In business, there are many situations when one business party wants to keep a piece of information completely confidential. But the safety of the information is that the other party also respects this and it also keeps it confidential.
The best way to keep the information completely confidential is through the use of a non-disclosure agreement. This agreement is used by companies, professional people, and many individuals. The NDA is needed by the company when it wants to protect the information from becoming accessible to the public. It is also used by individuals when they are given access to specific pieces of information. It is also needed when someone has to disclose very special and confidential information to a service provider.
The identification of both parties, the definition of the details that are kept confidential, the scope of confidentiality obligation, and the terms of the agreement are some important parts of the NDA.
Some disclosures are permitted disclosures which are required by the law. These disclosures are required for the safety and security of the public. It is not necessary to have only two parties in the agreement. Sometimes, the recipient may want to disclose the information to other affiliated companies.
When you are a disclosing party, then you should clearly identify in NDA the information that is required to be kept secret. On the other hand, if you are a recipient, then it is your responsibility to state that all the information which is required to be kept confidential has been described completely by the disclosing party and you know very well what you can do and what you cannot.
After signing the NDA, the recipient of the agreement becomes responsible for keeping that information safe and he has no right to use this information for himself. The recipient will have to take further steps to provide the proper confidentiality to the information.
Knowing the basic elements of a Non-Disclosure Agreement is important in order to protect any confidential information handed to you adequately. These elements play the role of the legal and practical basis in terms of the document as it helps to define what exactly is protected, what is the definition of each party involved, and what is likely to happen if the agreement is breached. It is always helpful to be aware of what each section of an NDA is and what its essence is, whether you are drawing up this document for the first time or you are faced with reading the one drawn up before you. Let us understand in detail the essential parts to be incorporated in every effective NDA.
Identification of Parties
The introduction of any Non-Disclosure Agreement begins with naming the parties in a specific manner. This part explains which of the parties will communicate the secret information and which will receive that information. In many instances, it is a one-way agreement, whereby only one person discloses confidential details, such as when an employer discloses business policies to an employee. However, there may be two-way NDAs such as partnerships or co-ventures, in which the both parties assume the responsibility of keeping the other’s confidential information. Clear identification of the parties and their place of business, usually in full names, eliminates any vagueness as regards to the identity of those obliged to maintain secrecy.
Definition of Confidential Information
Among the important stipulations of a Non-Disclosure Agreement is accurately defining what “confidential information” refers to. It indicates the kind of details that require protection for example trade secrets, business plans, customer and/or mailing lists, brochures, technical descriptions, computer programs, and financial statements. Contextual situations ask for a precise definition with no room for speculation regarding the scope of information. When any aspect of this NDA is and it is so broad, it may be very difficult to try and dedicate such an agreement’s provisions. Clear definitions ensure that all parties understand and agree on which information is to be protected.
Obligations of Receiving Party
Non-Disclosure Agreement serves a purpose only if there are obligations towards the receiver of such information. This section outlines the duties of a person or an organization who has been entrusted with confidential information. Generally, this implies refraining from disclosing the information to anyone other than those permitted under the agreement, and implementing adequate controls to protect the data against unauthorized access. There are as well agreements providing for imposing obligations on the recipients’ employees, contractors or partners and/ or permit.
Duration of Confidentiality
It is essential for each Non-Disclosure Agreement to state the duration for which the confidentiality is considered, whether it is a period of 1 year, 3 years or 5 years, and there is even an option when keeping trade secrets is involved, to extend the confidentiality forever. The period of the NDA will be dictated by the type of subject matter and the commercial environment. This is relevant because it avoids potential issues, as well as it informs the recipient of the contract for how long the non-disclosure terms in respect of certain information will have to be adhered to.
Exclusions from Confidentiality
Not every piece of information provided for in any Non-Disclosure Agreement remains confidential for eternity and this is where limitations are significant. In this part, the Agreement explains the exclusions such as what is already in the public knowledge, known by the receiving party prior to such disclosure or has otherwise legally gathered through other sources. This is in order to prevent any injustice upon the part of the receiving, if he/she discloses any information which was not confidential or which turned to be public, through no fault of the receiver’s own.
Consequences of Breach
An effective Non-Disclosure Agreement is one that clearly outlines what the consequences shall be for breaching them. Here it is specified what the consequence of the receiving party’s breach of privacy and confidentiality in regard to this information will be. Injunctions may be sought to prevent the further disclosure and / or there may be monetary compensation for loss compensation or in the worst case scenario the entire business relationship may be called off. This is aimed not only at preventing such violations but also providing aggrieved parties with the means by which they can realize their rights in the context of the violation and especially the infringement of the NDA.
Navigating the process of using NDA templates may seem straight forward, however, certain crucial steps need to be taken in order to make sure the agreement is binding both by law and their requirements. NDA templates make it easy and convenient to draft legally binding documents even without ever creating one from scratch. However, simply filling them in without care can create loopholes or legally vulnerable sections. Therefore, the need to comprehend the process step by step is important. This is an overview of how to effectively use an NDA template from the beginning until the end to protect the confidential information that you have.
Downloading and Reviewing the Template
At the initial stage, you have to find a robust ready-made Non-Disclosure Agreement template. Bear in mind that such templates should be downloaded from reliable legal sources or reputable sites that belong to your country or region. As soon as they are downloaded, do not start editing them, however, do read the whole document first. This helps you comprehend the document’s organization, legal explanations and stock clauses. You should find out which parts can be modified and be aware of the standard legal phrasing. Being able to comprehend what the clauses do and why they are put in the agreement helps ensure that nothing is omitted in further steps.
Filling in the Necessary Details
First of all, a careful review of the document should be followed by an amendment of the template to include your specific Non-Disclosure Agreement terms. Specifically, the names of all of the parties must be inserted, the information deemed as confidential explained and the term of the confidentiality stated. You’ll also have to modify any language with regard to the allowable uses of information, the approach to settling disputes, and the law in use. This is a case where the use of templates is insufficient and even dangerous unless the templates are properly modified. Avoid saying – phrases, sentences, and words that are irrelevant in your document also avoid lifting up whole paragraph or some long sentence if not applicable, alternatively the simplest. The better the customized alterations are, the stronger the NDA will be and therefore it will be easier to enforce.
Seeking Legal Review
Even if scholars have prepared the best drafts, a template might still be flawed if any of the laws applicable in the area or any specific situation is ignored in its use. So, legal review is indispensable. It must be remembered that Non-Disclosure Agreement or NDA can be checked with regard to legislation prevailing in a particular country or in terms of different industrial requirements only with the help of a lawyer. An attorney examines a document for weaknesses and redrafts it in a more ‘watertight’ manner in order to make sure that the NDA or any other document will be effective in the courts when it is attacked. Thereby, this review is perceived as an endorsement and a form of satisfaction of the agreement.
Executing the Agreement Properly
A formal execution follows the review and finalization of the document. Once all parties are happy with the content, everybody must sign the Non-Disclosure Agreement (NDA) and if necessary, some additional processes apply, such as appending initials on each page or taking signatures of witnesses. The agreement has to be kept in a safe digital or hard copy form with all the signatures affixed, for future use. Though the word ‘execution’ implies the act of signing a contract, in this context, it means more than that since both the parties with ink and stamp agree to the covenants and that make the contract in full force and effect after that; protecting the easily accessible information and preventing its unauthorized use or dissemination.
Aashiq Ali is a distinguished consultant and author based in the bustling city of Lahore, Pakistan. With a keen eye for detail and a profound understanding of corporate dynamics, Aashiq specializes in offering expert services in documentation and process management to various corporate offices. His consultancy has helped numerous organizations streamline their operations, enhance efficiency, and achieve their business objectives.
