Non-disclosure Agreement (NDA)

A Non-disclosure agreement or confidentiality agreement is a contract between two entities that commits one of these entities to keep confidential certain information that the other will be required to communicate to it. The agreement can also be “mutual”, i.e. both entities agree not to disseminate certain information exchanged.

A non-disclosure agreement allows, for example, a company to disclose secret information to a partner while ensuring that this information will not be disclosed publicly or to a competitor. This partner can then offer products that are compatible with those of the supplier while preserving the intellectual property or the industrial part of the components.

More and more often, confidentiality clauses are used between industrial partners to ensure the protection of an invention that is not protected by a patent; in fact, the public disclosure of an invention does not meet the criterion of novelty necessary to obtain a patent. In addition, an industrialist who does not wish to take out a patent can use these agreements to preserve the confidentiality of his know-how, and thus avoid incurring the registration costs associated with a patent. On the other hand, some criticize these agreements for their uselessness and warn against their abusive use. It is therefore necessary to think whether the object or discovery can be protected, an idea cannot be patented or protected.

Non-disclosure agreements are often used by inventors who are trying to maintain confidentiality before formally protecting their rights with a patent application. A public disclosure of a patentable concept may require the inventor to relinquish his or her patent rights. The NDA prevents such a situation until the inventor is able to file a patent application.

In addition, a company may require new employees to sign non-disclosure agreements as a condition of employment to protect confidential business information. For example, a restaurant may require employees to sign a non-disclosure agreement before disclosing award-winning recipes to cooks. Confidentiality agreements are commonly used at the beginning of a joint venture or other business arrangement where both parties are likely to exchange confidential information.

Confidentiality agreements are usually established between partners to maximize collaboration. Both parties disclose information that, if leaked, could harm their business. Whether you own a small business or run a department in a large corporation, confidentiality agreements and non-disclosure agreements are critical to protecting your organization’s sensitive or proprietary information.

As the name suggests, there will be only two parties involved in this agreement. Under this form of non-disclosure agreement, one party will disclose certain information and the other party will have to comply with the rules. Example of a unilateral non-disclosure agreement between a company and its employee.

As the name suggests, two parties are involved in disclosing confidential information to each other. However, the main difference between unilateral and bilateral non-disclosure agreements is that both parties have confidential information. When disclosing such information, both parties have reciprocal rights and responsibilities regarding the importance of confidentiality. A classic example of a bilateral non-disclosure agreement is when a merger occurs between a selling company and the target company, there is an exchange of non-disclosure agreements between the selling company and the target company.

As the name implies, there will be more than two parties in a multilateral non-disclosure agreement. All respective parties will enter into non-disclosure agreements with each other and share mutual rights. An example of a multilateral non-disclosure agreement is between three parties – manufacturer, supplier and distributor.

The Indian Contract Act, 1872 governs non-disclosure agreements in India. A non-disclosure agreement is a contract in which two or more parties agree not to disclose specified secret information in a certain process. Non-disclosure agreements are commonly prevalent in employment agreements and intellectual property agreements.

In India, the legitimacy of a non-disclosure agreement is determined by the requirement to be stamped. A non-disclosure agreement is only effective and enforceable if it is registered in accordance with the Registration Act of 1908. To be legally binding in India, a non-disclosure agreement must be stamped. In the perspective of the law, stamping is a required step for any document’s legality.

Depending on the way it is drafted, the non-disclosure agreement creates an obligation of means or of result. Indeed, when the individual undertakes to keep the information confidential, it is an obligation of means, an obligation to do. In the event of a breach of the agreement, the injured party must demonstrate the harm suffered in order to claim damages. Secondly, when the individual undertakes to keep the information confidential, this implies an obligation of result, an obligation not to do. If the agreement is breached, the penalty operates without proof of harm.

Regarding confidential information, which is the subject of the non-disclosure agreement, you can indicate that all shared information is confidential. While this protects against oversights, judges favor the fact that the information disclosed has been expressly declared confidential. You may also wish to draw up a (more or less) exhaustive list of information that should not be disclosed. The information can be listed in an appendix. However, you cannot include all the information exchanged during the contractual relationship.

Finally, in addition to this confidential information, a non-disclosure agreement must mention:

In the event of a breach of the NDA, its author is contractually liable. The debtor is ordered, if necessary, to pay damages either for the performance of the obligation or for the delay in performance, if he does not justify that performance was prevented by force majeure.

Thus, in addition to the breach of the contract, the failure to comply with the non-disclosure agreement may result in the party having breached its non-disclosure obligation being ordered to pay damages to the other party as compensation for the loss suffered. Since the obligation of confidentiality is an obligation of result not to do, the mere disclosure of information can prove the non-performance of the contract by one of the parties.

It should be noted that it is possible to provide in advance for a financial penalty applicable in the event of a breach by one of the parties of its obligations by means of a penalty clause. This clause specifies in advance the amount of compensation that will be due. The advantage of this penalty clause is its dissuasive effect. However, the judge is not bound by the terms of this clause and can decide to increase it if it seems derisory or, on the contrary, to lower it if he considers its amount excessive.

The owner of the information can have the other party sign a non-disclosure agreement during the talks; that is, at the time of contract negotiations. The pre-contractual agreement can be synallagmatic and thus mutually commit the parties not to disseminate or exploit the information deemed confidential.

In the context of an employment relationship, the conservation of professional secrets is naturally integrated into the employment contract. It therefore takes the form of clauses stipulating the employee’s discretion with regard to the company data to which he has access. In the context of a partnership, the agreement will take the form of a clause inserted in the partnership contract.