GLA Agreement Overview Series: Non-Disclosure/ Confidentiality Agreements

Over the next few months GameChanger Law Advisors will be running the ‘GLA Agreement Overview Series’. The purpose of this series is to give entrepreneurs an overview and understanding of some commercial agreements that you may come across as a part of the day-to-day operations of your company/ business. To kickstart this series, we begin with an overview of one of the most important agreements that companies execute both internally with employees, consultants as well as externally with vendors, investors, contractors etc.- the ‘Non-Disclosure Agreement’ also known as a ‘Confidentiality Agreement’.


A Non-Disclosure/ Confidentiality Agreement, or more commonly referred to as a “NDA” relates to the disclosure, receipt and protection of confidential information shared between parties engaged in business with one another.  A NDA can either be:

(i) one-sided, that is, with only one party disclosing confidential information and the other party receiving such confidential information; OR

(ii) mutual in nature, with both parties disclosing confidential information to each other during the course of the engagement.

A NDA may be signed even before the parties have entered into a formal engagement or agreement for the commercial transaction. It is quite standard to enter into NDAs prior to entering into commercial and technical discussions with potential business partners, vendors, service providers etc., as sensitive information such as confidential information relating to the business model of the company, pricing strategies or information with respect to competitive advantages may need to be shared. Therefore, it is important to protect confidential information even at this stage of a commercial transaction.

Some of the critical points to bear in mind are:

(1) Definition of Confidential Information: If the parties intend on entering into a long-term engagement for various commercial transaction, they may choose to enter into a generic NDA where the definition of ‘confidential information’ is wide enough to cover all possible scenarios. However, if the intention is to only enter into a specific transaction where the nature of confidential information to be shared is known, it may be prudent for the receiving party to narrow the scope of the definition of ‘confidential information’. In such cases it may also be important to specify the exact agreement/ transaction for which the NDA is being executed.

(2)Term of Confidentiality: Some NDAs will provide for confidentiality obligations to be perpetual in nature. This means that the obligation on the receiving party to protect the confidentiality of information does not terminate with the termination of the business relationship. However, depending on the nature of the commercial transaction, the term of confidentiality can be limited to either, he agreed duration of the engagement between the parties,  OR for the term of the confidentiality obligations to last for a few years after the termination of the main contract.

(3) Permitted Use and Authorized Disclosure of Confidential Information: The NDA can specify for what purposes the confidential information may be used by the receiving party. It can also specify certain entities with whom such confidential information may be shared, for example, with legal advisors, authorized representatives etc.

(4) Governing Law and Jurisdiction: Depending on the nature of the commercial transaction and the jurisdiction in which the parties are located/ the services or actions under the agreement shall be performed, the NDA may specify which jurisdictions the obligations of confidentiality shall extend to. It is extremely common for confidentiality obligations not to be limited by territory and are expressly stated to extend to any and all jurisdictions in the world.

(5) Breach of Confidentiality and Remedies for such breach: Breach of confidentiality is recognized as an equitable wrong and an analysis of judicial precedent helps us recognize that remedies are often on a case-to-case basis. The remedies for breach of a NDA vary and may in circumstances include damages, accounting for profits, injunction, specific performance, disposal, destruction or delivery of the discloser’s confidential information.

Practical Guidance for Businesses for Protection of Confidential Information Disclosed or Received

The following practical steps may be implemented or kept in mind by a business or person seeking to protect confidential information:

(1) Maintain a system for recording the manner in which confidential information is obtained and held;

(2) Mark or stamp documents containing confidential information as “Private and Confidential”;

(3) Set up a confidentiality procedure or process for the storage, monitoring of disclosure and destruction of confidential documents;

(4) Only disclose confidential information on the basis of a sealed envelope marked as “Private and Confidential” or if disclosed over e-mail, to state clearly in the e-mail that such information is “Private and Confidential”;

(5) Where disclosure of confidential information is permitted to be disclosed to certain persons, ensure that such persons receiving third party confidential information from you, sign back-to-back NDAs where they acknowledge the confidentiality of the information being shared with them;

(6) Maintain a record indicating the dates or periods when the information was produced and the manner of creation of confidential information;

(7) Maintain records of costs and expenses involved in the creation and maintenance of the information together with the time spent in such creation so as to provide, if required in the future, an indication of value, loss or damages;

(8) Maintain a list of recipients of the confidential information along with a record of when, how and to whom it is disclosed; and

(9) Seek legal advise and guidance from a lawyer as to the best standards and practices for protection of confidential information disclosed or received.

Learn more about our Commercial Contracts practice.

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