Full Form of NDA – Non-Disclosure Agreement
The full form of NDA is termed as Non-Disclosure Agreement. It is defined as the Legal contract of a confidential agreement entered between two or more parties (covered under the Indian Contract Act, 1872) to restrict the parties from disclosing any confidential information & proprietary information shared by the contracting parties during the validity of the agreement.
There are basically three types which are in practice currently:
- Unilateral Agreement
- Bilateral Agreement
- Multilateral Agreement
How to Write the Non-Disclosure Agreement?
There are certain steps that can be followed.
Step #1 – The first step is to identify the requirement of NDA; whether for the particular agreement, the party is going to disclose any confidential information which the company doesn’t want to be shared with the public.
Step #2 – After identifying the need, the party needs to identify the confidential information that is going to be shared while performing the contractual obligations and activities. During the identification, the party should make sure that such information is not to be shared before entering into the agreement & attesting the agreement. Sharing of the information can cover many prospects. Such information should not be easily available to the public because such will not be considered confidential.
Step #3 – After these identifications, the parties can draft an agreement by titling the agreement as a ‘Non-Disclosure Agreement.’ In the Title part, the name of the parties entering into the agreement is mentioned as well as the reason for which such agreement has been entered, i.e., Business purpose, etc.
Step #4 – With the Title of the document, the clause that ‘during the proposed transactions the parties may disclose some information, documents and materials which are of confidential & propriety nature’ is to be inserted.
Step #5 – The Terms & Conditions related to the contract should be mentioned, which cover the conditions that the confidential information is not to be shared further nor to be reproduced if necessary, the conditions in case of breach of contract, etc. The Agreeing parties should make sure that all the relevant conditions & clauses should be mentioned in the para.
Step #6 – And at last, the name & designation of the authorized/signing authority should be mentioned & the agreement should be attested by those authorized persons.
Example of Non-Disclosure Agreement
Make an agreement between a company and an employee for preventing data leakage of sensitive business information.
Employee Non-Disclosure Agreement
This Employee Non-Disclosure Agreement is entered by and between the ABC Company and Mr. Ashish, and employee of the company.
During the duties of the employee, the company may disclose to the Employee certain confidential & propriety information that is sensitive and generally not available to the public. As per the agreement, the parties agree as follows:
Clauses of NDA
#1 – Definition/Description of Confidential & Propriety Information
This clause is one of the most important clauses where the matters are described & classified as confidential, which are to be covered with the Non-disclosure agreement. It is the duty of the disclosing party to make sure that all prospects of communication & the information are covered in the clause and leaving no loophole for the other parties to exploit.
#2- Parties included in the Agreement
This clause represents the parties covered in the agreement and states that during the business, some confidential information is going to be shared by the parties.
#3 – Terms & Validation of the Contract
This clause represents the terms that need to be followed and provide the duration for which the agreement will be enforceable. It is to be considered that unrealistic & unjustified time may not be acceptable to jurisdiction.
#4 – Clause for Permitting use of the Information Shared & Prohibiting other uses.
This clause provides the area where such confidential information is to be used & reverse engineering of the demo of the product is prohibited.
#5 – Legal Obligations
In this clause, the parties provide that in case of a legal obligation, parties may have to disclose some confidential information covered by the NDA, which will not be considered as a breach of the agreement.
#6 – Jurisdiction & Remedy in case of Breach of Contract
This clause will provide the law which will cover the following agreement as well as the court or jurisdiction, which will cover any dispute.
This clause will also include the remedies which will be acceptable to the disclosing party in case of breach of contract.
#7 – No Obligation Clause & Liability of Legal Fees
This clause will provide that the other party will recover any legal amount which has been spent on enforcing the agreement.
#8 – Destruction or Return of the Material & Information provided in the act to fulfill the contractual obligation.
Difference Between Non-Disclosure Agreement and Confidentiality Agreement
- Non-Disclosure Agreement and Confidentiality Agreement are both used to protect private or confidential information. It is slightly different in both terms in practice.
- Confidential information agreement is used when it is a higher degree of information.
- A non-Disclosure Agreement is used between third party contracts. That party could be a vendor, debtor, or any other party.
- Confidential information agreement is used mainly between employer and employee.
- In a non-disclosure agreement, there is a different clause, and these clauses protect the confidential information. It protects intellectual property rights, trade secrets, and other confidential information.
- Party has legal rights and has legal protection of information. In case any party breaches the NDA second party has the right to enforce the clause of the agreement and can receive monetary compensation.
- One of the major issues is Defining Confidential Information in NDA- In the Non-disclosure Agreement, it is an issue that how to define confidential information, what information will be available for parties. In this, there are two approaches in one approach. Everything party is sharing is confidential information unless otherwise agreed in terms. In the second approach, parties have to decide what information is confidential information at the time of disclosure.
- Parties have to decide what information will be shared & if that information is already known to parties that will be excluded from the agreement.
- Breach of Contract- In contract parties have to decide that if any party breach the contract or disclose the information to the third party without permission then what will be the actions the second party is going to take. Whether the party will get compensation for the breach, there will be an issue of how much amount party will recover, whether only monetary compensation is enough for breach of contract.
- Residual Clause- In NDA, this clause deals with the transfer of information of the intellectual property. Means this clause will decide whether the receiving party will be allowed using the information which is learned in IP or to what extent they can use the information.
- At the time of preparing NDA, they have to consider the residual clause carefully. It can prevent a party from developing the IP even they received from a party, which may cause loss of opportunity in the market.
- Other issues are related to waiver of contact, injection clause, and the party can decide litigation of dispute. And which law governs this NDA.
A non-disclosure agreement protects the information on intellectual property, trade secrets, and other confidential information. This agreement has different clauses to support the agreements. At the time of preparing this agreement, parties to need to prepare the conditions carefully so that the other party couldn’t use those clauses wrongly. This agreement gives a legal right to protect the information.
This has been a guide to the full form of NDA (Non-Disclosure Agreement). Here we learn types, examples, and how to write Non-disclosure agreements. You may refer to the following articles to learn more about finance –