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CRITICAL ANALYSIS OF NON-DISCLOSURE AGREEMENT

Introduction

To proliferate any commercial activity, Business, Trade, or start-up it is imperative to have indestructible and confidential relations with your partner and employee. Human beings are so complex you can understand as difficult as Math but not human nature, and such things would affect business transactions. To weed out the clause of Skepticism attitude, to preserve and cherish the private information as private with the partners and employee’s non-disclosure agreement came into need and it will be a utopia to instigate a manifesto of confidence between partners and most important mutual understanding between parties is the bedrock of commercial transactions/relationship.

In a crescendo of a legal shadow, with an intent to start or proceed with any business idea or concept, the discussion will take place with financiers, suppliers, employees, or in dealings with potential business partners, and the information associated with it may be disclosed so there is myriad of chances that it may get misused or considerably someone takes advantage of that particular idea to intensified its own business. Consequently, one of the ways a business or start-up owner can protect these assets is by signing an NDA (Non-disclosure agreement) among your partners and employees before divulging the plan associated with it.

What is a non-disclosure agreement?

A Non-disclosure agreement (NDA) or a confidentiality agreement is a contract where one or more parties agree not to disclose confidential information that they have shared. It represents a binding legal document by which parties determine the circulation of information deemed confidential between themselves and limit the disclosure of this party to a third party. In India, a Non-disclosure agreement is governed by the Indian contract act 1872. A non-disclosure agreement unveils the confidential information of a particular idea and is deemed to be in a secretive state. NDA’s may be unilateral where one party discloses the information or bilateral where all parties to that NDA discloses confidential information. In short, it allows the complete protection of company repository data and information to be leaked out into the public domain.[1]

Who can step into NDA?

NDA is commonly signed between the business partners, two companies, and individuals, employer can also enter into NDA with the employee, starting a new project and the need to collaborate with a few people and various areas where there is a need to hold a piece of information inside a secretive hub.

HOW TO MAKE EFFECTIVE DRAFTING OF NDA?

Throwing the spotlight on the drafting of an effective contract, a view to making it factual and effective there are some crucial elements and clauses as discussed below-

  • Parties- The identity along with a reasonable address of both the parties is necessary.
  • Ownership of the information- It must be clearly stated on the document who is the owner of the confidential information.
  • The definition of confidential Information- Both parties must be aware of the definition of confidential information, its characteristics, Pons and cons along with whether that particular information is confidential or not. This all set of knowledge must be under consideration by both parties.
  • Terms of the agreement- Every bit of obligation and duties must be expressly stated, and the expiry of the agreement also the duration after which the parties can be disclosed the information must be included in the terms and conditions of the agreement.
  • Duration of the agreement – The agreement must contain the expiry as mentioned which means the time when the confidential information will be shared and the obligation to maintain that particular under consideration must be specified.
  • Limitations and scope of the information shared – It is pivotal to state the limitations and boundaries along with the nature of the information to be shared between the parties so that it can be properly identified and individualized.
  • Exclusion clause- This avails the information which the receipt party is not expected to keep secret as such information is already within the public domain.
  • Conflict resolution- In case to provide a prompt remedy for a possible breach by any of the parties it is advisable to resolve it through arbitration one of the convenient methods to be more agile and transparent.
  • *The penalties, fines, or sanctions must be imposed on the parties in case of breach must be noted down in the contract.[2]

Relief, Defenses, and enforceability

Relief to the aggrieved party as-

Monetary compensation for any damages arising out of breach of contract. The defaulting party is entitled to reimburse the loss to the aggrieved party that was incurred.

Injunction- Refrain the defaulting party as per the decree of a court to use or further disclosed the particular information.

As remedies are available for the aggrieved party then there are also defenses available for the defendant.

Legal Compulsion- The defendant will be exonerated where he is bound to disclose the information under some legal compulsion or obligations.

Exclusion Clause-When the information is already known to the public domain or was disclosed to the third party.[3]

However, in India NDA is enforceable only when it is stamped and registered for admissibility and veracity of the document as per the Registration Act 1908 by approaching the office of the sub-registrar and the stamp duty is varied from state to state.

DOES A NON-DISCLOSURE AGREEMENT REQUIRE REFORMATION?

After a deep analysis, it is pretty much precise that NDA does not require any amendments and modifications as the motive behind forging it is to maintain confidentiality and secrecy between the parties which is ultimately required to stand out of the line in this competitive world. However, some delicate issues like harassing women’s at the workplace being in issues especially some reports unveiled from the UK where employees were using or better add misused the confidentiality clause in the settlement agreement, to silence the victim of sexual harassment so it could be concluded that NDA required a protective coverage in a sense of definite legal terms and procedures to preclude and curb such dud activities which imbalances the veracity of the agreement.[4]

CONCLUSION

Conclusively, an NDA provides a legal hedge and protection to the Companies to proceed further with any business idea and concept without any fear of being deceived. It is a written duly document that sanctioned confidentiality over to the next party to be loyal to the owner or holder of the particular information. Oral Convincing and belief in the oral statement is pretty much not adequate and enough, it is very crucial that such oral important and confidential information must be in a specific written format and duly verified by both the parties so that a mutual bond of keeping it in seclusion.

When something is more perfect and utopia there are chances of being misused by someone as in the companies where the victims of sexual harassment at the workplace are being forced to keep silent on such issues by amending the clauses of the agreement which is totally against the legality. To curb such issues there must be a defined motive of NDA, that its proper purpose is for the protection of private information not to abuse the silent victims and cover up misconduct. The proper suggestion is that there must be a separate specification of the misused of such agreement along with its punishment so that it would get indestructible coverage to protect it from being misused.

It is pertinent to note that in any contract to acquire the status of validity it is essential for the consent of both parties. Here, in a Non-disclosure agreement to the receiving party is not being forced to verify its consent for any business idea or concept just because of the order of the owner of the information. The receiving party may nevertheless be reluctant to agree to any non-legal and unlimited terms and conditions of the contract also the information categorized as under the confidentiality clause must be priorly awarded to the receiving party before signing it. The receiving party gets neglected from their obligations when the termination of the contract takes place as expressly mentioned in the contract. Thus, it is concluded that the main purpose of executing a non-disclosure agreement is to defend the party from loss and fraud by keeping the essential information under the confidential clause.

Author(s) Name: Vaishnavi Sainee (Jagran Lakecity University, Bhopal)

[1]Laura Voda, “United Arab Emirates: Importance of Non-disclosure agreement (NDA) for Start-ups is available  https//www.mondaq.com/comntracts-and-commercial-law/1022132/importance-of-non-disclosure-agreements-nda-for-startups {Last accessed at 10 July 2022}.

[2] Neil Jones, “Why a Non-disclosure is worth the paper it’s written on”, {22 April,2022}, https://www.mondaq.com/uk/contracts-and-commercial-law/1185444/why-a-non-disclosure-agreement-is-worth-the-paper-it39s-written-on  {Last accessed at 10 July 2022}.

[3] T & A Legal, “Nigeria: Relevance of a Non -disclosure agreement in a commercial Transaction/Relationship,” is available at https//www.mondaq.com/Nigeria/contracts and commercial law/pdf7116118 (Last accessed on 11july 2022).

[4]Michael frost, UK: Non-disclosure agreement: ethics and enforceability, is available at https://www.mondaq.com/uk/discrimination-disability-sexual-harassment/728678/non-disclosure-agreements-ethics-and-enforceability {last accessed at 11 July 2022}.