What are NDAs?
A confidentiality agreement, often referred to as a non-disclosure agreement (NDA), is a legally binding contract under which one or more parties agree to keep certain information private and not disclose it to others without permission.
When should NDAs be used?
These agreements are commonly used in business and legal contexts to protect sensitive information such as trade secrets, intellectual property, or details of negotiations.
NDAs only cover discussions of a confidential nature and do not cover work of any kind or the sharing of any personal data. Any services/provision of goods, other work being undertaken or sharing of personal data should be dealt with in a different type of agreement, which will include confidentiality provisions. (This therefore negates the requirement for an NDA). On that basis, NDAs are often used for initial discussions to scope out work that is required.
What types of NDAs are there?
One-way NDAs – a one-way agreement, where only one party provides confidential information to the other party.
Mutual NDAs – a two-way/multi-party agreement, where both/all parties agree to keep each other’s information confidential. This creates reciprocal obligations.
What key points should be covered within an NDA?
An NDA can contain a range of different clauses, but it will usually include the following key provisions:
- The Definition of ‘Confidential Information’ – this clause specifies what information is considered confidential (for example, trade secrets, client data or business plans). It is usually fairly broad, however, if there is anything in particular that requires to be kept confidential (e.g. potential customer details), this can be included here.
- Confidentiality Obligations – this clause requires parties to keep confidential information secret and not share it with unauthorised persons. This clause may include obligations to use the information only for agreed purposes.
- Duration of the Confidentiality – this clause will state how long the confidentiality obligations last. Generally, one to three years after the end of the relationship is most common for business NDAs however, some NDAs set the duration for longer or indefinitely (usually for highly sensitive information such as trade secrets). This should be considered on a case-by-case basis to determine what is appropriate.
- Return or Destruction of Information – this clause may require confidential materials to be returned or destroyed upon termination of the agreement.
- Warranties and Indemnities – this clause is sometimes included to protect against misuse of confidential information but under regulatory guidance , these must not discourage lawful reporting or disclosures.
- Permitted Disclosures for Legal Compliance – in recent years NDAs have faced scrutiny where they have been used to conceal wrongdoing such as harassment and criminal acts. Using NDAs to prevent the reporting of such wrongdoing is now prohibited under regulatory guidance in Scotland and England & Wales. Therefore, it is particularly important that provisions are included within NDAs explicitly allowing disclosures required by law, regulatory bodies, or for whistleblowing purposes, such as reporting crimes to the police.
- Enforcement and Remedies – this clause specifies consequences of breach, such as damages or interdicts/injunctions.
- Governing Law and Jurisdiction – this clause identifies which legal system applies to the agreement.
Practical Tips
- Consider whether an NDA is the most appropriate type of agreement for what you require or whether you require something more, e.g. a services agreement which contains confidentiality provisions.
- Tailor the type of NDA to the relationship, for example, is a one-way or mutual NDA required in the circumstances?
- Clearly define ‘Confidential Information’.
- Build permitted disclosures into NDAs.
- Set a reasonable duration for the confidentiality.
