need to review and negotiate NDAs.

Very Long And Boring List Of Practical Tips On Reviewing NDAs

1. Determine Nature & Tone of the NDA: Read the NDA carefully to see if the NDA is only favoring one party. You should be protecting Confidential Information, but not at the cost of sabotaging your own safety & freedom.

Important Note:

2. If you’re an individual signing the NDA, make sure that the NDA is reasonably neutral;
3. If you’re an entity, business or startup, make sure that the NDA protects your confidentiality along with other Restrictive Covenants such as non-compete, non-disparagement, non-solicitation & anti-raiding etc. via a comprehensive document.
4. Seek Mutuality: Consider requesting a mutual NDA for balanced protection because most lawyers draft NDAs only to favor their clients.
5. Correct Party Identification: Ensure your personal details are accurately represented in the agreement to avoid ambiguities, and confusions later.
6. State the Object/Purpose: Make sure that the purpose and object of signing the NDA is clearly mentioned in detail. The NDA should clearly mention why is there a need to protect this information in the first place?
7. Reasonable Restrictions: Verify that the restrictions imposed are fair and feasible, especially, if you’re an Employee signing an NDA or any other Agreement containing restrictive covenant/clauses.
8. Allow for Disclosures: Confirm that the NDA permits disclosures to representatives and permitted parties on a need-to-know basis. The NDA should also clearly stipulate that the Confidential Information may be disclosed to legal authorities as and when directed/instructed by them.
9. Customary Carve Outs: Ensure standard exceptions are present, such as disclosures required by law.
10. Legal Disclosures: Beware of inappropriate restrictions that may hinder business operations or restrict any of your fundamental rights as guaranteed under the Indian Constitution.
11. Define Term/Duration: Specify the duration/period/term of the confidentiality maintenance to align with your objectives. Frankly, because if a party wants you to take the secrets to you grave – I hope you get paid extra for it. Lol!
12. Non-binding Nature: Clarify that signing the NDA does not obligate parties to engage in further transactions.
13. Jurisdictional Clarity: Specify the governing law and venue for dispute resolution.
14. Good practice: There are numerous instances in which you may want to share confidential information with another party. But, the key to doing so safely is making sure that the other party is bound to respect the confidential information you provide them and not use it to your detriment.
15. Representation and Warranties: Include assurances regarding the accuracy and legality of disclosed information.
16. Interaction with Employees: Address how employees and agents will handle and protect confidential information. Otherwise, you will end up becoming a scape-goat.
17. Disclosure and Representatives: Outline who can disclose confidential information and to whom.
18. Use of Confidential Information: Clarify permissible uses of confidential information by the recipient party, because otherwise why are you even receiving such information in the first place.
19. Return or Destruction of Confidential Information: Establish protocols for returning or destroying confidential materials after the agreement ends.
20. Consideration: Ensures both parties receive something of value in exchange for their obligations under the agreement, as required by contract law principles. It can be in the form of time, resources, knowledge, etc. it is the most essential part of forming an NDA which is not mentioned in NDA, because NDA comes under the Indian Contract Act,1872 and consideration is one of its major essentials as per Sec 10 of the Act.

Types of NDAs

Understand the distinctions between Unilateral, Bilateral, and Multilateral NDAs, each tailored to specific collaboration scenarios.

1. Unilateral NDA-It involves two parties but only one party discloses certain information to the other andwants to protect it from further dissemination.
2. Bilateral NDA- It is also known as Mutual NDA. It involves two parties, and both parties disclose information to each other, and both intend to protect that information from further dissemination.
3. Multilateral NDA-It involves three or more parties to enter the Agreement, out of which at least one party discloses the information to other parties and intends to protect the same form further dissemination. Instead of having two-three unilateral or bilateral NDAs one can have a single Multilateral NDA.

Popular and Important Clauses

Familiarize yourself with key clauses such as: 

1. Definition of Confidential Information
2. Term of Confidentiality
3. Consideration
4. Disclosure
5. Use of Confidential Information
6. Compelled Disclosure
7. Return/Destruction of Confidential Information
8. Remedies
9. Interaction with Employees
10. No Binding Agreement for Transaction

Confidentiality Clauses vs. Confidentiality Agreements

It’s essential to differentiate between confidentiality clauses and agreements:

Confidentiality Clauses

These are contractual provisions within larger agreements, serving to protect information with less details than an NDA would encapsulate usually.

For e.g. the Employee acknowledges that the confidentiality of the Employer’s confidential information is critical to the Employer’s success and that the Employer has invested substantial time, money and effort in developing such confidential information.

Confidentiality Agreements (or NDAs)

Standalone agreements between parties, providing comprehensive protection for confidential information.

A confidentiality agreement is a legal agreement that binds one or more parties to non-disclosure of confidential or proprietary information.

A confidentiality agreement is often used in situations wherein sensitive corporate information or proprietary knowledge is not to be made available to the general public or to competitors.

Our Advice

Always remember: there’s no substitute for legal counsel. While our guide equips you with essential insights, seeking professional advice ensures comprehensive protection for your business interests.

Should you have any questions or require assistance in reviewing NDAs, our team is here to guide you through the process.

Arm yourself with knowledge, tread cautiously, and protect your business with oslid air-tight agreements..

Reach Out to Us with your NDA related queries.