Non-disclosure or confidentiality agreements

What is an NDA and when would you need one?

NDA stands for “non-disclosure agreement” and is sometimes called a confidentiality agreement. An NDA is basically a contract that binds someone to keep a secret so that the parties to it are promising to keep each other’s secrets. This could include information such as marketing plans, technical “know how”, trade secrets and even contact with each other’s employees and clients.

If you are thinking of discussing a new business concept with a potential partner, you should know that there is no copyright in an idea and the only method of preventing someone from using yours is by agreement.

An NDA can be reciprocal, so that each party is receiving information and promising not to abuse it, or one sided, for example where a contractor comes into a business on a one off project. For example, you might not have thought about your IT consultant in this way but he is probably coming into contact with the very essence of your business by dealing with your CRM.

Each NDA should be customised for the specific situation rather than using a generic template and it should deal with the following as a minimum:

  • Protected information
  • Timeframe for the confidentiality to continue
  • Particular uses of the information (for example, if it can be shared with employees)
  • What happens if there’s a breach – damages and/or injunction ?
  • Method of resolution if at all possible.

Is there a commercial angle?

You ought to consider the timing of an NDA. It can be off-putting at the initial stages of a negotiation to press for one – the person you’re asking to sign the NDA may wonder why you’re so keen! Generally, it might be more sensible to get to know someone/a business before divulging your secrets anyway. Try introducing the concept early on, but put it on the table when the relationship is well established and there is a good level of trust between you and the person/business, just prior to revealing all.

What happens if you do not have an NDA?

Without an NDA, you have no control over what they say to anyone else, and you certainly don’t have any legal influence over them. Without an agreement doing the job for you, you may find that you have to rely on expensive lawyers and case law to prove that a “duty of confidentiality” existed at all, and that a breach of it caused a loss.

It is much simpler to set out expectations and obligations early on with a short document signed by both parties than trying to mop up afterwards. After all, it’s your business that’s at stake here.

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Vanessa Challess

Vanessa Challess

Managing Partner at InHouse Legals
Vanessa is the founder and Managing Partner of InHouse Legals and Tiger Law. With years of experience as a litigation specialist, she founded IHL and Tiger to provide SME business owners with easier, more affordable access to the essential legal services they need as their business grows and develops. She blogs on a wide range of legal & HR issues with the goal of equipping entrepreneurs with no frills, easy to understand information to keep them on the right side of the law.
Vanessa Challess

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