Non-Disclosure Agreements or more commonly known as NDAs, are commonplace in various industries. NDAs are deemed necessary in order to protect confidential, sensitive, or secret information. When sharing of such information with another is required, parties then enter into an NDA in order to ensure that the important information is not divulged any further than absolutely necessary. There are two aspects to NDAs - one where one party is sharing the confidential information and the other party receives it (one-sided). Secondly, where there is mutual exchange of such information between the parties and thus the parties enter into an NDA.
As an entity new to the concept of NDAs, what should be the elements that require a close perusal?
Elements
1. The time limit.
The NDA may be valid for the lifetime of the parties, for a certain duration, or till the subject of the NDA is not known to the public. The last scenario may or may not be as planned or intended by the parties, but it does release the parties from the obligation under the NDA for just that portion of the NDA which has been revealed to the public. The parties would still be bound under the NDA for any portion of the NDA which has not been revealed to the public.
2. Consequence
This relates to what would happen in the event of disclosure of the subject of the NDA. In what manner would the disclosing party be liable to the other, whether by way of monetary compensation or by performance of any additional task or to be bound by an additional obligation etc. Depending upon the nature of the contract, the consequence of breach of the NDA may be different.
3. Survival Clauses
NDAs may include survival clauses, with reference to how long the subject of the NDA is required to remain confidential even after the termination of the NDA itself or any of associated or ancillary agreement between the parties. It is important to be aware of how long any obligations may exist.
4. Manner of use of information
The parties have a reason why any content or information that requires for there to be an NDA, is being shared in the first place. Hence an NDA should ideally also have the manner for the execution of such a reason. Any use of such content or information in the manner prescribed would not constitute a breach.
5. Immunity
This relates to instances where an action that constitutes a breach does not attract a penalty under the NDA. It generally includes sharing of the subject of the NDA under orders from the relevant law authorities pursuant to statutory provisions. Depending upon the nature and circumstances of the NDA, there may be additional scenarios where breach of the NDA does not attract a penalty.
6. Remedies
A way to identify a remedy to breach of NDA is whether the use of the subject of the NDA per se defies the purpose/scope of the NDA, and thus constitutes as a breach or not. An NDA will most likely have a purpose clause laying down why the parties need to enter into the NDA, abide by it and the intended use of the said confidential information. If the use of the subject of NDA does not defy the purpose somehow, it may not be considered a breach. In the event it is considered a breach, the extent to which the breach defies the purpose, the consequence of the breach may also vary.
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Conclusion
Not being able to fully understand one’s obligations under a contract due to difficult words or language does not preclude such a person from facing the consequences of not performing the obligations. This makes it crucially important for all parties to a contract to understand just exactly where they stand and what they are required to do. The above mentioned specific elements of an NDA are not exhaustive and do not specifically mention elements like dispute resolution and jurisdiction. This is because they form part of the list of common clauses found in contracts that require attention.
