A non-disclosure agreement is a more and more popular solution in business. What is it? What is the purpose of signing such an agreement? How to prepare NDA correctly? You will know the answers after reading this article.
What is NDA? What is the purpose of signing it?
The purpose of NDA is to protect a company’s confidential (secret) information. The parties to NDA agree to keep the confidentiality of the information obtained from the other party. NDAs can be both unilateral and bilateral. The first type applies when only one party to the contract receives access to the other party’s confidential data. The second type applies when both parties exchange confidential information.
The aim of the NDA is thus to prevent the leakage of confidential information and its unauthorised use by third parties. Such information often constitute the company’s business secret. A “business secret” is a term defined in the Act of 16 April 1993 on Fair Trading. Protection of business secret under this act requires that the authorised party undertakes prior measures to maintain its confidentiality. An example of such action may be a written obligation of persons to whom the confidential information are disclosed to keep them secret. NDA can thus help in pursuing claims for acts of unfair competition related to the unlawful use of the company’s secret information.
With whom and when do you need to sign the NDA?
The NDA should be signed before disclosing confidential information to someone. In what situations? Usually at the moment of signing a cooperation agreement with anyone who will provide services to us. This may concern an employee, a contractor, a manager, a supplier, an advisor, and so on. There are also cases of signing the NDA before concluding the main contract. This can happen when the parties negotiate the rules of future cooperation and share confidential information already at the stage of the negotiations.
Is it necessary to sign a separate confidentiality agreement?
NDA may be a separate document signed before or together with the main contract. Most often, however, confidentiality clauses are part of the main contract.
How to prepare a good confidentiality agreement?
What should be included in the non-disclosure agreement? Like any contract, an NDA must be adjusted to the case of a particular cooperation and its parties. Yet, each well-constructed NDA should specify the following information:
- what information are confidential and which information does not have such status,
- rules that the receiving party should follow to keep the information confidential,
- the purpose for which confidential information will be used,
- conditions for possible further sharing of confidential information with others,
- the duration of the confidentiality obligation. Usually it is for the duration of the cooperation and for a specified time after its termination.
- an obligation to return or delete copies of confidential information after the end of cooperation,
- rules of liability for breach of information confidentiality. They are precautions for breach of NDA obligations.
Contractual penalty as a form of security in the NDA
The most common form of security for breach of NDA obligations is the clause on contractual penalty. This definitely makes it easier to pursue possible claims. This is because confidential information are a component of intangible assets. If general principles of liability for damages are applied, the amount of the damage suffered must be precisely indicated. In the case of damage related to the disclosure or unlawful use of confidential data, this can be quite difficult in practice. Yet, if there is a contractual penalty clause, there is no such problem. The aggrieved party may claim the amount that results from NDA’s provisions.
Another common solution is the possibility of immediate termination of the main contract in the event of a breach of the confidentiality obligation.
Do you have more questions? Do you need help in preparing an NDA? Or maybe your contractor has violated the confidentiality rules? Do not hesitate to contact our law firm. We will answer all your questions about non-disclosure agreements!