Last Updated on June 10, 2024 by Satish Mishra
There are numerous instances in a business in which a person possessing a confidential information wants to share it with other person or entity. That person may be a buyer, an employee or any entity. The main question in such situations arises as to how will the party receiving such information ensure to maintain its confidentiality. The answer is by signing/executing a Non Disclosure Agreement (NDA). It is also referred by the name of confidentiality/secrecy agreement in companies but NDA and Confidentiality/secrecy agreement means one and the same thing.
What is a Non Disclosure Agreement?
Just like any other agreement, a Non Disclosure Agreement is an agreement between two or more parties (which are either bilaterally sharing confidential information or one of the party to the agreement shares any secret information with the other) agree not to share the secret/confidential information provided to them except in exceptional circumstances without the prior permission of the the party sharing such information. This agreement also provides for liability of the person sharing confidential information in breach of NDA in form of damages.
What is the importance of Non Disclosure Agreement?
A non disclosure agreement creates binding obligation on the part of signatories to the agreement to maintain and protect the trade secrets or other confidential information shared with them so as to maintain the operational safety of any business. A breach of the same makes the defaulting party liable under Indian Contract Act.
What are the key elements of Non-Disclosure Agreements?
Some of the basic key elements required in a non disclosure agreement are as follows:
1. Identification of the parties to the agreement
2. Description of confidential information
3. Obligations of the party receiving confidential information
4. Exceptions to the rule of non disclosure
5. Terms relating to liability in case of breach of obligation.
6. Jurisdiction of courts to deal with the matter in case of dispute.
7. Proper stamping and signatures of the parties.
Is it mandatory to execute a Non Disclosure Agreement on a Stamp Paper?
As a general practice, a Company duly registered under Companies Act can execute a Non Disclosure Agreement on its official letter head. However, it is always preferable to get an agreement properly executed on a legal stamp paper (value of stamp duty may vary from state to state) duly notarized by the notary.
Non Disclosure Agreement between Employee and Employer
Non Disclosure agreement is essential for employees at workplace where employer is sharing vital information like customer database, user info and trade tactics. It is mostly seen the ex-employees land up opening a company of similar nature as that of previous employer taking marquee customers from him which is completely unprofessional and unethical in terms of business. Therefore a strong non disclosure agreement governing the relationship of both employee-employer will safeguard the interests of an organization.
Enforceability of Non Disclosure Agreement in India
If stamped properly, the NDA will have same force as that of any legal agreement binding on the parties. The party at fault can be asked to pay damages, indemnify for the loss occurred and face consequence for breach of information. The Indian Court though slow but are able to distinguish where party at fault has done grave injustice to other party in confidence. So, it would be wrong to say that the parties can go scot free rather breach of contract could let them face both consequences criminal and civil. Always sign NDA when hiring a new employee working on sensitive projects. Mostly software programmers are asked to sign NDA in IT industry. It would hardly make any difference is the NDA is on a simple paper.
Thus a non disclosure agreement is a legally binding contract on both the parties.
What is non circumvention clause?
This clause protects the ideas and opportunities in a business transaction between two parties. The receiving party will not use the information received other than the purpose of pursuing a business relationship among them. NDA is also used in Drug Development.
Time Frame for NDA?
Non disclosure agreements usually lasts for 3-5 years once the agreement is signed but if the information is made public than NDA will lose its meaning in respect to information covered by the agreement which is now propagated.
Non Disclosure agreement can be used in any Industry irrespective of the nature of work. Even Media/Entertainment Industry is now using this type of agreement to protects its intellectual property rights.
Need help in drafting a non disclosure agreement, just give a call on 9855406991 or write to us at [email protected] . LegalSeva team comprises of contract lawyers who can draft contract as per the requirement of corporate. You can create NDA with LegalSeva.
