What is a Non Disclosure agreement (NDA)?
A Non Disclosure Agreement is a legal contract between two parties to keep confidential information protected and away from a third party’s knowledge. In India, the Indian Contract Act 1872 governs Non-Disclosure Agreements.
The Disclosing Party and the Receiving Party, agree not to disclose certain proprietary or confidential information explicitly outlined in the agreement. The Disclosing and Receiving Parties can be individuals, companies, or entities. By agreeing that such information is sensitive, technical, or valuable for commercial or other purposes, both parties can safely explore starting a business relationship without fear of having sensitive information leak.Confidential information includes trade secrets, business plans, business methods and strategies, drawings, charts, software programs, codes and so on.
People also refer to a Non Disclosure Agreement as a Confidentiality agreement, Confidentiality disclosure agreement, Proprietary information agreement, and secrecy agreement.
Some contracts contain confidentiality or non-disclosure clauses that perform the same function as a standalone non-disclosure agreement. It’s common to see such clauses in: Employment agreements, Consultancy Agreements and Freelancing agreements
Types of Non Disclosure Agreements
- One-way or unilateral agreement- Here, only one party has the confidential information to be shared with another party. The party having the information is called disclosing party and the other party is called the receiving party.
- Two-way or bilateral agreement- Both the parties have confidential information which can be shared with one another. According to the information shared, they will be either a disclosing party or a receiving party.
- Multilateral agreement- Three or more parties are involved. One of them discloses sensitive or confidential information and the others promise to protect such information from further disclosures.
Advantages of a NDA Agreement
- Improves Clarity: The agreement involves a detailed description of what can bring to the knowledge of a third party and what not which improves clarity in the minds of parties.
- Exercise Legal Rights: The parties also express their will, rights, and duties in an agreement which reduces the scope of disputes between the parties in the future.
- Claim Damages: Agreement involves clauses that state the compliance with any confidentiality and in case of non-compliance the aggrieved party can claim damages from the other.
- Enhances Client Relationships– Businesses that work on third-party projects require their employees to sign NDAs, to restrict the use and disclosure of confidential information, and assure clients that their data is safe.
- Confidentiality- Additionally, It maintains the secrecy of the information shared between two or more parties and reduces the chances of important information going out of the organisation. It also protects Trade secrets.
What should a NDA include?
- The Parties
- This section will mention if the nondisclosure agreement is a unilateral, bilateral, or multilateral one. The agreement must state the names and details of the parties of the contract
- Term of the agreement
- It must mention the date of execution of the agreement and the duration of the existence of the same. It must state if the rules and obligations related to disclosure of information will be applicable after the expiry of the nondisclosure agreement
- Confidential information
- It must also specify what information is ‘confidential’ category and trade secrets
- Disclosure of confidentiality
- It must specify the intentions for which the confidential data/information will be used. It will also specify with whom such information can be shared.
- Dispute resolution
- The law which shall be applicable in case of any dispute, and the court which shall have jurisdiction over the matter must be mentioned. It must also mention the measure that the disclosing and receiving party will use to resolve their disputes. This may include any form of Alternative Dispute Resolution.
FAQs
The agreement of non-disclosure allows the parties to maintain trade secrets and other business strategies and plans confidential.
There’s no difference between a confidentiality agreement and a non-disclosure agreement. The primary objective of all these agreements is to protect sensitive information.
It is not mandatory to Notarise or to have the Non Disclosure Agreement signed by Witness. But to ensure the further validity and enforceability of the Non Disclosure Agreement parties may choose to have witnesses sign the NDA and entact the validity of the document so that it cannot be questioned in the court of Law.
Hey @HarshitShah
The things to include in an employee’s personnel file are: