Non-Disclosure Agreement (NDA)

In India, Non-disclosure Agreements are governed by the Indian Contract Act, 1872. Non-disclosure Agreements are the agreements, where the parties to agreements agree not to close the information mentioned in the agreement. Non-disclosure agreements are agreements in which the contracting parties  agree not to close the information specified in the agreement. The non-disclosure agreement completely prohibits third parties from accessing the information specified in the agreement. Non-disclosure agreements are very common in  the business world regarding partners, company intellectual property rights (usually trade secrets) and also  employees. An enforceable contract must bear a stamp to be valid. Non-disclosure agreements can be used for many purposes when a subject's silence is desired.

Non-Disclosure agreements are playing a very important role in India as Outsourcing business is very burgeoning. NDA creates a confidential relationship between the parties and protects the proprietor information or trade secrets.

The general use of NDAs is limited to protecting:  

• Information related to intellectual property rights shared with  employees, contractors, partners, etc. of the companies;
• A discussion with a partner or investor about a real invention or business plan;
• Any  trade secret that may relate to sales methods or strategies

‍

Key Information About NDA

An NDA acknowledges a confidential connection between two or more parties and secures the information they share from disclosure to outsiders.

The NDA is common before exploration between businesses about potential joint ventures.

Employees are often required to sign NDAs to secure an employer’s confidential business information.

‍

‍

Three types of Non- Disclosure agreements are;

Unilateral NDA: There are only two parties to such an NDA, only one party discloses certain details to the other and assumes that the information will be withheld from now on.

Bilateral NDA: There are also two parties to this agreement  and both  parties disclose information to each other and undertake to protect each other from disclosure to the other as an Alliance.

Multilateral NDA: There are more than three parties  involved, one of which releases the information to the other parties and forces them to protect it from further disclosure. This type of NDA also eliminates the need for a separate unilateral or bilateral NDA.

• Who are the parties to the agreements, mentioning, receiving and disclosing party
• Description of the confidential information
• Information that is already public and of which the other party is well aware must be excluded from  the requirement of confidentiality
• Validity of confidentiality agreement. Generally, NDAs are valid for  two to five years.
• Duties and Obligations to Non-Disclosure Agreement Parties
• Consequences of breach of Non – Disclosure Agreement
• Dispute Resolution and the jurisdiction where a case can be filed if breach occurs.

NDA performs three main functions which are:

1. It protects sensitive information. The contract promises not to reveal more information after signing. If information is leaked, the injured party can sue them for breach of contract.
2. It helps the inventor retain patent rights. In the case of a new product or  development concept, an NDA can help the inventor protect his rights. Disclosure of new inventions  can invalidate patent rights. A properly drafted non-disclosure agreement can help an investor protect his right to a product or  idea.
3. It also helps to differentiate between exclusive and confidential information

‍

An NDA is a legal document that helps parties properly agree on their obligations. The agreement provides the parties with an understanding of the exact application and situation of elimination of  obligations.

• The NDA is an important document that can be helpful if conflicts arise in the future. If one of the contracting parties violates the contract, they must compensate for the damage.
• It provides  information about a particular confidential matter and helps to keep it secret.
• It helps achieve the goal of the parties' obligation to exercise due diligence in protecting  confidential information.
• In addition, it helps protect intellectual property, including trade secrets, confidential information, and proprietary information. In short, NDA secures the organization as a whole.

‍

Situations When NDA Shall Be Drafted

During the following situation NDA shall be drafted

• When the parties are entering into a business deal
• While any of the party is seeking expert help on new product
• At the beginning of new project
• While hiring new resource in a company
• When sensitive project is going on and needs to be signed with the contract worker
• Making any new investment deal
• When party has to deal with the client on sensitive information
• While making new products

‍

‍

It is possible for the parties to sign an invalid NDA, believing it to be valid. Since the parties agree to each and every term of the NDA treated to be valid, the real test of validity comes when any party to the agreement tries to enforce it. It’s important for the parties to know the situation when the agreement is enforced and unenforced.

Lawyers can challenge the enforceability of NDA in court of law. Most common challenges are like;

If the terms of NDA are immensely broad;

NDA is required to be drafted in much reasonable manner; the criteria of drafting can vary by jurisdiction. Court will enforce the NDA if they are unreasonable, vague, and burdensome.

If NDA fails by disclosure to maintain the secrecy;

If the party looking to enforce the secrecy of provided information fails to safeguard it from their side or any breach occurs, NDA shall not be considered to enforcement.

If the party disclose the information to the third party;

In cases where the receiving party discloses the confidential information to the third party, NDA may not be enforced against the third party.

‍

Penalties

Penalties for breach of contract are usually defined in the contract itself and violations or breaches are dealt with accordingly. Where no sanction is provided for in any contract, it shall be clearly added that any person guilty of breach of contract or breach of contract shall be prosecuted for such breach of contract.

‍